Intro to intellectual property for web3 | Scott Kominers

Transcript

[Music] thank you so today we are talking about uh very high level intellectual property strategy for web 3. um just like with the auctions I'm going to like frame and explain why we're even talking about this um because just like with auctions it's the type of thing that sort of on its face sounds like it's sort of a niche topic right um but in fact uh many different web 3 products and again not even just ones that are about digital branding or something of the sort um face some question about IP strategy especially like when you're building composable protocols right there's there's all this question and it can be about you know IP in the sense of brand

and media or just IP in the sense of inventions and and protocols and creation and there are questions like what is your strategy around it how do you decide how your project is going to leverage its IP and the IP created by you know various community members um to what extent is you know do you want this thing to be very open and sort of public and accessible to what extent do you want IP to be proprietary and how do you choose where different parts of the product fall in that Spectrum um so one thing is just lots of web 3 projects even if they don't sort of think of themselves as IP products are in fact going to be engaging with questions of Ip strategy so many of you will do that um conversely novel IP creation

um has been in my view like one of the most sort of breakout sort of successful and perhaps surprisingly successful applications to date right like you know we knew from open source software that it's possible to develop you know sort of applications as a as a community and that there's like a tremendous amount of value in that when it works that is itself you know sort of an instance of you know sort of community composition of Ip um taking that idea like if you had asked me five years ago whether you could take that to Brand building or um you know or the design like like the writing of a book or something like that I would have thought it was absurdly hard right this was not a thing that

would have occurred to me that you could build you know products around uh and web3 but and yet web three and and token design have really proven to be an unlock for that have they've sort of created ways like new ways of building Community Based IP in lots of categories where I would have thought it was previously like you know difficult to Impossible uh and so on the one hand this is something that like a lot of us are going to use on the other hand it's an illustration of like how web3 can really work well and then third you know even if like you know sort of this isn't you know this specific application category is not one that that really resonates with what you're building it's an illustration of the web 3 ownership and incentive Loop and so like you know we're gonna we're gonna do a couple of case studies today

and sort of try and work out like how different web 3ip models work what drives them when you want to use them all of that thinking just like thinking about game theory in the context of auctions is useful for just like understanding how do we do token design same thing here it's like how do we do incentive design in a web 3 project this is going to like get us thinking about how that actually works um okay the uh so reminder from yesterday there's this idea of the web 3 opportunity right like shared ownership is about lining incentives uh and you know I I have to say I've been thinking about Jana's comment essentially non-stop since that session I guess he took a break for the auction

session but all the open space in my like schedule between like you know the end of the first session of yesterday and like you know starting the session today um you know I've really been thinking hard about this you know sort of idea that this framing of like you know you're giving something up right this in reference to platform design this idea that like you're giving something up when you when you enter into web three like you you give away some value to your community and you know and you know as a way of driving sort of like larger value creation Downstream that actually like you know it sort of Misses many of the contexts right many of the contexts we think of web3 as being purely additive right there's sort of a possibility that the fundamental the product can be

fundamentally more valuable in the end and that comes just from you know that can come from giving up nothing or or at least very little and that's what a lot of these IP strategies actually look like right it's super original I like left that talking I was like wow like you know actually this IP example is more an instance of purely additive value creation through web3 then uh then it is sort of about you know giving up a part of your brand right it's much more um like I talked about in the answer and the answer about the hundreds yesterday it's like it's much more about sharing ownership as a way of creating something that is bigger and greater than the constituent Parts than like

chopping up parts and giving them to people somehow um and we'll see that in the in the IP context we're talking in the different case studies so I thought that was like you know as I say that was just like a really really deep insight and you know wanted to shout it out and and bring it in as part of the frame for today so cool what are we doing so three parts first thing just like a quick review what is the purpose of intellectual property why do we have this at all and sort of like what is it uh and then two case studies so we're going to talk about nft brand building um in a you know sort of both a um well we'll see we're talking about you know nft brand building in two projects and then take those ideas and think about

what they mean in the context of software you know sort of composable software protocols uh and then at the very end and this is going to be like serious lightning round we might do this in like seven minutes or something uh I'm just gonna quickly run you through the basic parameters of an IP design so if you are in fact like you know building a uh you know a crypto project that is centered directly on on IP questions you sort of know what you're asking about you know what you're thinking about uh that as I say it's a lightning round it's going to be a summary and it is not exhaustive like this just like auctions is an entire field intellectual property strategy is an entire field this is purely introductory if you want more stuff please come and chat with me yeah it's super interesting and as you've probably

already inferred I'm a huge IP geek as well as an auction geek so should be fun all right footnotes I am not a lawyer none of this is legal advice uh as you're developing your own IP strategy you should consult with a lawyer we are talking about IP business strategy actually putting IP designs into practice requires really careful thinking about the legal Frameworks as well but more broadly just like if you're going to do a business model that is centered on IP you've got to talk to a lawyer early uh second thing in my slides today I'm going to use examples drawn from various nfts I hold uh this is actually like demonstrative I'm using the nfts in accordance with the IP rights granted through the holder agreements uh so it's

