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NFTs: What Are They And Who Are The Key Players Filing Patents for Them?

07

NOV

2022

Ubisoft becomes first major gaming company to launch in-game NFTs… Post Malone buys two Bored Apes for USD735k… Gary Vee launches his own series of NFTs… The Wolf of Wall Street (Jordan Belfort) buys a CryptoPunk NFT for USD420k…

What is going on? What are these NFTs, and why are people paying so much for them?

Well, in this article we are going to cover these very questions!

NFTs are Non-Fungible Tokens, which by that very definition means tokens that are not interchangeable or in other words, irreplaceable.

In the longer and more detailed version of what an NFT is, we would have to first understand the basis of the underlying technology of an NFT. But before that, let’s look at what is meant by the word “non-fungible”.

For the sake of easy reference, let’s replace the word “non-fungible” with “non-replaceable”. Now Non-Fungible Tokens would be regarded as Non-Replaceable Tokens.

But what does this mean? Imagine an item that is very dear to you – it could be an item that was inherited, gifted to you or an item that you fell in love with and bought.

Now if I were to swap that item with the same thing, let’s say if I were to give you the same exact pen in exchange for the one you currently have, that has a sentimental value attached to it, would you do it? Most of us would not because although the pen I offered is the same as that piece you have, it means much more than its price tag and to you that particular pen is priceless and irreplaceable.

This is the concept behind the NF in the NFT, basically something that is irreplaceable like the Mona Lisa painting or the pen in the example above – there is only one of its kind and therefore it cannot be exchanged for another of its kind.

Now, let’s see what is meant by the T (token) in NFT.

To understand this, we would first have to understand what technology governs this token, and that would be blockchain technology.

In short, blockchain technology is a system of recording information using a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Due to the transparency and distribution of the system it is almost impossible to hack or cheat the system as even the slightest anomaly in the transactions could be detected and would be immediately corrected.

Examples of this application would be the cryptocurrencies such as Bitcoin, which emerged around 2008 and Ether (governed by the Ethereum platform), which came about around 2013 – the latter is a decentralized, open-source blockchain with smart contract deployment, an interesting feature which we will touch on again later.

In essence, what the banks do in our everyday transactions by keeping record of it in a ledger and making sure all our transactions add up, the blockchain technology now does with cryptocurrency transactions where they are recorded in a public ledger which is verified by the network of computers (called nodes) using the same blockchain technology.

Now, what if we applied the same thing to a piece of art or music, what happens then? Well, that is what an NFT is all about. Examples of NFTs are like pieces of art that have been minted as a token using the blockchain technology that issues a digital certificate for that artwork, with distinguishable information like who created it, who owns it and who sold it. This tamper-resistance is why NFTs cannot be duplicated or copied.

Where do smart contracts come into play? Smart contracts are a major feature of blockchain technology that are typically generated when one enters into a commercial transaction of a digital work like an NFT. Unlike regular contracts, smart contracts will automatically be executed when predetermined terms and conditions, like the transfer of cryptocurrencies, are satisfied. This enables the automation of the contract and does away with the need for a middleman.

For example, let’s say you created an artwork and minted it into an NFT, and you place a term in the smart contract whereby you as the creator are entitled to a 10% royalty for every transaction made for that piece of NFT. This term in the smart contract is encoded in the NFT and will be triggered each time a transaction takes place, earning you that royalty.

So, with the general idea of an NFT explained, you may be wondering – what does this mean in the IP world, and what possible implications could this bring about?

First, let’s have a look at some stats on patents filed for NFTs, where these are patents being filed and who are the key players filing these patent applications.

Figure 1: Graph showing the number of patent applications filed worldwide for protecting technological aspects of NFTs, from the year 2018 to 2021 (Source: https://xlscout.ai/)

A general search for “non-fungible token” on a worldwide patent database reveals that patent applications for protecting various technical aspects of NFTs were filed from the year 2018 to 2021 (see Figure 1).

Figure 2: Graph showing the number of patent applications and the countries in which these applications are being filed for protecting technological aspects of NFTs from the year 2018 to 2021 (Source: https://xlscout.ai/)

The US, Europe, China, and Australia are seen as the preferred countries for filing NFT-related patent applications from the year 2018 to 2021.

Figure 3: Table showing the key players who are filing patent applications for protecting technological aspects of NFTs from the year 2018 to 2021 (Source: https://xlscout.ai/)

Meanwhile, Figure 3 shows that the key players filing the highest numbers of patent applications related to NFTs are Commvault Systems, Visa International Service Association and Strong Force TX Portfolio.

Fun fact: Did you know that Visa, the parent company of the second key player shown in Figure 3, has also purchased an NFT in the form of CryptoPunk 7610? (See https://usa.visa.com/visa-everywhere/blog/bdp/2021/08/18/nfts-mark-a-1629328216374.html)

In a nutshell, like the ever rising tide of technological advancements, the emergence of NFTs can be said to mark a new era of possibilities on a massive scale. We need look no further than the recent news of Indonesian student Sultan Gustaf Al Ghozali who took a daily selfie of himself for five years and decided to sell them as NFTs on the OpenSea trading platform. What started as a joke caught the attention of the NFT community who embraced them, earning Ghozali around 384ETH (well over USD1 million)! One can only wait to observe the possible ripple effect this could have – is it a bubble that will pop and be eventually forgotten or something that will expand beyond our imagination? Let’s wait and see!

Want to know what else NFTs are capable of? How could it change the IP game? Could NFTs be an alternative way to safeguard your inventions? Why would you want to protect your NFTs? Stay tuned for our next article on NFTs where we unravel the possibilities of whether NFTs could affect the entire IP landscape as we know it. Until then, if you have any questions, drop us a line at kass@kass.asia!

About the Firm

KASS International Sdn. Bhd.
Address Suite 8-13A-2, Menara Mutiara Bangsar, Jalan Liku, Off Jalan Riong, Bangsar, 59100 Kuala Lumpur, Malaysia
Tel 60-3-2284 7872
Fax 60-3-2284 1125
Email hello@kass.asia
Link www.kass.asia

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