DeSci: IP-NFTs and IP Tokens

In the last article, we discussed the concept of Decentralized Science (DeSci). In this article, we will focus on IP-NFTs and IP tokens, which make DeSci possible.

So, what Problem Are IP-NFTs and IP Tokens Solving?

IP-NFTs and IP tokens promise to revolutionize research funding and intellectual property management by eliminating traditional gatekeepers. Currently, research funding is often a slow, cumbersome process, reliant on bureaucratic institutions or complex legal negotiations, and typically limited to investors or philanthropists within specific networks and jurisdictions. By leveraging blockchain technology, IP-NFTs aim to decentralize research funding and the IP market ecosystem, enabling governance through DAOs and fostering a more efficient, inclusive system.

Okay, let us understand IP-NFTs and IP tokens.?

IP-NFTs:?

Intellectual Property Non-Fungible Tokens (IP-NFTs) act as proof of ownership for intellectual properties on blockchain networks. Since they are on-chain, these proofs are secure and immutable.

An IP-NFT uses a smart contract and two legal agreements - a Research Agreement and an Assignment Agreement -to enable on-chain management of IP and R&D rights.

The Research Agreement is a contract between the researcher and the research sponsor. It grants IP and R&D data rights to the sponsor in exchange for research funding. This agreement also ensures that the research is conducted according to the sponsor's requirements and includes provisions for confidentiality, intellectual property rights, data ownership, and the publication of results.

The Assignment Agreement assigns the contractual position in the Sponsored Research Agreement to the owner of the NFT. It serves as a bridge between the legal contract and the smart contract, bringing the IP and R&D data rights on-chain.

From a technical standpoint, IP-NFTs use ERC-1155 or similar tokens, alongside decentralized storage for encrypted legal information and access control mechanisms

IP Tokens:

IP Tokens (IPTs) represent governance rights over the intellectual property linked to an IP-NFT and enable DAO-based governance.

By acquiring IPTs, you gain a stake in the IP generated from research, such as patents. However, IPTs do not guarantee financial returns or revenue sharing from commercialization. Instead, IPTs provide governance rights, access to exclusive information, potential early access to innovations, and more. Apart from governance, IPTs can also grant access to proprietary data and IP licensing.

IPTs are fundamentally community-building tools, not used for economic transactions or contracts. Technically, IPTs are ERC-20 or similar types of fungible tokens.

IPTs also enable fundraising for research projects through a process called Crowdsale. This digital version of traditional fundraising allows contributors to receive tokens that may have utility within the project’s ecosystem or represent organizational shares. Research projects can set the number of tokens for sale, their price, and the sale duration, allowing supporters to purchase tokens and fund the research.

Now, let us end this article by discussing the risks associated with IP-NFTs and IPTs.?

At a high level, the risks are twofold: technological risks and regulatory risks. Technological risks are understandable, as the blockchain and DAO ecosystem can be technologically unstable. Let’s focus on the regulatory risks.

Regulatory risks primarily stem from uncertainty regarding the legal status of DAOs and concerns that IP-NFTs and IPTs might be classified as securities.

One aspect of DAOs' legal status is their overall legality. Another key consideration is determining the exact legal identity of a DAO, even if it is recognized as a legal entity - whether it is an LLP, a corporation, or an investment fund.

Previously, we discussed the potential for tokens to be considered securities. Simply put, tokens can be construed as securities if they are issued to raise funds for a common enterprise.

Finally, disputes may arise over the control of intellectual property represented by the IP-NFT due to conflicting IP laws across jurisdictions. One way to address this issue is by transferring the IP-NFT into a single legal entity and clearly defining the control of the legal entity.