like a meta illustration of how the whole thing works uh this is not in any way an endorsement of those or other specific nft projects right this is this is like you know just uh I like meta illustration because it's fun cool all right so what is intellectual property for why do we have this so first thing to do is remember why we have property right what is the point of property in the first place um it's a little hard to do in two bullets but if I had to do it in two bullets I would say that well-defined property rights are essential for enabling markets and creating investment incentives and what do I mean by that so

enabling markets is to enable people to trade in property rights right like if we don't know who owns a given plot of land it's not possible for someone to you know buy or sell it right you know if you have two people with like sort of competing claims for the same piece of land and some third person wants shows up and says I want to buy this well who do they buy it from right so one reason you need property rights and well-defined property rights is to enable markets and by the way it's not just markets in the property itself but perhaps you know markets derived from the property right if I show up and I want to um you know someone owns a commercial you know there's two people with competing claims for a commercial building and I would like to put a restaurant in that commercial building

I don't know who I lease it from right like the derived product gets blocked as well and so we're losing a lot of value there and second of all it's about investment incentives um just like we talked about with tokens yesterday if somebody doesn't own something they don't internalize all the value that's created from improvements right so if you're renting an apartment and you feel um you know really really um creative and decide to gut the kitchen you know um you get to enjoy that new kitchen until the end of your lease but in the end most of the value accrues to the landlord in fact you know the landlord

you know if you just improve the kitchen the landlord might you know say well gosh you know I'm going to raise the rent now because you have a nicer kitchen I'll bet I can rent the apartment to somebody else in the future you know whereas by contrast if you own the house if you own a house or you own a condo or something and you replace the kitchen now you internalize the benefit right if you know first of all you get to use it for as long as you'd like you know assuming you know modulo the you know kitchen appliances need to be replaced or whatever down the line you'd use it for as long as you like and when you later sell it you internalize the value and again this value for and so if you own the house rather than renting the house you're much more

willing to make investments that improve it and then sort of like raise the overall value of the house yourself this by the way also goes for non-transferable forms of property right like human capital like intellectual sort of like you know your your education um you know all the cool stuff you're learning at crypto startup school and so forth like you know you're incentivized to invest in all of this new knowledge uh because then you get to use it right you internalize the benefits of gaining the knowledge so property is important because and again there are markets on top of that right you know you could build a startup and then do stuff with it like property is important because it creates markets and it creates investment it enables markets and it creates investment incentives

so intellectual property is about property over ideas right in many categories idea can be a you know a protocol an idea can be an invention an idea can be a character an idea can be a story World um and note that unlike you know with that with a house or a piece of land or like you know a box of crackers um I have no idea how he came up with that third example just the first thing that came to mind idea space is much harder to delineate right you know it's a little bit it's a lot harder to Define you know what are similar inventions this is why there's a you know there's often controversy over whether you know some new product does or does not infringe on a patent but the fundamental purpose of delineating property in idea space is

the same right it's about you know creating incentives for people to develop that intellectual property right to invent new products or to design new protocols or to create cool characters and story worlds and then eventually often to enable markets in that IP um again I'm not a lawyer but there are lots of different forms of Ip protection that exist today and they have very different legal structures and enforcement mechanisms uh so you know we've got you know miscellaneous footnotes here copyright trademark patent trade secret and so forth we're mostly going to like shove all of that stuff under the rug for the purposes of today again if you are doing IP work talk to a lawyer to figure out how you want to protect the intellectual

property that you're working with um but we're going to shove it under the rug today and think about just sort of like IP as a concept right like there there's ideas that we have property rights in um so first mini case stuff with IP and web3 here we have subduct 6484. this is my uh you know my pfp um subducts have an intellectual property agreement uh of the sort of It's A variation of the Forum that was uh initially popularized by the board apiat Club um where the holder of the nft associated to a subdoc image um has the right to use that image for

both uh you know sort of personal use and Commercial purposes so um you know first of all uh here's here's a you know personal use I have included this subduck image in the slides per the IP license um and you know this then this excerpt here is from the you know the terms and conditions right so this is actually like an IP right that is granted via sort of external legal contract right there's a terms and conditions for the holders of the subducts nfts um but it says like you know you could use the IP you can create derivative works you can even sell them and so our first flight you know just simple puzzle question is why this is pretty unusual right it's it's

very uncommon you know in in classic brand building it was it has not been standard we shall let's say for um intellectual property creators to just sort of like allow anybody who owns a part of you know an instance of the product to build their own derivatives right like you know if I buy a Mickey Mouse t-shirt I don't then get to like you know produce my own Mickey Mouse cartoons so why is subducts doing this um think to yourself for 20 seconds I know some of you guys like actually build like domain IP so so you'll have you'll have like you know specific views from your own products and projects which is great and bring the please bring those to the discussions well think to yourself for 20 seconds talk to

