What is a blockchain network?
A blockchain is basically an online database with special features. Many identical copies of the database exist, and all are automatically updated when a change is made. The distribution across all network nodes guarantees the integrity of the data stored on a blockchain as no single user or node can manipulate the decentralized data record.
How is IPwe using blockchain technology?
Blockchain technology is extremely secure – which is why we decided to build our whole platform on blockchain technology. But beyond the security aspect, the blockchain is an even more important springboard: it is a nurturing ground for Smart Contracts (see FAQ “What are Smart Contracts?”). When specific contractual events occur, the Smart Contracts directly can read from the blockchain and automatically trigger a predefined reaction – human intervention is no longer necessary. This means that micro-transactions, such as small-volume licenses are suddenly economically viable as they are no longer suffocated by transaction costs. The trail of evidence on the blockchain safeguards that every action can be audited properly.
What public blockchains did IPwe select?
We did not select Bitcoin or Ethereum, because their solutions negatively impact the environment. Instead, we selected Hyperledger and Casper Network because they use nodes versus miners with conservative energy utilization and are at the same time suitable for the enterprise class use cases we provide.
Will our company need to make internal changes to access the blockchain network?
Not at all. The platform is developed on the blockchain network but the blockchain dimension of it lives completely “under the hood”. Once you complete the IPwe verification process, you’ll be able to access the IPwe Platform from anywhere with an internet connection. The platform takes care of all blockchain records autonomously.
How long does it take to upload into the blockchain network?
Synchronizing data with the blockchain network only takes a couple of minutes, e.g. in the case of transactions. Because of our security checks on ownership, it takes roughly 2 days to verify your patents until they are added to your dashboard on the IPwe Platform.
What are NFTs?
NFT is an acronym for “non-fungible token”. “Token” is the technical term for a blockchain object. The adjective “non-fungible” expresses that the token is unique, i.e. that it only exists once as it represents a single real-world object – in our case an intellectual property asset. A counterexample for a “fungible” token would be a crypto coin (e.g. a Bitcoin or an Ether), where the focus does not lie on the ownership of one specific coin but on the value expressed through that coin. The creation of an NFT is referred to as “minting”.
Why do NFTs matter?
We like to refer to NFTs as shells that hold all relevant information to a patent in one single and secure repository for the first time in the history of patents. Having all data points at hand enables the NFT owner to quickly make informed strategic decisions about what to do with the tokenized patent to use it efficiently.
At the same time, NFTs increase the transparency for all market participants. It is easier to find out if there is a patent in a specific space (existence), who owns it (title), and what the asset’s history is. The reason for these transparency and efficiency gains is based on the standardization of the NFT key attributes, underlying agreements and rights. Simplification and standardization of licensing rights are a simple example that will benefit innovators, creators and capital sources.
Unlike a tweet sale or digital art sale, this is the first time NFTs touch almost every single enterprise company and all the Small and Medium Enterprises (SMEs) that hold patents.
Why do you need an NFT when dealing with an asset that is already unique?
There are many advantages of maintaining a digital twin of a real-world asset but the key advantages are the following:
- Data aggregation: Information around specific patents is not kept in one central repository but is highly fractionalized. The NFT serves the purpose of aggregating all relevant data about one patent to analyze it quicker and more efficient.
- Data verification: Collected data is only valuable if it is trustworthy. When adding a data point to the NFT, IPwe and other third parties confirm its level of trustworthiness, e.g. whether all the “public” records show the same owner for a patent as 30% of worldwide patents are currently assumed to have inaccurate ownership records across the 150+ worldwide patent offices.
- A History of Value: At some point, all the history of a patent will sit on the NFT – not just who owns it, but who is licensing it, who is commercializing it, who is financing it. This information can be used to confirm value.
Why does this need blockchain? Why can't you run this is a centralized database?
Generally, permanent reliable records become important for auditing trails. Assets like bitcoin or tokens that originate on the blockchain are easy to verify and track. An asset that originates some place other than the blockchain, like diamonds, music or patents, does not include its source, a state that is referred to as the “oracle problem”. Factually, simply because one puts something on the blockchain does not clear up title, rights or other critical business attributes. The NFT we developed solves this “off blockchain problem” in a way that all participants can be comfortable that they are dealing with the “real” patent and the “real” owner. As mentioned above, the ability to administer future contractual requirements can be provided by smart contract
Does the creation of an NFT make confidential information about my asset public?
No. Only the existence of an NFT is logged to a public blockchain. All other information can be kept confidential as IPwe, Casper Labs and IBM have figured out a model that gives owners and their transaction partners information and comfort to make transactions easy but, at their choosing, private or public. You have full control about this at any point. But value will be demonstrated by making a lot of this information public.
Can all kinds of Intellectual Property be turned into NFTs?
Yes – copyrights, trade secrets, trademarks, utility models, design, and patents can each be turned into an NFT. The tokenization of patents is just the first use case that IPwe is starting with.
Does the creation of an NFT require any governmental or administrative buy-in?
No, the participation of a government or public administration (e.g. a patent office) is not required to create an NFT. We have prepared interfaces to include such institutions into the NFT ecosystem with the possibility of direct data exchange but we primarily want enterprise companies, universities and SMEs to benefit from our efforts. We expect the patent office to follow soon afterwards.
