A Digital Marketplace for Patents: Patents as NFTs
To rid the current patent recording system of its existing transparency and validity issues, patents should be digitized as NFTs and stored on a blockchain to create a trustworthy and extensive digital marketplace.
In 2021, an application was granted and published for a patent on non–fungible tokens (NFTs). The application defines an NFT as, “a device to securely access a digital asset with an asset blockchain address on a blockchain.” NFTs were initially designed to authenticate digital art but have been adapted to nearly every form of media. Once an NFT is recorded in a blockchain, it becomes an unalterable and externally verifiable record of the authenticity of an asset. An NFT is a certification of ownership and authenticity. When purchasers buy an NFT, they obtain the legal title to the NFT and a license to use the corresponding digital asset. The NFT does not store the media form but acts as a unit of data, transferable between parties and then recorded in a blockchain.
What about patents as non–fungible tokens? Why not utilize this novel and innovative technology for patents themselves? Tokenizing a patent into an NFT is possible and has been done before. Just as artwork is unique, so is a patent. Patents are per se novel and, therefore, non–fungible.
Blockchain technology was originally coined in 2008 for its ability to provide security, anonymity, and data integrity. The technology is widely known for running cryptocurrency, namely Bitcoin. A blockchain is a public transaction ledger. In the context of Bitcoin, blockchain technology is a decentralized managing technique that issues and transfers money to Bitcoin users. However, a blockchain can be used for other technologies. For example, blockchain technology is widely applauded for its data integrity and security characteristics, which extends its use to other applications. Transactional data from numerous sources may be readily collected, integrated, and shared using blockchain cloud services. The blockchain system prevents fraud and data tampering since data cannot be changed without the permission of the nodes of the parties. Data integrity is protected through the technology’s use of a single source of truth which eliminates the risk of data duplication and increases security.
The U.S. Patent and Trademark Office (USPTO) is grappling with transparency issues that have ramifications on the progress of intellectual property and innovation in America. It is estimated that “only 2% to 5% of intellectual property in the patent market is valued, and there is likely a $1 trillion–plus opportunity if the patent market can find a better means of identifying, authenticating, and trading on the IP.” Tokenizing patents would ensure that every transaction would be logged on a blockchain, making patent ownership changes easier to trace. A blockchain could also streamline and encourage licensing agreements with options such as embedding an automatic royalty collecting methods in a portfolio. When an inventor mints their patent as an NFT they can form a commercial IP portfolio and generate licensing revenue automatically. The USPTO lacks a digital marketplace for patents to be easily researched, traded, licensed, or otherwise monetized.
A digital marketplace for patents would increase transactional efficiency and portfolio return on investment. A transaction is efficient when time, effort, and money are minimized in the completion of the transaction. An accurate digital marketplace would decrease the time, effort, and money that currently goes into researching a patent’s history and chain of title. If patents were digitized as NFTs and stored on a blockchain, more people would have access to accurate information. Patents could be reviewed and compared to increase trading and licensing capabilities. A blockchain that stores tokenized patents would be accessible anywhere. The data would be managed in a streamlined system, reducing costs, increasing efficiency, and generating better returns and value realization for those transacting in IP. An NFT marketplace for patents has the potential to promote transparency and liquidity and open the market to innovators who aim to commercialize their inventions efficiently.