a neighbor for a minute and a half we'll come back what do we think why does would subducts share their IP with holders what's does this make any sense at all uh Nikita from chain Patrol uh also one one thing we we were thinking is like I mean it's like kind of like free free marketing basically like um yeah I don't know sub Ducks personally but I know like we've like we have budgie Penguins ourselves and like everybody in the community makes a ton of uh you know memes out of it uh animations and like everybody it's like work that they did their team doesn't have to do it's whatever the community creates um yeah it gets posted all over Twitter all over socials and everybody gets to

see it absolutely yeah right like it has a huge marketing application and it means that you know you have a you know a whole community of marketers rather than just you know sort of the central brand doing that let me stick with you for one second why does the community do it right why do people post pudgy Penguins memes like what's what's going on there well one it's fun like I think they just like it that people see it as their identity like when we bought a penguin like part of it was speculative obviously like we just wanted number to go up but the other part of it was like we like the art and we actually like picked one like not because it was like on the floor or something but because we we actually paid above floor for the one that we wanted because we oh this one looks more

cute you know um no absolutely right like it reinforces this identity aspect sorry go ahead keep talking yeah one more thing I just want to get your thoughts on is like when people create like um I do think there's like a challenge with it too because people create like kind of like copycat collections or like derivative collection like for example with penguins they made this thing called Mecca penguins and so like a couple of thousand and eth in volume actually went into that project and we're thinking that's like volume that could have been continually been in the maybe the penguin ecosystem but then people went and bought these Mecca Penguins instead and are just thinking like does that also okay challenges where people might leave your project and spend money elsewhere

absolutely great question um so let's let's ask the room LG Penguins lodges they give people the right to create derivatives someone creates Mecca Penguins now the subducts license says like you can't create new nfts without like changing more than 75 percent of the imagery or something like that but I'll bet the Mecha Penguins changed but 75 of the imagery or maybe they just allow all commercial nft derivatives whatever so someone creates Mecha Penguins this is let's let's stipulate for the purpose of the the thought question completely okay under the terms of the agreement there's now a thousand each of volume in Mecca Penguins is this good for pudgy Penguins bad for pudgy penguins and different how do we feel about it how many people are like wow that sounds

great I want that got a couple okay so the whoever it is in the back who's got their hand up please run up and and say why and then you know while we're well while that person is joining the mic you know why you know how many people are like no way this is like super unfortunate like I really really don't want the mecca penguins why why is this good for you know why do you argue this is good for the Penguins yeah so I think in the short term in my bud but in the long term it's probably good because it's somewhat brought against the community right um and you still sort of end up in a situation where um the original project feels aspirational right so you might still end up having people who have like the

derivative work but still say over time I'm going to trade this over time and flip it until I end up having like the original thing um so I think fundamentally like derivative communities do end up probably adding some form of value um to the base base communities um even if you end up being medium to long term super interesting so like and the question so does that resonate do does that feel like the experience of Mecca penguins and Pudgies okay I actually I'm not as familiar with the with the whole Mecca penguin situation but I don't think they ever like officially brought them into the community as like uh like I think they had some like hesitation about like officially

associating with them because yeah I think also the challenge was that like the mecca penguin project was trying to say they're they were trying to act more as if they were like officially Associated but I think the I I might be like making things up here to be honest but like but I think that like the original pudgy Penguins project was trying to like not fully associate with them like and so uh but then you see examples with like um um there was like these mutant Hound collars and like Yuga labs and there I think they actually did say something like the mutant hounds which weren't officially a Yuga project but they would end up being in like the other side game as like actual avatars and I think they

managed to get a partnership there maybe or something along those lines so in that case like that they it's like different I feel like different communities handle in different ways some people want to keep their IP private but or like not as easily make those make those like oh yeah you you made a derivative so now you're kind of part of the community but then with Yuga I think they they did manage to make some of those Partnerships happen love it um that is this conversation is prefacing literally what's on the next slide so I I'm loving this Let's do let's do one more comment and then we'll uh then we'll we'll recap um hi um JP from friends um so awesome actually I think I have a slightly different opinion I think in

the short term it's like neutral to positive for the original project the reason it's neutral to positive is because it drives up additional demand for the existing project because people are like well all these people want to buy this other thing because they are priced out or they missed out on the original project so it could feel positive but in the long run I actually think it's negative and the reason I think the second order effects are negative is because most of the time when you look in like in in practice these uh these derivative projects they they're only copying the art they're not actually doing anything unique with the community so the community that you joined is like a shell of the community of the original so you end up without Community cohesion which is something you talked about yesterday so you join these shell projects and then you end up realizing

that you did not buy the thing that you thought you were going to buy and a lot of people end up feeling pretty pretty disillusioned by both projects more more likely that you know the River Project they bought into so that could hurt the original project where people are like well now they might feel negative things around that brand even though that brand did not create this derivative project absolutely I love it okay these this is entire this is the tension right this is the question it's like we're adding new derivatives to the ecosystem where we're inviting people to create derivatives when they create commercial derivatives there's a risk that they might create commercial derivatives than one fashion or another you know harm the brand maybe it takes people away maybe it just like you know it's not very good you know

