Patents Joining The Hot NFT Market? – Intellectual Property

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Patents Joining The Hot NFT Market?

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Jack Fonss and his consulting company, True Return Systems LLC,
are auctioning U.S. Patent No. 10,025,797 (‘797) on the NFT
marketplace OpenSea. Bidding for the patent, which is believed to
be the first auctioned as a non-fungible token (NFT), starts around USD
$7.5 million. An NFT is a unique unit of data that can be stored
and tracked on a blockchain and bought or sold, and the
technology has made a splash in the sports, music, and arts
industries in recent months. While NFTs are generally viewed as
digital collectables conferring few, if any, substantive rights in
the underlying object, the NFT representing the ‘797 patent
includes a self-executing contract that automatically grants the
buyer all rights in the patent, including the right to sue for
infringement. Others are entering the space as well, with the
startup IPWe, working with IBM, announcing plans to represent
patents as NFTs and store the digital records on a blockchain
network. It believes this “tokenization” of patents will
allow them to be more easily sold and that representing patents as
NFTs is a critical next step to making transactions simpler and
more cost-effective. Proponents believe an IP-focused NFT
marketplace will provide another platform for owners to market
their patents to potential licensees and may be particularly
attractive to companies with large patent portfolios, like IBM, who
want to license their inventions. Connecting blockchain to patents
can also create more transparency in patent transactions, which are
often an opaque process, said Ian McClure, the associate vice
president for Research, Innovation and Economic Impact at the
University of Kentucky. “Blockchain is a key element in
helping IP transactions and management happen more
efficiently,” McClure said. Blockchain serves as a public
ledger, where different users can verify information about the
asset and, in effect, hold others accountable. Blockchain is also
an immutable record, meaning that it generally can’t be altered
or changed. A blockchain-based patent data ledger could provide
“a public, crowd-sourced database of information that helps us
better understand and rely on the probabilities related to that
patent,” McClure added. That, in turn, could create
“better predictability and better, or more,

The application of NFTs to patents is not without its skeptics.
Some question the value of representing patents as NFTs, noting
that the technology is somewhat duplicative with the patent office
already keeping public records with patent assignment and other
information. There are additional concerns that a public
marketplace could spur additional lawsuits from non-practicing
entities (NPEs). IPWe is run by Eric Spangenberg, who earned a
reputation suing companies over tech patents, and some predict the
marketplaces could create new libraries of patent assets for NPEs
to shop from. NFTs can also provide opportunities for fractional
ownership, where smaller investors purchase fractional pieces of
the tokens, providing another way for NPEs to raise the capital
necessary to assert their patents. Other uncertainties surrounding
NFT patents in public marketplaces exist such as how public
platforms will handle confidentiality of transactions and royalty
streams, which are often prized in patent transactions. There are
also questions about whether fractional sales of NFTs could risk
violating securities laws, and there are concerns about anti-money
laundering regulations arising when patents are represented as NFTs
in a marketplace.  

Read the full article on Bloomberg Law here.

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