Primer: NFTs and the Emergence of IP TokenizationNovember 16, 2021
Partner Cameron Pick recently published a primer on NFTs and the emergence of IP tokenization in Managing IP, offering readers insight into the recent movement to monetize patents through NFTs. Cameron explained that there are currently several issues with patent monetization that may be resolved, at least in part, through the use of NFTs. He writes, “By using NFTs to monetize patents, patent holders may sell fractional shares of a patent to multiple buyers.” Cameron notes that this monetization may create a liquid marketplace in an otherwise illiquid market. It could also create a new form of litigation funding as patentholders may sell fractional shares of a patent to multiple buyers. NFTs may also reduce transaction costs and simplify the transaction process for transferring patent ownership.
However, Cameron warns that there are also drawbacks to using NFTs for patent monetization. “Most importantly,” he writes, “using an NFT as proof of ownership of an asset has not been tested in the courts.” It is unclear whether courts will recognize ownership of an NFT as proof of ownership of the underlying patent. He further explains that since NFTs can be stored on several different blockchains, “a patent holder can mint an NFT representing the same patent on several different blockchains and transfer the same ownership rights to several different parties unbeknownst to them.”
Overall, Cameron says based on this new trend of utilizing NFTs to represent ownership of assets, IP counsel should consider recommending this as a tool to clients who would like to monetize their patents. But to use caution as patent NFTs are still in their infancy.
Subscribers may access Cameron's Managing IP article "Primer: NFTs and the Emergence of IP Tokenization."