it's sort of like you know they tried to make like cool robotic penguins and they actually got sort of like weird looking penguins that don't quite look like robots don't quite look like penguins you know they're is there neither fish nor foul they're neither robot nor foul or something um foreign on the one hand sharing IP encourages people to create derivatives this expands the brand footprint this expands the Brand's reach but it's not without risk right you know there's this possibility that someone might create just like a low quality or an offensive derivative um there is at the same time like in this conversation in the comment about mutant hounds right there's a semi-permeable membrane between the brand and the fan products right it's still the case that there is a core brand pudgy Penguins can

decide not to absorb the mecca Penguins or if they really like the Mecha Penguins right if they turned out that it was like really great for the uh you know for the for the brand for the ecosystem then maybe they could bring it in in you know in-house or they could do some sort of partnership this is to my understanding what Yuga has done with with the mecca collars sorry the mega that keeps saying it wrong the mutant colors uh Mecca hounds probably is a derivative somewhere out there I bet but that's not the one mutant hounds um you know where where there's you know shared IP and co-development of game assets and things like that um and so web 3 has enabled this model where you you can sort of share ownership you can grant sort of this broader license to

create derivatives and then you as the brand have some degree of control of what actually you know sort of feeds back in you can't control entirely right you can't you know sort of once you've granted a license to create a derivative you can't sort of take you can't post hoc say never mind you know we didn't like that derivative um again I am not a lawyer that is not I'm not making this as a legal statement I'm making it as a heuristic statement about how IP strategy you know and policy Works um but you do have control of what becomes part of the you know sort of part of the ecosystem and you know here we have you know here we have my subdoc in lots of different variations um the bottom left the uh is is my subduct decked out in Hanukkah attire by

a Community member Freddie Lowry who was doing such a good job of creating you know subject derivatives in various costumes that the official like it was a subducts team you know invited Lowry in as like you know sort of a you know a collaborator and he got like a subdux tailor shop in the subdux boardwalk right so like you literally there's this instance of like somebody you know from the community who was just creating really cool derivatives that people liked and we're buying right they were buying it using the the vote currency uh becoming part of it um second image there uh you're seeing bored and dangerous uh in fact sadly you know subducts were not um you know eligible it was only apes and mutants um but you know subjects can be included in other derivative projects including

like you know sort of the the more recent uh or tally Labs podcast that's for uh Jenkins the valley podcast that's forthcoming from tally Labs uh and then up there you know you can always print your your ducks on mugs what is it that like stops these things from you know stops communities from creating especially low quality derivatives on the margin mostly like where's the protection come from the hope is that it comes from that shared ownership right it's like and this is not perfect right like if somebody really wanted to acquire a token for the sake of like producing something like really ugly or something they you know and they had the the means with which to do so they could but if you're you know right to produce the derivatives like you're you if you're

producing a collection of Mecca penguins and to do that you need to buy a hundred penguins or something of the sort or like Mecha ducks and you need 100 ducks you're at least somewhat indexed on the brand right like you have you know you have a shared and aligned incentive to try and make something that's good doesn't mean you're going to succeed doesn't mean you necessarily know how to do it or have the opportunity to but it does mean that there is some of that alignment there foreign as I said before those IP Agreements are structured via contract um at least at present most of these Agreements are not enforced on chain um although I've heard people thinking about prototypes for like how you might enforce certain types of Ip agreements on chain mostly right now this is all enforced through the legal system uh reminder I am not a lawyer

um one more sort of nft example just to like plant so we just talked about Creator sharing IP with holders another model is to share right that we've seen popularized here that's sort of akin to what we saw you know really the sort of one of the core IP models in open source software is cc0 no rights reserved you're not just granting rights to Holders you're granting them to everyone and so you know what does this mean it's like you know it's open source but for brand IP and there's this related question of like why the heck would you do that we can think it through right it's like what's happening we're going to create many derivatives and we're inviting

creation derivatives from anyone now we have no control over what types of derivatives they might produce um oh and also note that the value from those derivatives you know when when I produce a duck you know a mug with my sup duck and like sell you know subduct mugs to people um you know that value accrues to holders and I have that shared incentive along with the brand because I am a holder here you don't necessarily right like you know you're and there's not necessarily a mechanism by which that value directly accrues to holders right it's not that holders are authorized to like sell hats with their their uh with the characters on it well rather they are but so is everybody else um

so in a second we're going to think about like how does value capture here well how does this like Drive value back into the original brand but but here's a sort of like you know cc0 progression um so this is the blit map logo from uh you know from an early CC zero collection called blit map which then appeared on a hat in the chain Runners um and then people like the hats so they you know in chain Runners to cc0 as well they like the hat so they actually produced The Hat um you know sort of a you know a blip map and chain writer's collector produced the Hat with the blip map logo from the Chandler's collection and then that hat became memes so in the in the elite skulls collection where I'm I'm one of the the the serves the 532s um you know we had a trait which was you know A variation of the Hat featuring

