Better Policy Can Turn NFTs Into An Intellectual Property Powerhouse - CoinDesk

Better Policy Can Turn NFTs Into An Intellectual Property Powerhouse – CoinDesk

Securities laws issues have often driven crypto policy, but when it comes to non-fungible tokens, we need to prioritize intellectual property interests. Treating all NFTs as financial assets will compromise the U.S.’ position as the gold standard of intellectual property (IP) protection and enforcement.

The immediate danger of this one-size-fits-all approach is that it will damage the commercial prospects of this emerging technology. NFTs are a medium for not only evolving the way we create, use and monetize IP, but also how artists and brands engage with their audiences. It is critical that policy efforts encourage and protect U.S. IP rights holders who are expanding their creative portfolios through NFTs.

This article is part of CoinDesk’s Policy Week. Diana Stern is general counsel at Palm NFT Studio.

IP is a critical part of the U.S. economy. According to the U.S. Patent and Trademark Office (USPTO), industries that intensively use IP protection, which include manufacturers, broadcasters and independent artists, account for over 41% of U.S. gross domestic product (GDP) and employ one-third of the total workforce. American IP is worth $6.6 trillion, more than the nominal GDP of any other country in the world, and accounts for 52% of all U.S. merchandise exports, per the Chamber of Commerce’s Global IP Center (GIPC).

An effective IP regime incentivizes creators and companies to generate new IP and capitalize on their rights in innovative ways. We are just starting to see how rights holders will do this by unlocking the potential of NFTs, which is part of the reason the USPTO requested information on this burgeoning industry last year.

In corporate America, NFTs are crossing the chasm from novelty research and development (R&D) initiatives, to meaningful digital marketing spend that outperforms traditional channels and even to entirely new ways to monetize IP portfolios. In 2022, Nike, Tiffany & Co. and other household names sold NFTs resulting in tens of millions of dollars in revenue, and in Nike’s case over $1 billion in sales volume.

NFTs are contributing directly to the bottom line and transforming how companies connect with their audiences. Where in the past fan fiction may have resulted in a cease-and-desist letter or even a lawsuit from the IP rightsholder, today the preeminent U.S. comic book publisher DC Comics worked with Palm NFT Studio to create one of the largest writers’ rooms by inviting holders of its NFTs to shape the story of future comics. Companies have activated entire communities of brand ambassadors overnight through NFT drops, and holders can remain engaged over time through experiences only made available to them.

Individual artists are also deepening their fan bases with engaging experiments. Digital illustrator Yam Karkai and her co-founders created the World of Women NFTs (WoW), a collection that celebrates art, representation, inclusivity and equal opportunities. WoW joined famed manager Guy Oseary’s star-studded clientele, inked a deal with Reese Witherspoon’s media company Hello Sunshine, and started a foundation dedicated to empowering women in Web3. U.S.-based artists Tyler Hobbs and Dandelion Wist Mané created QQL, a project that invites collectors to become co-creators by using the algorithm they designed to add an NFT to the collection. It successfully sold out to the tune of nearly $17 million in late 2022 when NFT sales had already cooled off, revealing potentially evergreen demand for innovative, IP-driven NFTs.