Detailed Plan

Obtaining and exchanging intellectual property (IP) in the form of patents is a complex process. In this proposal I intend to define a system by which NFTs are used to aid in the process of both the establishment and management of IP.

**As a note, I have reworked this proposal to match more closely in line with the discussions through the comments that follow in order to tie the information together.

I believe it is also important here to establish how NFTs are involved in the management of IP. First and foremost, the NFT is not going to be the IP itself, rather the NFTs are tools to be used in the process of creation and management of IP. In examples below I show the NFTs being used for Identity Verification, Access Permissions, and Proof of Purchase.

An NFT based system for IP requires several important considerations:

- Original works and patents that exist on current systems still need to be referenced against as part of the validation process for if an NFT should be created during a submission review process

- NFTs for newly awarded patents need to be obtainable alongside traditional processes to help onboard creators into a DeFi system

- Existing patent holders need an avenue to obtain NFTs for their existing IP

- Systems must be created to store, manage, and exchange IP in a DeFi space

Obtaining NFTs for New and Existing Patents in a DeFi space:

The review process for obtaining a patent is expensive and time consuming. In order to ease the process, NFTs can be used alongside a peer review system that exists in the DeFi space. Here I’ll discuss how a peer review process might work using NFTs as a core element.

In order for any IP to be officially recognized it needs to pass through many hands that confirm its claim. This process can be simplified by having the review process spread amongst peers around the world. The process would be split into segments that can be worked on by anyone with proper credentials. Each section worked on would also need a separate reviewer to ensure accuracy of work performed.

People working on the project would receive commission for their contributions to make the time they spend doing so worthwhile. A fair fee structure would need to be created and maintained as part of this, likely leading to the creation of a side chain for purposes of governance.

For the review process to occur, a platform must be created where all those involved in the peer review process are properly identified and brought together. They will need the ability to interact with the group or individuals who are attempting to patent their IP and work with them on edits, revisions, and changes.

NFTs are used here as the credentials of those peers handling the IP process. One part would be an NFT acting as the identity of the university, law firm, patent company, or other qualifying entity that the individual is representing. The other would be the personal NFT of the reviewer signing off on the documentation. Using NFTs in this way ensures that those working on the process are from reputable sources and have the ability to do so.

Once the process concludes and a patent is to be awarded an IP NFT would be minted and given to the originator. The IP documentation involved would next be placed on a server space and encrypted in such a way that the NFT minted for the IP acts as access permissions for that file. Access to that server space would be given to the individual or company that filled for the IP, using their Identity NFT. This way, the person or company can access the server for future management and exchange of the IP and they have an IP NFT for use when they are on the server to access the contents of the IP file itself.

Management and Exchange of IP using NFTs:

Let’s imagine a sort of scenario where two companies plan to work out a very secure and private deal. Both companies arrive at a bank, show their credentials to the front desk, and are let into a back security deposit box room. In the center of the room sits a locked box on a table. They both sit at the table start by talking about the terms of the deal and setting up the paperwork. After they both agree to the terms, the buyer is lent the key to the box to verify the contents are what was expected. The box is closed, the key returned, and payment happens. Once payment is complete, the buyer is left with the key, and the seller leaves to go about their day.

So in this scenario we need to break down where all of our DeFi components fit. First and foremost is access to the room in which the deal takes place. In order to be let into the room both companies had to prove they were who they said they were. This is the first job of a NFT on the network. Both companies need access to a shared space where they can make the deal and they need to be sure that who shows up to the deal is who is expected. Identity NFTs can be used to ensure both parties are who they claim to be.

Second is the room itself. The room is where the transaction will happen. It is important as this location is where both companies want to meet to work on their deal. Think of it as a specific place on a server that each has access to. By using their NFT to verify entry, the handshake happens and both are connected at the specified address.

Next is the paperwork. Both companies would exchange documents and information on the server space. These documents would only be editable by the parties that upload them to the server, meaning their permissions are tied to the NFT used to access the server space. This keeps both parties honest in their dealings and ensures that nothing gets changed before or after any agreement is struck.

When an agreement is reached, both parties set up their previously discussed amounts to be paid. In comes the smart contract which will be designed to only execute once both parties place all the previously agreed upon items up for exchange.