the logo uh and of course all of these collections are cc0 which means in particular that this nft uh I'm including here is not mine right like there is a holder I actually don't remember off the top of my head who the holder is I don't think I know this person personally um you know but because it's cc0 I can just include it by slide so I had to include one of my sub ducks to use a sub duck but you know all of these you know I actually don't hold any of these assets although I have one of the hats coming in the mail similarly with loot right like loot introduced a very simple primitive right just lists of items that you might have in adventure games and people have built on top of them lots of different architectures uh they've built games that use those lists

as sort of like core items they've built characters that like interact with those items and then you know make sense in the games um they've done storytelling they're all these projects with people like you know writing stories in the loot verse uh and even like leveling infrastructure like these these assets don't have the ability to level up but like you can stack assets and compose around them in ways that level up you know here you have all these like different like some like really serious Dev teams like building games that sit on these assets that they did not create and so what's going on here relative to Holders only IP there's a much larger network of people who might build right it's literally everyone but a lot of them are you know sort of

are not owners and so the question is is the asset something that can create enough value for the people who build on it to want to build on it and as I said you know how does it feedback so when do we think cc0 is a good idea when might you want to like just like totally open up IP um same thing let's let's think to ourselves for 20 seconds then talk to your neighbor for a real minute and a half and then and then we'll come back all right when cc0 does it make sense when does it make sense

hey Scott Iman here from Shield awesome so I think there's a couple trends that like I've seen with um cc0 projects they tend to be very memeable um so just thinking about nouns goblins I believe goblins is cc0 um they're all projects that are like very very so one is memeable and two is like I think typically these projects haven't had a very clear road map or direction from like a central team um and I think those are the types of projects where it opens up a lot a lot more possibility for okay the community you guys can take this wherever you want um there's this kind of like Central meme but beyond that like it's really whatever you guys want to do it's very

different compared to like board Apes where like there is in a you know a sense of like a more clear road map and Direction that's being led by like a specific team yep awesome I love it spot on right like what's making these tick it's like I like to call them building blocks like memes is exactly right it's like The Primitives the the fundamental unit in Goblin Town the fundamental unit in loot like these are assets that are very easy to build and reference and Meme and create on top of and on the other hand exactly as you said right like they benefit a lot from that because you know they generate this like attention among very broad communities but in fact the creators themselves you know sort of didn't have you know at least didn't Express a desire to build you know sort of the

full scale of the thing they really wanted to build along with the community and their experimentation so it's both it lowers the cost of experimenting right it's something that can embed into lots of different experiments and the project design is like set up to embrace the experiments in the first place spot on um thanks perfect so what's the key what have we been watching in in both of these contexts right the derivatives have to drive value back to the original brand and brand assets on average right it doesn't have to be like every single derivative of a goblin or or a loot or you know a sub duck or whatever is is actually like creating value for subducts but on average in fact the Goblin's creating value for subducts I don't know doesn't have to create value for their parent

brand but on average the derivative has to create value for the parent brand um and this is very much just like the way that like you know within Community like creating stuff right even if it's not built on top of Ip like just like you know people creating new t-shirts or like you know having Twitter spaces or whatever like creates you know ways of driving value back to the assets um we don't have time to do this as a discussion block unfortunately but the the real challenge question we talked on in the first session about value capture is how do you then capture the value from derivatives we've seen some illustrations already so if they're part of the session right subducts can absorb some of the you know the best derivatives through a semi-permeable

membrane pudgy Penguins could do that like any of these projects can if there's something that's really good and that they think is like building the brand in the direction that they want to build they can partner they can even acquire right they can sort of make fan projects Canon which by the way is like one of the coolest things about web3 brand IP right like how awesome is it that you can like be really really good at creating sub duck costumes and then like become part of subducts you know all of those costumes get redcond in as like the subdux Halloween um with blit map and loot right with these like cc0 projects you actually need something stronger right it's not just you know it's not just that the the team could absorb projects but you really need

the value to feed back into demand for the original assets right and and to sort of grow the value of the brand beyond the extent to which sort of things sort of drift there's a things borrow from it right so like the cool thing about you know the uh the blint cap is that a lot of people had never heard of blit map and they learned about it because of chain runners and like that's pretty cool right it's like a way of like sweeping many new people into your communities but as the things get more memed out you have to like make sure that that value comes back to the the core and that's like you know the nogles like the nouns glasses are like really good at that right they're sort of like instantaneously recognizable even if you have no idea what they are you can like recognize that they are a brand asset

and it's important to make sure that that link eventually drives value for things from the core brand right to be able to capture that value as well um by the way just as a footnote a contract type that was successful in in a number of Open Source software contacts but that I haven't seen as much there are a few examples it's a little bit like forgotten runes does I believe that there haven't seen nearly as many versions of in in nft space are contracts that basically you know allow free creation of derivatives but like some degree of Revenue share on on Commercial derivatives or or commercial derivatives over a certain scale so then you get all the memes right like you've you've directly invited people to meme but like when they end up having sort of like a

