A new paradigm for intellectual property assets?

Irreplaceable tokensOr NFT, is a digital record of asset ownership. The asset types most commonly associated with NFTs are digital assets, such as memes, GIFs, or artwork such as game characters or attributes. However, the assets represented by the NFT may be digital, tangible, tangible or intangible. Examples of asset types that have been transferred or used NFTs to record their ownership include sports memorabilia, music rights, artwork, and real estate. Intellectual property assets, especially the transfer of ownership and ownership of patents, can also be recorded and transferred as NFT.

related: Unfungible tokens from a legal perspective

The ownership of real property can be recorded in the deed registry, the ownership of patents can be recorded in the United States Patent and Trademark Office (USPTO), and the ownership of written works or music can be recorded in the copyright system of the Library of Congress in the following ways. Since asset types such as collectibles, video clips, memes, digital avatars, or inventions do not have similar systems for recording ownership, these asset types are considered too abstract to be patentable, so there are huge benefits to using NFTs. However, even assets with existing systems that record ownership, such as the United States Patent and Trademark Office for patents, may still benefit from using NFTs to help potential buyers, sellers, or licensees understand the owner and value of a particular patent.

NFT and blockchain technology

The ownership of NFTs is recorded on the blockchain, which is a distributed digital ledger that provides unalterable transaction records and transfer of asset ownership through software codes called smart contracts. Blockchain technology is best known as a technology that records transactions involving cryptocurrencies, such as Bitcoin (Bitcoin).

related: How the NFT market uses blockchain technology to achieve explosive growth

Recording NFTs on the blockchain provides multiple benefits. On the blockchain, NFT and other information are recorded in a series of data blocks of a certain size, depending on the implementation of the blockchain. When the amount of information to be recorded is sufficient to meet the block size requirements of the blockchain, a new data block is created and appended to the end of the existing block chain in the blockchain. The new data block includes a cryptographic code called a cryptographic hash, which is generated from a combination of the data associated with the information in the new block and the cryptographic hash of the previous block. This makes the information in the blockchain block safe. If a malicious party attempts to change the information in a blockchain block—for example, the ownership record contained in the NFT—this will cause the cryptographic hash of the relevant block to change. This change will cause the password hashes in subsequent data blocks to be mismatched or changed, thereby indicating unauthorized changes to the recorded information.

In addition, the data blocks in the blockchain, collectively referred to as the blockchain ledger, are not recorded in a central location. Instead, blockchain ledgers are recorded in multiple different computer systems, usually users who execute transactions through the blockchain or create one or more new blocks on the chain. The lack of a single centralized location in the blockchain ledger further improves the security of the information recorded on the blockchain. A malicious party cannot hack into a single computer system to change the records in the blockchain, because the ledger on that single computer system will not match the ledger recorded on other computer systems in the network. If there are signs that the information previously recorded on the blockchain has changed—for example, due to changes in the cryptographic hash of one or more blocks—the ledgers of multiple or all different systems that record the ledger may proceed. Compare to determine which system has been compromised. Therefore, recording the ownership, transfer, and previous sales or licenses of assets (such as patents) as NFTs on the blockchain will benefit potential buyers, sellers, and potential licensees by providing unalterable public records.

Patent and NFT

Currently, the U.S. Patent and Trademark Office does not have a requirement to record the assignment or sale of patents, so it is often difficult to know the owner of the patent. It is also difficult to assess the value of patents, because patent sales terms or licenses are rarely disclosed. If a patent is sold or licensed through NFT, the sales record and current owner or licensee of the patent will be immediately available to the public. In order to further benefit potential buyers, sellers or licensees, the sale or licensing of patents through NFT can be automated through the use of smart contracts.

The first NFT was created in May 2014, but it was not until 2017 that Larva Labs Published a project called CryptoPunks for trading cartoon characters on the Ethereum blockchain and Dapper Labs released CryptoKitties game project, Allowing players to buy, trade and “breed” virtual cats.

The market related to NFT sales will grow significantly in 2021, with estimated sales exceeding $250 million.Notable NFT sales include: Algorithm-generated pixel art images of aliens The CryptoPunks project spent USD 7.57 million in March 2021; Twitter CEO Jack Dorsey’s first tweet From 2006 to March 2021, $2.9 million; there are many more. In the highest-priced NFT auction to date, Christie’s auction house sold digital artwork by digital artists “Every day: the first 500 days” Mike Winkelman, also known as Beeple, sold for $69.3 million March 2021. NFTs can now be created and sold on digital auction sites or traditional auction houses (such as Christie’s).

Creating NFT-based markets for asset types such as patents takes time and requires patentees to adopt a new paradigm in recording patent ownership, assignment, and licensing. Creating a digital representation of existing patent ownership as an NFT requires a lot of initial work. If a transfer or license is made but not recorded on the blockchain, difficulties may arise, leading to conflicts in ownership records; however, work on such a market has already begun. For example, IBM has announced plans to cooperate with the patent market IPwe to create a digital market that records and provides patent ownership transfers through NFT. True Return Systems LLC started the first patent auction in the form of ​​NFT, which is suitable for patents on blockchain technology.

This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.

The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.