Tokenize This: Week 13 ~ Tokenized Intellectual Property Rights
Everything is a negotiation. Everything is tradable at the right price.
Patents. Copyrights. Trademarks.
They all fall under one umbrella — Intellectual Property.
Intellectual Property is an ever-evolving subset in the legal field since it quite literally expands across every type of industry (tech, sports, finance, music, art, etc.). It’s an area that keeps even IP-specialists on their toes and demands for the most up-to-date knowledge and amendments.
The way people envisioned IP Rights changed heavily when the Internet became the giant that it is. Suddenly, intangible webpages, software, and domains became tangible enough to require ownership guidelines.
The definitions and guidelines surrounding IP only escalated when the world went mobile.
Now as society gears up to enter the Web 3.0 Era, IP specialists will have their hands more full than ever because nearly everything of value — tangible or intangible — can be wrapped and managed via security tokens and blockchain technology.
Which is awesome.
Let’s get a glimpse into a world where Tokenized IP Rights act as a hot market after spending decades in a loading phase…
Value Adds
Intellectual Property Owners (Token Issuers)
- Get a chance to monetize patents that have been dormant or unexecuted, especially if patented concepts are in higher present demand than when originally filed
- Can circulate ideas and concepts to the proper parties who may be better suited to bring them to fruition in an “open space”
- Can build in stipulations to maintain future benefits associated with the IP sold (i.e. licensing and royalties)
Intellectual Property Buyers (Tokenholders)
- Have the opportunity to purchase pre-registered patents on concepts they are looking to build out
- No need to wait for a 10-year expiry on patents if they are ready to develop in the near future — simply need to buy the patent rights via exchange if the patent is listed
- Ability to invest in concepts that they feel will appreciate in the future for resale, without personally going through the patent filing process
Communal Benefits: Greater velocity in exchange of intellectual property will lead to more patents being executed on in key fields that may improve society, such as medical and health technology developments.
According to Statista, there are nearly 400,000 outstanding Patents in the United States alone. Patents are mainly directed towards physical products and inventions. Imagine the number of outstanding Trademarks on words, phrases, symbols, and logos? Well as of 2019, there were nearly 900,000 outstanding Trademarks in the United States, so that 7-figure mark is either right around the corner or has already been surpassed.
That is an immense amount of digital ownership, and while some may be generating revenues through one avenue or another, it’s more likely that a majority of the combined patents and trademarks are sitting idly by.
Why not create a market for these digital rights?
One key point to note is that Trademarks are typically associated with some aspect of a business, and rarely are transferred individually. However, licensing is a popular choice for allowing others to use trademarked property.
An Intellectual Property market can definitely be categorized as a niche market, and is unlikely to be thought of as an asset class in itself. Nonetheless, LegalZoom’s average trademark filing cost is $500. Using that estimation in conjunction with the collective 1.3+ million outstanding IP filings, there’s an estimated $650 million locked up in Patents and Trademarks.
With all that illiquid value, exchangeability is something that could benefit both sides of the market and prove to be a key in unlocking stagnant assets. There are currently over 20 Patent Marketplaces — all of which stand to be upgraded with the technology that we know and love.
What role does an NFT Play?
The foundation of Non-Fungible Tokens (commonly known as NFTs) is the ability to verify and credit ownership. Whether an NFT represents a GIF, an EDM album, or a throwback Derrick Rose highlight, verifiable ownership of the original item rests at its core.
Again, emphasis on Original Item. NFTs are built to beautifully combat fraud. They’re built to display true ownership and rights to the item and associated properties.
Sound familiar?
Given that IP Rights are dedicated to the same principle — ownership of something potentially intangible (i.e. a product or service that is still in early development) — it’s likely that paths will cross with the same technology that powers NFTs.
One key aspect of NFTs is the ability to bake in royalties and re-sale fees. For instance, the creator of a digital art NFT can stipulate that she receives a 5% royalty on all resales of the artwork. So long as the NFT remains trading, she stands to receive dividends.
This technology can absolutely be modified to process licensing and royalties on trademarks as discussed earlier, in a completely hands-off manner. For that reasoning, it’s only a matter of time before NFTs and IP Rights are seen interchangeably, and transact in a marketplace across numerous industries.
What’s Next?
You decide. What has more potential — tradable IP Rights for outstanding and future filings via Security Tokens or NFTs?
The NFT realm has obviously taken the world by storm and is still looking for its footing in non-creative industries (art, music, media). Perhaps a digitized market for current Intellectual Properties is the on-ramp needed to bridge Non-Fungible Tokens and traditional industries like product development and manufacturing.
New Edition coming next Wednesday 4/14/21!
Disclaimer: This is not financial or investment advice and should not be interpreted as such. Please do your own research on investments and financial decisions before partaking in any ideas or ventures depicted in this publication.