really successful sort of commercial breakout follow-up project the brand shares some of the upside um that was like a very successful model for certain certain open source software products um and as I say it's much less common in Ft space probably in part because it's very hard to do on chain at the moment but like we could certainly imagine versions of that down the road anyhow all right so as we just saw it was just said embeddedness is important has to like you know Drive value back to the original assets right it's important for loot actually let me make that point like one more time in a slightly different way it's important for loot that all these games be built on the original loot assets right if you bring your loot bag into any loot versus game that's got to be great it has to be like you want to own the best loot bag

because it gives you the best items in all the different games corollary footnote sharing IP very much not always optimal right many firms benefit from Brand curation um and perhaps and especially in a world where there's a lot of meming and derivative experimentation you might actually think that the value to having a like very well curated brand is much higher um we're even uh you know footnote on the footnote we're seeing some established Brands uh starting to like sort of tiptoe into this sort of experimentation so like hottie toes released this uh Bones nft collection where you get you know personal use rights and some very limited commercial rights mostly around merchandise and stuff and they they're you it seems that they're very carefully

looking at like what that encourages right like you know you know they're they're a different set of like iconography from their main brand assets but they're they're clearly related and so there are ways to like sort of experiment and try this out as as you go as well I'm gonna like tell you very quickly you know sort of this is a summary slide for open versus proprietary nfts this just like summarizes everything we just saw um there's a second summary slide that sort of extrapolates that same observation to protocols right so if you're a proprietary protocol then the IP creators incentivize all of the value they create which means they sort of had maximal incentive to invest in development but it means development can be much slower because people aren't sharing their IP around right like you know if someone invents some you know sort of a

you know a really cool idea then other people either have to like reinvent it or invent around it or something of the sort fully open uh you know protocol development it's much harder to internalize value easier to become embedded um and also the marginal return on investment is higher right because like you know there's there's more development that can happen on top of your software like you know and also it often becomes less costly to develop because there's all this all of the open library to build on and so thinking about these types of trade-offs or what's going to calibrate your decisions about how open versus how proprietary to be it's like how much are people gonna how much does opening the IP enable people to like produce things that are valuable for the overarching project

versus relative to the additional difficulties it creates in those creators capturing value Ultra lightning round in like four minutes basic parameters of an IP design you have to decide what is the IP unit like what are the rights who has them and then how like you know how are they licensed you know transferred and so forth um often and again you know lots of crypto projects are in one fashion or another about using tokens to define the IP asset right or to at least Define you make the you know to to allocate the IP asset you know the IPS it also doesn't live in the token but is like attached to it by contract or or

chain reference but the the IP sort of construct is attached to the token uh lots of questions about which types of Rights you might want to wrap up in that token we already talked about personal use and commercial use there's also do you want to let people sub license like can I take my you know token linked asset and like you know grant that IP to somebody else um thing that is you know sort of not nearly thought about as much as it should um although I know some of you guys are working on it um how well did the how are the derivatives linked to The Originals right to what extent does New Creation sort of like directly relate to the original product then what are the IP policies how are they

enforced and again who internalizes you know sort of the results uh I think at one point we're going to see this stuff happening on chain um or I I think and I hope and I sort of expect that like at some point a lot of the stuff is going to be managed on chain they'll be just sort of like you know flexible markets and a lot of different types of Ip licenses but right now this is mostly at least enforced to be an off-chain mechanisms and like that's okay right like we talked about Progressive decentralization yesterday like IP enforcement in the you know in in the real in the physical world isn't perfect but it's actually like you know pretty good right this is like you know there's been a lot of careful structured work on like how to how to define and manage and enforce IP rights and so leveraging

those institutions you know is a great idea at least until you know we figure out ways to do it on chain as well uh and then lastly and this is very important right people can't invest right property rights aren't useful if people don't understand who has them and in particular if they don't understand that they have them and so the extent that you are sharing IP with your community um you know you have to create those rights you have to clarify them to people and you have to make them durable um and as I said you're going to hear from miles um soon uh but let me just quickly shout out um his work with with a number of collaborators on these can't be evil licenses where the contract itself so it's a legal contract

but the contract itself is encoded on chain and then you know can be embedded in a smart contract for reference as a way of making that commitment durable right sort of guaranteeing that you know the the project Creator can't just like change the terms of service on a lark because the terms of service for IP are in effect in the smart contract and this type of innovation by the way again is not limited to IP you know we talked yesterday about just like credible commitments are useful for investment and for getting people to like buy into your platform this is a great example of it but but I think there are many others um so if you're doing IP you gotta understand what is the unit what are the associated policies and how are those policies codified and maintained

and then you know why are we doing this again it's like what will that IP structure incentivize in terms of behavior and how does it feedback into the value of the product so you know you're it's sort of like a um it's like a fixed Point problem right you're sort of you're trying to craft a policy that incentivizes a specific type of behavior then figure out how you implement that policy and confirm that it's going to actually drive that behavior and all of this again like with all of our other web 3 examples it's really about how does that behavior among users Drive value back into the project and make it a greater whole than it ever could have been before oh and just quick footnote on that greater whole thing like this is an instance that's true in my view like you know reflecting on again