Why start with enterprise customers?
The top 1,000 enterprise entities in the world hold approximately 50% of the world’s patents. We think that, given the nature of IP, it makes sense to lead with enterprise. We have programs to bring SMEs online, but the major impact in the market will be realized as a result of enterprise adoption. Unlike other NFTs, enterprise will lead here, and we are already seeing this.
What does the current patent market look like? Is there room for improvement?
There are about 15 million active patents and about 5 million pending applications around the world – representing trillions of dollars in R&D investment. About 2% to 5% trade or are licensed (China’s Patent Commercialization Rate) was over 34% in 2020, in any year at a total of $180 billion in licensing and sales volume. At the same time, only 5% of the worldwide patents are ever commercialized into products. This setting provides a lot of opportunity. The keys to drive market engagement are transparency and lower discovery costs
Do IPwe patent NFTs create value for all participants?
Yes, we are convinced that they do. NFTs benefit owners, licensing and commercial partners for the reasons discussed above. Many key players in the ecosystem have expressed their frustration that IP and intangibles are material assets that are difficult to understand and very difficult to engage with. We believe that the simple act of patent owners claiming their patent NFTs already increases the value of their patents. Transparency alone increases value—to say nothing of the other benefits associated with this effort, such as the improved commercialization rates benefiting innovators, owners, commercialization partners, finance, and service providers.
But we also believe that our NFTs will benefit banks, insurers, capital markets players – and anyone who lends, insures or financially engages with IP. Our goal is much broader than any one ecosystem participant. Platforms do not work if there is not value creation for all who engage with the platform. So, we will refine and make sure that our NFTs generate value creation opportunities for all of the participants in the ecosystem.
How do NFTs make trading IP more efficient?
NFTs make trading IP much more cost efficient. Today’s process requires attorneys, contracts and paper-based processes. By using an NFT, the entire model is simplified by having all of the key information in one easy to access location. If you are inclined and require the information, there is additional information readily available on our platform. We are standardizing how this information is presented and accessed and standardizing the transaction process. Capital tends to pursue opportunities that exhibit these attributes. The mortgage securities and credit derivative markets developed and standardized over the last 30 years—the IP market can as well. NFTs technologically enable what was simply too complex or simply not possible before.
Who sets the value of the NFT?
IPwe has developed an array of algorithms to evaluate and value patents. These algorithms provide a minimum value for any granted patents – which will be considered as a “IPwe Verified” minimum value. The patent owner can provide an own valuation which will be referenced as the “owner verified” value of an NFT. On the basis of the provided evidence, the market can decide, which valuation or aspects of which valuation it trusts.
Is the plan for the NFTs to contain the intellectual property rights that patents hold, or are they - like most of the NFTs associated with artworks - ledger entries that are associated with a URL?
Our NFTs go beyond the mere record of the title itself. We help you create additional tokens that represent the licensing rights, development rights, financing rights, commercialization rights or any rights you like – easy to track and all standardized.
What is the distinction between IPwe's technology efforts of the past two years and the NFT component?
In early 2018, what IPwe described was an “NFT”, we just did not call it that because the name did not exist – we were reluctant to tokenize because in 2018 that was not being embraced by enterprise. The business at a conceptual level is not new – IPwe’s CEO Erich Spangenberg has been talking about this publicly and thinking about it since at least 2009. The time spent learning the existing market, building the technology and creating the relationships is incredibly valuable. Now the dream is technologically enabled as a result of advances in exponential technologies and transforming what we think is one the most critical corporate assets: IP.
What are Smart Contracts?
A Smart Contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code controls the execution, and transactions are trackable and irreversible.
How are Smart Contracts utilized in the process?
The Smart Contract is built into the NFT with standardized terms associated with every patent. The owner of the patent sets their contract terms, what is public and what is not. The capital and other transaction partners have the transparency, information standardization and ease of interaction they need. We utilize a connection between Ricardian contracts (they can be read by lawyers and business professionals) and Smart Contracts that actually deliver value in a format useable by business executives and the participants in the IP ecosystem.
What trials will be carried out over the next few months, who will participate, and what are the top objectives?
IPwe is focused on both enterprise and SMEs in our initial trials. Our initial trials will test exactly what we talked about above. We know we are solving a very real and huge business problem. Our solution has been developed by the best minds in the field over the last two years– but refinements are needed to further make this easier for enterprise companies and SMEs.
Is a new NFT marketplace really needed for patents? Why can't you just use an existing NFT marketplace to transact patents?
IPwe believes that patents are unique assets with unique attributes and requirements. Creating an NFT is the easy part – there are a number of blockchain protocols that let you create NFTs. Creating an NFT that addresses the unique attributes of patents has taken us three years to think through and required that we create a solution that is compelling from an owner and transaction partner perspective. One can tokenize pretty much anything – the rights associated with that NFT are critical. The question always was: does the NFT solve a business problem for the ecosystem or is it just adding complexity to an already complex system, and does it solve the problem in a way that creates value for all of the participants in the ecosystem and not just the creator of the token. Focusing on enterprise and solving their needs are critical.