The technology and patent have existed side-by-side as they have made the world technologically more advanced to be in. By providing a legal monopoly over a particular technology, patents have provided much need boost to tech innovations. With the patent for the latest tech in hand, innovators are always trying to invest creativity, money and time into the latest inventions once they are assured of being rewarded with a monopoly of such inventions. A patent protects technology and boosts its future. Once the protection term of such patent expires, everyone shall have access to it. The non-fungible tokens (NFT) are one such tech innovation that continues to make a wave. NFTs come with novel opportunities and challenges for the intellectual property (IP) holders especially related to patents. Recently, applications, standards & protocols associated with NFTs are witnessing upgrades, however, there is a need to examine requirements of presenting patents as NFTs so that there is liquidity & transparency for innovators who wish to commercialize their NFT innovations. A NFT patent application includes strong patent claims that increases valuation of NFT projects by global patent filing.
A wide range of patent applications have been filed in last few months that claim NFT related inventive features. These patents disclose patent claims covering, use of NFT assets in peer-to-peer network, cryptographic transactions linking virtual assets with real-world physical assets, NFT based gaming platforms, and the like. A common element of such NFT patents is the combination of system and method claims, wherein the method claims disclose the essential steps required to implement the innovative process relating to the NFTs. Similarly, the system claims disclose the innovative aspects embodied as an apparatus including one or processors that execute the steps of the inventive process. In this manner, both the system and the method claims are closely interconnected to ensure a strong patent protection for NFT related inventions.
NFTs are digital assets that come with a unique identifier stored on the blockchain. They are not interchangeable and consist of unique characteristics. They are distinct sets of data that are stored and tracked on the blockchain. An individual can buy & sell and even utilize NFTs as digital certificates of authenticity for different kinds of transactions. They are one of the most common applications of blockchain technology that has gained immense popularity. Off recent NFTs have featured in the arts, sports and music industries. They can also be digital representations of real-world objects like cartoons highlighting video and are associated with substantive rights in the underlying object. Few benefits associated with NFTs are these assets being fraud-proof, indivisible, guaranteed ownership, easily transferable, and provably scarce.
These NFTs serve as a certificate of authority that represents either license or ownership. The value of an NFT is determined by its linked asset’s desirability along with resale potential and account market demand. One can create NFTs on any blockchain that supports smart contract programming. For example, the Ethereum blockchain supports NFTs & Bitcoin. Users take the assistance of other blockchains like WAX, Binance Smart Chain, Polkadot, EOS, Tron, and Cosmos to dictate network where they would like to sell NFTs. Once users create NFT and are ready to sell it, they will have to submit it to a marketplace which should be connected with a wallet to send and accept payments. Mintable, OpenSea and Rarible are a few popular marketplaces.
The NFT project valuation process includes determining valuation of all the assets of the project, including the NFT patents. The NFT patent valuation procedure or the NFT project valuation procedure can cover various elements, such as, the NPV (Net Present Value), Future Value Forecast of the NFT Project, and, Financial Modelling to Estimate Cash Flows that can be generated from the NFT project including the NFT patents. The NFT patent valuation method or the NFT project method can be based on either the qualitative approach or the quantitative approach. Specifically, the NFT valuation quantitative approach covers numerical or economic data, whereas the NFT valuation qualitative approach covers one or more of the established methods like, the cost based method, the income based method, or the market based method.
The international and national authorities (patent offices) along with patent registers operate the patent system worldwide. Firstly, the authorities examine patent applications by determining if they are eligible for patent protection. Apart from that these authorities also need to act as clearing bodies to record pledges, ownerships, and licenses in respective registers. Although these patent authorities try to maintain transparency, however, at times their work becomes less secure (incorrect records) or too burdensome (before recording any change in register, few of them may need legalized transaction documents).
NFT usage seems limited when questions regarding how to examine and grant NFT on patents. However, when it comes to tracking transactions regarding granted patents, use cases of NFTs arises. If a user wishes to tokenize their patent portfolio, they may require to transfer their interest in patents to a third party without the need to involve a patent office. For instance, IBM along with IPwe (a global innovation platform that leverages the power of AI and blockchain technology) to represent patents as NFTs and come up with infrastructure for the same and store such records on the blockchain network. As per the IBM press release, the tokenization of intellectual property (IP) must assist in positioning patents to be more easily commercialized, traded, sold or monetized along with bringing new liquidity to this asset class for innovators and investors. With this, investors can purchase NFTs in patents via platforms such as OpenSea.
As technological advancement continues its progress, global patent offices will have to enter the game and regulate the NFT usage to document transactions associated with a patent. The updated patent regulations should make sure that it is easy to assess state of art publications so that the patent filing process can be completed quickly. As NFT’s popularity and volume usage increase, the patent filing numbers shall automatically go up – more guidance and approach lessons shall be required about patenting of NFTs. Further, legal and policy practitioners should also address patent eligibility & infringement issues as per their respective jurisdiction. The patent framework should be updated to launch an NFT-based concept that can be utilized to patent a reliable and decentralized network for global trading.
Our team of advanced patent attorneys assists clients with patent searches, drafting patent applications, and patent (intellectual property) agreements, including licensing and non-disclosure agreements. Advocate Rahul Dev is a Patent Attorney & International Business Lawyer practicing Technology, Intellectual Property & Corporate Laws. He is reachable at rd (at) patentbusinesslawyer (dot) com & @rdpatentlawyer on Twitter.
Quoted in and contributed to 50+ national & international publications (Bloomberg, FirstPost, SwissInfo, Outlook Money, Yahoo News, Times of India, Economic Times, Business Standard, Quartz, Global Legal Post, International Bar Association, LawAsia, BioSpectrum Asia, Digital News Asia, e27, Leaders Speak, Entrepreneur India, VCCircle, AutoTech).
Regularly invited to speak at international & national platforms (conferences, TV channels, seminars, corporate trainings, government workshops) on technology, patents, business strategy, legal developments, leadership & management.
Working closely with patent attorneys along with international law firms with significant experience with lawyers in Asia Pacific providing services to clients in US and Europe. Flagship services include international patent and trademark filings, patent services in India and global patent consulting services.
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