Intellectual property in the Web3 space

Understanding intellectual property rights

The third generation of the World Wide Web, also known as Web3, encompasses the use of blockchain technology and decentralised solutions to deliver a more accessible, transparent and secure Internet.  

If you don't know what Web3 is all about, why not read this article: 'What is Web3? Understanding how the decentralised web could replace Web2'.

Intellectual property (IP) rights present legal rights used to protect creations of the mind such as literary and artistic works, symbols, inventions, design, names and trade secrets. 

It is an umbrella term for a set of intangible assets. Intellectual property infringement happens when a third party uses the intangible asset without authorisation or consent. Legal protections can expire after some time has passed, but some can last forever as well. 

If we bring together Web3 and intellectual property (IP) rights, a continuous issue can be spotted. Since one of the main perks of decentralisation is to enable interactions and peer-to-peer (P2P) transactions without the meddling of a central authority, it might seem a bit harder to enforce IP rights. 

On the other hand, the blockchain ecosystem has demonstrated so far that it is capable to protect IP due to its other perks such as robust security and immutability as well as help creators in the areas of royalty payments and licensing.

Main types of intellectual property (IP)

Intellectual property can consist of many types of intangibles such as patents, copyrights, trademarks and trade secrets. 

Patents refer to rights granted by a government agency dealing with IP. A patent gives the inventor exclusive rights to the invention which can be a physical invention, technical process or improvement.  

Copyrights provide creators of original material exclusive rights to use, copy or duplicate the creation. For example, musicians and authors of books copyright their creations. The creator can grant other people authorisation to use the creation through a licensing agreement. 

Trademarks refer to symbols, phrases or signs that are recognisable on the market. A trademark separates one product on the market from other products. This type of IP is usually associated with brands. 

Finally, trade secrets refer to a firm’s practice or process that provides an economic advantage. A trade secret can be a certain design, recipe, process, formula or pattern. If an idea is hidden, it exists as a trade secret.

What is the impact of Web3 on IP protection?

Web3 decentralised technologies have an impact on the development of IP in many ways. Decentralised computing changed the way we use digital assets, and these changes highlight some significant challenges regarding IP protection.

While there are challenges such as anonymity and jurisdictional issues, it enables enhanced proof of ownership, novel models of IP ownership with non-fungible tokens (NFTs) and automated risk management models enabled by smart contracts. 

In other words, the decentralised nature of Web3 may require an adapted approach to IP protection such as combining smart contracts with existing IP protection laws and global harmonised legal frameworks. 

The conflict between Web3 and IP ownership

IP protection has always been under the control of central authorities. Even though Web3 has the potential to enhance and manage intellectual property protection more efficiently, there are several areas where they collide within the digital space.

For example, areas of IP protection and Web3 can collide in situations where multiple parties claim fractional ownership if it has not been resolved by standardised legal frameworks.  

Additionally, smart contract vulnerabilities could lead to unauthorized use and access to IP protected assets. Even though divergent blockchain protocols support NFTs, there is a possibility that cross-chain copycats occur and diminish the value of original protected assets.  

Other conflicts include issues such as privacy and publicity rights, legal protection across multiple jurisdictions, enforcing and addressing IP infringements, license disputes as well as the fact that immutability can make it hard to correct initial mistakes and errors.

IP protection within the Web3 space

The emergence of Web3 presents a paradigm shift for intellectual property protection. While challenges exist in the Web3 world, brands and creators can overcome them by implementing innovative strategies, leveraging blockchain technology and collaborating with experts to maintain control over their IP and generate new revenue streams.

To be able to examine the nuances of intellectual property in Web3, it is also important that you are familiar with blockchain technology.

If you are new to this digital landscape, take a look at available courses at our Learn Crypto Academy and learn more about decentralised systems.

Can smart contracts help?

Smart contracts assumed a significant role in IP protection within the digital space by automating the enforcement of IP rights. 

A smart contract presents a self-executing legal agreement, coded with terms and conditions. In terms of the Web3 space, users can create NFTs that represent ownership of digital content such as art, music or patents. NFTs can include smart contracts that enforce licensing agreements, royalties and resale rights.

By utilising smart contract technology, IP holders can determine how their work is used and automate royalty payments whenever their creation or invention is accessed. Automation simplifies licensing and minimises the risk of IP infringements.

Tokenization of intellectual property rights

Tokenization is another IP enforcement mechanism in the digital world which enables the representation of intellectual property ownership on the blockchain through tokens.  

It ensures immutable proof of ownership and makes the whole process transparent. 

Can DAOs own intellectual property?

DAOs stand for decentralised autonomous organizations. For example, Web3 gaming typically includes the establishment of decentralised autonomous organizations to empower players to participate in governance issues and the decision-making process. This community driven approach can foster IP development.

DAOs are self-governing entities with the potential to provide transparent protocols for IP ownership, licensing and revenue distribution.  

Having a legal entity can enable DAOs to own assets such as intellectual property. There has been a lot of discussions regarding the legal personality of DAOs.

If you're interested in finding out more, check out this article: 'DAOs: In Search of Legal Personality & Limited Liability'.

How to protect IP in Web3?

Until there is a harmonised legal approach regarding IP protection in the digital realm, there are a few things you can do to protect your digital assets. 

Within the Web3 ecosystem, utilise smart contracts to automate royalty payment and licensing. Keep in mind that you should create an immutable record of your IP ownership on the blockchain to have a tamper-proof record of your assets.  

Depending on the type of intellectual property you have, you can always register with a suitable government agency and obtain protection in case of any IP infringements. 

Finally, you can always use traditional methods such as non-disclosure agreements (NDAs) to safeguard your creations when interacting and working with third parties. If a person you’re working with signs an NDA, they are legally bound to keep the information confidential. 

Stay updated on legal developments, regulatory changes and court rulings that might have an impact on the regulation of IP in Web3.

The information contained in this article is provided for informational and educational purposes only and should not be construed as legal advice on any subject matter.