In recent years, non-fungible tokens, or NFTs, have become a trendy digital sensation, with splashy headlines touting sales totaling six and seven figures. NFTs have even begun making their way into the intellectual property space, including patents. While the law and technology of NFTs are still being refined, NFTs are primed to change the perception and practice of IP and patent law.
NFTs and Patents
The standard application process for patents is lengthy, complex, and costly. While trademarks and copyrights can be obtained in months or even weeks, the patent process often requires years. Incorporating NFTs brings the potential to simplify and speed up the process, making acquiring a patent more accessible to inventors who are eager to take their innovations to market.
By employing blockchain technology, NFTs can establish rightful ownership and authenticity, while the decentralized and transparent nature of blockchain provides a measure of protection against fraudulent or unauthorized NFT transactions. Examining the test case of Jack Fonss and his blockchain patent auction can give insight into the future of patent NFTs.
Fonss’ Blockchain Patent Auction
In 2021, Fonss and his consulting company, True Return Systems LLC, listed U.S. Patent
No. 10,025,797 as an NFT auction offer through the OpenSea marketplace, with opening bidding set at more than $7 million.
The original patent was filed in 2011 and 2012 and is part of a portfolio owned by Accu 2.0 LLC. It involves online brokerage systems using leveraged, inverse, fractional, and other fixed price strategies. The patent buyer would enjoy the ability to aggregate $1 units in an inventory and separate each $1 unit for real-time tracking, including individualized entry and exit.
The patent NFT takes the form of an automatic self-executing agreement that, upon completed purchase, transfers all rights, title, and interest in the patent to the purchaser. This includes the right to sue for past, present, and future patent infringement and to collect damages from any past infringement of the patent.
In this regard, Fonss’ NFT patent auction differs from many NFT transactions, which often include no rights regarding the substantive content associated with the NFT. For instance, purchasing an NFT of a video clip showing basketball superstar Steph Curry taking a spectacular shot does not assign ownership of IP rights to the clip itself. The NFT only carries the guarantee that it is unique and genuine.
By contrast, Fonss’ NFT represents a turnkey IP asset – a significant reason behind the hefty price tag. In a real sense, Fonss’ is offering an exchange of time for money – millions of dollars versus years of back-and-forth via paperwork transactions with no guarantee of success in the form of an approved patent application.
Implications for the Future
It is unrealistic to speculate that NFTs will completely displace the conventional patent application process. But Fonss’ NFT patent auction highlights various points of a patent application that could be streamlined and made less cumbersome with the integration of blockchain to guard against unauthorized NFT transactions. The self-executing contract represents an especially promising innovation for transferring IP rights through assignment or licensure.
Understanding the implications NFTs have on patents, especially patent infringement, will be vital as the technology grows and evolves. The ability to track ownership of NFTs and who has intellectual property rights to the original digital entity, such as a post, tweet, video, or digital file, will become more critical. SMI Aware helps our clients discover, analyze, and preserve information from social media and the web. Our in-house experts use proprietary software to pursue a social media inquiry objectively and ethically, with data gathering procedures that are reliable, effective, and repeatable.