on johanna's comment from yesterday is totally is many times truly additive right like the subducts didn't have costumes but giving people the right to create costumes for sub talks suddenly created this whole new part of the septux ecosystem that made them a better product for everyone and so that's a sense in which web3 is really like truly adding right it's it's not about it's not like you know the the subduct creators gave up the right you know their own right to build costumes for the ducks in fact they didn't they literally could introduce that product tomorrow like who knows maybe it was on the road map and they didn't need to maybe it's still on the road map maybe they were never thinking about it but whatever the case all they did was invite somebody else to create costumes in a fashion that's supplemental to all the rights they have

and like what do you know you get costumes everyone's showing off their ducks and Halloween costumes and holiday you know outfits and stuff it's pretty cool so anyhow it really feeds back into this you know and again I'm reflecting on this more and more like you know as since yesterday like this sort of purely additive web 3 opportunity that that really is sort of a I don't know a great way to think about it um cool so what Behavior do you want to incentivize how do you implement that and don't forget to consult a lawyer QED I'm not sure if I missed this part um but let's say I have something that I have the IP license to because I own the nft I've signed some agreements with other people

um and then I sell that nft what exactly happens in that case oh great question okay and again so so I'm not a lawyer and this varies from contract structure to contract structure so what the question is I have an nft which grants me say commercial rights to produce t-shirts with my subduck on it I sub license those rights to you know a t-shirt producer right who's going to produce shirts with ducks and then you know I sell my duck does the T-shirt producer still have the rights to produce those shirts um and and there's questions of can they produce new ones are the ones they've already produced still things they can sell all of these categories and and you know who makes money if they do sell them um these are these rights are are specified by term of contract one of the components of the design of those can't

be evil licenses I mentioned is that they address this case in a in a very smooth way right like rights and sub licenses cut off at the moment of transfer um not all to my knowledge not all um nftip agreements like clearly specify this one way or another um but again this is like a reason it's really important to think through carefully like what all the different use and edge cases are um one likes to think that people who you know buy their duck and then create t-shirts off of the duck are never going to sell it by the way I don't remember off the top of my head whether the subdux agreement deals with sub licenses I'm just using the duck as an example is never going to sell it but in fact they might and you need a smooth process for for adjudicating like what happens to

sub licenses or even the original holders rights right if they produced a series of t-shirts themselves with the duck on them can they continue selling those shirts after the fact um really important to work through these types of details um and Also to clarify how those details are specified because that's important for someone evaluating whether they want to buy the asset or not great question awesome and the answer is important to think through okay thanks again for another excellent talk I think yesterday we kind of covered defensibility through Network effects and another a number of other properties and today it seems like we're talking about kind of the benefits of distribution that you can get through mutual incentives with ipn communities how do you think about IP in terms of defensibility in the face of maybe adversarial entities at the at the

boundary of web 2 and web 3 because I think web2 companies are pretty aggressive about claiming territory and in web 3 we're much more community community oriented so what are your thoughts about strategy there first of all I think we're seeing my answer to this one again uh is opinion I don't think I don't think there's a known like true answer to this question yet like what what's going to happen with your sort of classic IP um and and both web 2 type classic IP and also um you know historic classical IP right like you know sort of brands that have existed for centuries but I think what we're seeing with with the the historic IP you know sort of brands that have existed for centuries is that a lot

of them are realizing that there is value to sort of sharing bits of their brand with their greatest enthusiasts right the you know and we're seeing this not just with like clothing brands but also with media properties and I guess Porsche recently like you know sort of released an nft project where part of the utility is they're inviting their holders to like come in and like sort of talk to Porsche designers and sort of like you know sort of to some degree advise on and shape the the future of the company like one one small refinement so not so much the brand side but the actual underlying Technical Innovations like the patenting strategy oh I'm sorry yes yes good sorry totally right okay let me finish the story on the brands for a second and then we'll talk about patents um

right so I think that they're like seeing that there is value assuming that there's value there but but if you look at how these companies are doing it they're doing it in a very different way right they're sort of you know they're not sharing the core brand IP they're sort of trying to experiment and explore how like you can you can add more to it and sort of you know sort of through the web through space uh mostly other thing is is sort of web 2 you know web 2 and web3 interactions I think there's a lot of tension right now about whether the web 2 platforms are going to be strongly incentivized to let the web 3 content in great like you know Twitter linking you know sort of linking to nft wallets and introducing any sort of verified nft profiles Instagram talking about doing that and then suddenly not um you know

