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IBM, the longtime top U.S. patent recipient, and IPwe, the Paris-based company behind the world’s first global patent market, have teamed up to launch an ecosystem for patent-based non-fungible tokens, or NFTs.
The patent tokens allow owners to license, sell and otherwise monetize their intellectual property on IPwe’s global patent market and other platforms. Patent NFT trials begin today, and the company expects the NFTs to be commercially available by the end of 2021.
“This is expected to benefit not only large enterprises that have significant intellectual property, but it will bring new opportunities to small and medium enterprises and even individual IP owners,” said IPwe CEO Erich Spangenberg. “We believe it will usher in new offerings by financial services firms and corporations to promote the evolution of a new patent asset class.”
Patents themselves are searchable through the U.S. Patent and Trade Office, but getting reliable data on licensing agreements has been almost impossible. What is apparent: Intellectual property can be a significant source of income.
For “patent godfathers” like IBM, a term coined in a recent Bloomberg article, annual income from IP can exceed $1 billion, although it recently slid to $626 million last year.
The real value of tokenization, according to Spangenberg, is that the patent-based NFTs will have a permanent chain of custody that lives on a blockchain.
“You can use the blockchain piece to lower transaction costs, record it and look at other transactions to make sure you’re not overpaying,” he said. “That’s the magic of this.”
It’s important to point out that this isn’t a product for retail investors. That means Apple superfans who want to own a digital token connected to the first patent granted to the company in 1979 will have to wait for some regulatory clarity around security-based tokens.
Companies that have tried to offer security-backed tokens to U.S. investors, like 1Broker and Abra, were fined by the Securities and Exchange Commission. That’s been enough to give the rest of the market pause. For now, Spangenberg said the tokens will only be used for B2B transactions.
Even if retail investors can’t yet buy patent-based tokens, they will be able to use the resulting data to see how or whether a company has monetized its IP. That is, if the company decides to mint NFTs based on its intellectual property.
Spangenberg explained that IPwe won’t mint NFTs without the patent holder’s permission and will work with the person or company to set an initial price.
There was a time when Spangenberg’s name was synonymous with patent trolling. His now-defunct company, IPNav, promised to “turn idle patents into cash cows” by demanding licensing fees from large tech companies it deemed to be patent infringers.
Before it shut down, IPNav named IBM in seven such lawsuits, according to a search on RPX Insight.
It's been four years since Spangenberg left that business, but the notoriety gained means the companies he’s now partnering are very familiar with his expertise in the space.
This patent token announcement has been three years in the making, Shyam Nagarajan, Blockchain Partner of IBM Global Business Services said in an email. In that time, the company has worn many hats: business and strategy advisor, systems integrator and platform and infrastructure provider.
“The IPwe Platform is hosted on IBM Cloud, powered by IBM Blockchain and bolstered by IBM AI,” Nagarajan said. “These technologies all work together in a way that allows IPwe to store and share patents, facilitate transactions, and offer users capabilities such as natural language processing-based summaries of patents, enhanced searches and intelligent reporting and analytics.”