“Metaverse” is the buzziest of the buzzwords in tech and will soon be joining the ranks of “AI” and “ML” as requisite keywords in the next generation of pitch decks and patent applications. But what are the core components of the Metaverse? And what are their implications in the world of intellectual property? The Patently Strategic Podcast will be exploring this topic over the course of several upcoming episodes.
Web 3.0: Metaverse Building Block
We begin our exploration in this episode with Web 3.0. While it may prove to be the next great tech revolution, the broad shape and definition of the Metaverse is still more firmly baked in science fiction than in commercial tech reality. Many of its core building blocks, however, are likely right in front of our eyes (or headsets, perhaps). History shows that most major technology revolutions are rarely leaps, but instead evolutionary products of incremental steps, composed of many existing building blocks, met with market readiness. The Web 3.0 innovations of blockchain, cryptocurrency, and NFTs that are taking shape in front of us will no doubt be among these essential building blocks. With an ability to touch both our physical and virtual worlds, cryptocurrencies could form the monetary basis for all economic activity in the Metaverse. NFTs make it possible for unique items to exist and assets to be exclusively owned in the digital realm. The very foundations and infrastructure for the Metaverse and its virtual worlds could be built on blockchain.
Perhaps the Metaverse is simply how we experience the third major phase of the web – or maybe in its purest, most decentralized form, the Metaverse is built entirely on top of it. In any case, it’s hard to imagine a future where the two are not inextricably linked.
This third phase of the internet also poses some of the most interesting questions for the world of IP. What will the impact be on digital property rights in a secure marketplace, governed by smart contracts? How will copyrights play in digital worlds with their own art and governance? Is there merit in considering a new type of protection category outside of patents and copyrights?
In our inaugural IPWatchdog episode, Kristen Hansen, Patent Strategist and software patent guru, leads a discussion along with our all-star patent panel, digging into:
- The fundamentals of blockchain, cryptocurrencies, and NFTs – and why the hype
- The state of the technology
- Questions around what web evolution, blockchain, and NFT technology means for IP ownership
- Strategies for protecting blockchain and cryptocurrency innovations
Why the Hype?
No matter which corner of the Internet you find yourself searching these days, you are bound to run into something crypto-related. It seems the world has been inundated with anything to do with cryptocurrency, NFTs, and blockchain. Some people are intrigued. Others are outraged. But why are we seeing crypto and blockchain everywhere now? The short answer is that historical trust issues with digital money have been overcome. The longer answer is that blockchain has solved the majority of these trust issues by providing a cryptographic way to store, use, and access data that is secure, decentralized, and private.
What is Blockchain?
Blockchain technology allows multiple parties to transact in a peer-to-peer manner with the benefits of being:
- Decentralized: No need for a trusted intermediary, such as a bank or a government entity.
- Immutable: Unchangeable over time. Transactions cannot be undone or removed – it is strictly an additive system.
- Secure: In order to hack, if you’re going to change one block, everyone else knows immediately if it’s been tampered. Corrupting the system would require changing every block in the chain – and doing so across all the distributed versions of that chain.
- Programmable: Programs can be stored and executed in the blockchain, triggered based on predetermined conditions.
- Unanimous: All network participants agree to the validity of each record in the blockchain. Participants in the network validate (and can get paid) via proof of work confirmations.
- Distributed: Digital ledger technology is distributed to every peer in the peer-to-peer network vs. being passed to a centralized authority for verification.
- Anonymous: Doesn’t need to know your personal identity.
What is Cryptocurrency?
Cryptocurrency is a decentralized, encrypted digital currency that is transferable between peers on the blockchain. Fundamentally, it’s just data with a value and address, but when paired with the benefits of blockchain, it makes for a compelling medium for enabling commerce between the real world and cyberspace. Transactions completed using cryptocurrency are maintained in a distributed public ledger (a blockchain) and are incredibly secure as a result. They are checked, re-checked, and hard to hack. Financial transactions are performed without the help of a third-party service. There is no permission needed to participate. Transactions are fast (under 2 minutes end-to-end, worldwide). Use is anonymous and there is no central banking system.
What is an NFT?
NFT stands for “Non-fungible Token”. It could be a unique piece of digital artwork, a domain name, a rare book, a unique in-game item, an event ticket, a digital collectible like a unique bitmap, or a unique sneaker in a limited-run fashion line. It is non-fungible because it is one-of-a-kind, represents real world items or digital content, and uses blockchain to record transactions. An NFT is functionally similar to a recorded deed in the real world in that you’re not putting the item on the blockchain, but rather something more like a receipt for the item on the blockchain. They are deployed as individual chains of ownership (smart contracts) to track specific assets
What’s the Main Difference Between an NFT and a Cryptocurrency?
There is no fungible trade amongst NFTs because they are unique representations of assets. No one NFT is exactly the same as another NFT. In cryptocurrency, one bitcoin is exactly the same as another bitcoin.
Evolution of the Web and Blockchain’s Place
- Web 1.0. (~1990-2004). The “Read-only Internet”. Open platform. Nobody owned or controlled it. Products and content were limited – not much user created content. Advertisements were banned at the time. Think: Netscape, AOL, Microsoft, Google, etc.
- Web 2.0 (~2004-Present). The “Read/Write Internet”. Can create your own platform or use existing closed platforms (using bigger names out of ease). Rich internet applications, interactivity, social media, and semantic web. Think: Google, Apple, Facebook, Spotify, etc.
- Web 3.0 (Incoming/Underway). Likely open platform using blockchain. Introduces property rights and decentralizes a lot of things. Data is owned by users and fewer large companies.
What Does Web Evolution, Blockchain, and NFT Technology Mean for Intellectual Property Ownership?
The IP world will be on the frontlines as these technologies transition from vague terms to commercial technologies. Many questions begin to arise. Will it bring changes to the patent system? New protection art units? Should there be a new type of protection category outside of patents and copyrights? Does the expansion of blockchain into digital content warrant a move to more aggressive patent licensing?
Blockchain and Cryptocurrency Patent Strategies
- Do wider foreign filings. Sales/in use occurrences are possible from any location with a computing device. Financial transactions are involved, which happen all over the world. China, in particular, is a huge player in blockchain inventions/companies.
- Understand the state of the landscape. There are thousands of blockchain related innovations on file, but many have not yet been allowed. In terms of freedom to operate, it’s an open market. And litigation isn’t common yet since few are profiting from it at this early stage. But in terms of patentability and prior art searching, make sure you’re understanding the published literature landscape since it’s a very active space.
- Draft claims to avoid restriction requirements. Claims are going to look like Methods, Systems, and Computer-Readable Medium Claims.
- Avoid Alice. To mitigate against issues with subject matter eligibility and Alice 101-based rejections, craft your Specification with descriptions for advantages, technical solutions to technical problems, practical applications, improvements to technology, and specific results-based outcomes.
- Adjust for the open source nature of the software. A lot of software in the space is open source and in the public domain. Your Specification needs to cover why the innovation is new or different – or what problems are being solved. Be sure to include descriptions for aspects that are not part of the open source pieces since you may need to rely on them.
Kristen is also joined in this episode by our always exceptional group of IP experts, including:
- Ashley Sloat, President and Director of Patent Strategy at Aurora
- David Jackrel, President of Jackrel Consulting
- Shelley Couturier, Patent Strategist and Search Specialist
- Daniel Wright, Patent Strategist