After that we have to discuss the locked box itself. Think of it in terms of an encrypted file sitting at that server address. In order to access the encrypted file, the IP NFT acting as its key must be present in the accessing party’s wallet. This ensures that only the owner of the IP NFT has access to the original files.

Additionally with IP involved it would be good if prior to the final execution of the smart contract exchange the buyer had a chance to inspect the locked box to make sure they were indeed getting what they intended. For this purpose I would propose a set of lending smart contracts. The lending process would allow for the IP NFT to be traded via a timed smart contract. This would allow for the buyer to inspect the IP files before agreeing to finalize the deal. The timed smart contract ensures that the NFT is still in control of the seller even if the buyer decides to back out.

Finally, the NFT is returned to the seller if it was lent out via the timed smart contract, regardless of if the buyer is still buying. This ensures confidence on the seller’s end. The smart contract for the IP exchange is then agreed upon by both parties and fully executed. The seller gets their funds, the buyer gets their IP NFT, and the exchange is a success.

The buyer with the IP NFT now has control of the IP access and the sale of the IP to future buyers. Either party can access the server space again, but only the IP NFT holder would have access to the IP files.

As the process completes there are several other things that would help traditional finance to feel more comfortable. The smart contract that completes the sale can also update a ledger held at the permanent server address. This ledger could have more information about the deal between companies because it would only record exchange transactions that occur at that server address. Meaning that only companies that owned the IP would have access to see it and it could be much more complex than typical block chain data. Think of it as a public receipt file that permanently sits in that server location and nowhere else.

Another thing that can be done is that upon the smart contract executing, two NFT receipt images bearing the addresses of transactions, as well as other basic company info or watermarks, can be minted. This provides records for both parties involved if they so desire.

Creating a Unified Searchable Patent System:

The process of having searchable patents on DeFi is quite another story and it requires the patent owner to have a public safe accessible version of the patent information, which would need to be a copy and not the original documents. The IP NFT in that case would provide the ability to edit/upload the documents at a separate server address, one that is meant to be picked up by a search index and used on a DeFi internet space for public purposes.

Closing Thoughts and Remarks:

I believe that by using NFTs to redesign the patenting process we will lower the barriers of entry for the many industrious and keen minded individuals from all walks of life around the world. The purpose of this proposal is to act as a stepping off point for the community to build from. The scale and complexity of this system requires a level of expertise far beyond my own, but as Cardano is building a true world community I wanted to share what I could to inspire those looking to innovate and build something great.

Budget and Timeline:

As seen above, the full design and scale of using NFTs in the patenting process requires a lot of components that will need to be broken off into separate projects in order to see success. Many of these components may arise from other projects currently in development, but it will take some time to build the groundwork. With this proposal as more of a call to action for the developers in the community than anything else, I have fairly requested only 1 USD (the smallest non zero amount). In my mind, funding should be requested by each team working on the separate elements as it is hard to quantify what would be necessary to fund this project as a whole.

The timeline for this project is likewise hard to pin down but there are goals for the short, mid, and long terms that would show things are moving in the right direction:

Short Term:

Idea is circulated in the Catalyst community, inspiring future projects

White Papers showing NFTs being used for Identity Verification Processes, File Access Permissions, and Proof of Purchase are created

Security risks and robustness of NFTs being tied to IP outlined and explored

Mid Term:

Platforms for peer review and NFT exchange proposed and tested

Technical demonstrations of NFTs being used in earlier defined three cases

Partners amongst patent companies, universities, law firms etc. brought in

White papers of NFT lending contracts

Long Term:

Platforms for peer review and NFT exchange fully operational

Storing and access of IP for low barrier public research

Advertisement of NFT patent systems to draw in traditional patent holders

Possible Risks:

The project hinges on many factors that may affect progress:

First, it requires development teams to work on and build aspects of the project either directly or indirectly. If there’s no interest in further development of this proposal by the community it will not progress far.

Next, NFTs must be shown capable to perform adequately in each of the three proposed roles and function on peer review and exchange platforms. As the major driving force of the design, the NFTs have to work as intended or the project will stall.

Finally, it will require the partnerships amongst existing IP handling entities in order to see its full potential. Since a lot of IP currently exists in other forms it is very important to bring on existing IP entities. Proving something even qualifies as new IP requires access to and knowledge of current IP. Without partnerships in the space it will be very hard to make progress at scale.