I think there's gonna be a lot of pressure as people like start to build up libraries of digital assets that they own I think there's gonna be a lot of pressure for web 2 companies to let those assets in um whether you know how that pressure relates to those companies incentives to keep their ecosystems closed and walled I don't know we'll have to see how it plays out but I think at least they're going to be under a lot of Market pressure for it now on your question as you know sort of on Tech so the interesting thing first of all is that you know web 2 again this is this is highly over generalized like but web2 has had sort of an interesting relationship with with tech IP on the one hand um a lot of the web 2 Giants have

extremely locked down um you know control of their their core IP think of like the Google you know the Google search algorithm um you know or Amazon's like recommendation system and stuff like that on the other hand they've actually like done a lot of work to try and um cover like create a very large like public patent space of a lot of their secondary Innovations as sort of like a a combination like territory claim and like litigation blocker which was sort of like a really strange you'll hear the term patent Thicket um it's like sort of this funny like yeah you know almost like accident of of sort of all these companies trying to prove that they have lots of types of Ip to block litigation from their competitors and from third parties

um I think we are likely to see again this is strong conjecture and opinion who the heck knows um I think we're likely to see that like that patent Thicket type activity sort of morph into like more like web3 shared IP with cross licensing and and more open development because I think that's that's fundamentally like the the most Market efficient mode for it to exist um I say again as an opinion um on the like proprietary algorithms and things I think we're actually like not only are like web 2 companies going to continue to keep those private but we're going to see some degree of privacy of that in web 3 also right like if you have the best recommender

algorithm you might want to share that with people in order to embed it into other software and like you know get it to be the central recommender algorithm of the web 3 internet or you might want to keep it as proprietary as possible and like monetize it and I think it's important to recognize that these two business models are going to coexist and the question is how do you like how do you make them integrate in a way that creates the maximum amount of value right like some IP is only worth investing in if you really internalize all the benefits at the end but by the same token like I think web3 is going to raise the value and the opportunity for these IPS that are like you know core components that are like Primitives that you can build on like reputation signals and so forth

um and so I think it's not that we're gonna like lose that proprietary stuff like it's going to exist forever they're likely to exist forever but we're gonna get a big boost to the things that can be shared and sort of composed upon anyhow sorry really long you know the first long answer to the question it wasn't actually the one you were asking then answer long answer the question you're asking but hopefully that helps that was a great answer thank you thanks my question is how do you retain uh value capture or scarcity or just creative control uh over like cc0 assets is that something you should even try to do great question I mean you know I think creative control is is impossible right like um in fact you know we saw this with with lead skulls um some project

some some Anonymous person create or team created a spin-off project that was really really heavily mashing up the elite skulls artwork and the or imagery and the and the chainwriters imagery and really looked like it was probably a rug right like there was you know there no way no way to know but just like didn't like they had this sort of like sensation and like they didn't reach out to any of us like it was sort of you know just happening sort of independently and the the skulls team decided sort of as a group that it was important to explicitly say look this thing is not affiliated with us we're like you know we haven't heard anything from them we've tried to get in contact and haven't been able to successfully we're not sure what to make of it but you know per the terms of the license it's not

like anything we do to like stop that project right it's completely you know permitted under cc0 for somebody else to like take the imagery even the exact same imagery if they wanted and like you know create a you know create a rug whether that's like legally you know sort of appropriate or whatever completely different story right like again I am not a lawyer there are all sorts of challenges to that on other grounds but not on the use of the imagery right right um and so the best we could do is just tell the community like look this isn't us we don't think they're really in any way affiliated they don't seem to be community members like you know it's it seems very risky um so you don't you can't maintain creative control um but you can like really maintain some degree of curation in what again what

you surface right like by contrast there was like a really great Community project recently and like you know you draw a lot of attention to and say look this is someone who's in the community who's doing something super cool um you know and so you have you can modulate in that way uh and then how do you capture value and again it's very hard and we haven't really seen it's two it's early days in in the land of cc0 nfts to know whether any of them are going to really be able to successfully capture value over the long term um but I think it it seems to me that it's possible and the way it would happen is if the sort of popularization of those brand assets and the value that's sort of like accrues to to them you know and to sort of their

derivatives and sort of all the things that they sort of support in the ecosystem brings a lot of demand to be Associated to the core project right either to like have those loot bags so you can be embedded you can like play with them in the various loot games or just to like you know have something like a noun or a chain Runner or whatever um so you can be part of the community that is the central entity and so I think we're going to see like a lot of work towards building those Central entities and or embedding the cc0 project in lots of like high quality derivatives um because those are the two ways that drive value back to the original assets right so it seems like the core project still has branding and signaling power to say reactively prevent griffs and

rugs absolutely I mean like the and but it requires a team you know but if you want to do that the team has to be very active right they have to be paying attention they have to be like you know sort of sort of managing how they're sort of how the visible surface of their brand you know sort of is built on and recognizing equally important is recognizing really really high quality derivatives and Community contributions by the way this isn't just for cc zero this is all of like crypto right recognize really high quality derivatives and Community contributions and Elevate them and help those people build and help other people build alongside them yeah like the Marquee users from yesterday exactly yeah yeah it's like it's almost like discovering the Marquee users right like what these like IP strategies do is they let you discover more key users you might never

have known about otherwise got it thank you awesome well everyone join me in thanking Scott commoners once again thank you Scott thank you guys you are so awesome [Music]