A Look at Web3 and Psychedelic IP

The article A Look at Web3 and Psychedelic IP was originally published on Microdose.

Psychedelics have been teaching us about more than just mental health. Questions like what consciousness is and how it can be studied are now on the table. At the same time, larger societal issues like inclusion, indigenous reciprocity, and political bias have been highlighted with a psychedelic lens.

Perhaps the most popular (and controversial) topic highlighted by psychedelics is the patent system. As companies move themselves toward the potential commercialization of psychedelic medicines, a great deal of speculation and attention is being placed on intellectual property (IP).

Psychedelic Intellectual Property and Web3

The problems with the patent system and how it relates to psychedelics have been covered in-depth (also see this in-depth analysis by Shayla Love). Systemic problems in the pharmaceutical industry are common knowledge at this point, with the track record that exists monopolies on medicine have good reason to make people uncomfortable.

There is public outcry concerning monopolies on substances many consider sacred or that others see as a powerful tool to balance a mental health crisis. Yet, this kind of friction can be the incentive for innovators to find workarounds and new systems.

One such space is Web3 and cryptocurrencies. So a group of biotech-focused startups are looking to bring new sources of funding, niche research topics, and the participation of many more people in the creation and management of intellectual property.

The ideas are experimental and still in their early days, with the kinks of tokens, NFTs, and DAOS not fully understood yet. However, instead of griping about a broken system, perhaps an investigation of innovation is warranted.

How Web3, NFTs, and DAOs fit into IP

The value of Web3 IP lies not in the price of Bitcoin but in how a distributed ledger or blockchain technology has facilitated the creation of NFTs and DAOs.

NFT stands for “non-fungible token,” a smart contract (a bunch of code) living on a blockchain representing ownership. NFTs use the advanced cryptography of the blockchain to verify ownership, making NFTs immutable and transparent — so they are hard to tamper with, and ownership of an NFT is easy to verify.

What most of us know as NFTs are pictures of monkeys with seemingly bloated valuations. However, NFTs can be much more than digital art. NFTs can be personal documents, datasets, or even intellectual property. NFTs that are IP are known as IP-NFTs. What makes IP-NFTs unique is the ease at which they can be fractionalized, meaning ownership is shared among many parties.

Fractionalized ownership has become popular with DAOs, or decentralized autonomous organizations. DAOs are smart contracts that perform organizations’ functions using distributed ledger technology. DAOs often make decisions for organizations by facilitating voting among stakeholders in a project. It’s a new concept, but believers envision DAOs to be the LLCs of the blockchain.

With IP-NFT, a project can create and distribute a piece of IP amongst stakeholders, who can then vote on the IPs management through the DAO.

Chris Byrnes, an IP Strategist and Patent Attorney sums it up with:

“IP-NFTs network IP into a co-governed knowledge commons, run as a DAO. The IP can be enforced against infringers either independently or as part of a co-governed collective.”

Why Fractionalize Ownership?

Collective ownership is attractive because it democratizes participation in research and ownership. Traditionally, creating and owning IP is very exclusive. IP created will be used to serve the interests of its creators.

While this is all business as usual, it leaves some groups out in the cold. Chris Byrnes explains that fractionalized ownership using a DAO ensures “members can maintain autonomy to enforce their own IP against infringers while also co-governing the commercialization of the DAO’s collective IP network.”

An example is AthenaDAO which saw an underrepresentation of women’s reproductive health in research. The group created a DAO that now can utilize Web3 to crowd-fund research that would otherwise require monumental effort within established institutions. There is also a startup focused on democratizing psychedelic research, PsyDAO which is focused on creating IP for the public good.

Other Benefits to IP-NFT

Byrnes elaborates that ownership of IP-NFT can be easily tracked and verified by the blockchain, making coordination of licensing or royalties fast, easy, and cheap. With the blockchain quickly verifying IP ownership or history, disputes can be settled without exorbitant fees of legal battles.

In industries like psychedelics that rely on IP plays, there can be what is called the “Valley of Death.”

Patent Attorney Savva Kerdemelidis alludes to the gap between early-stage research in the lab actually being applied. For example, a huge percentage of discoveries made in universities don’t ever turn into something that helps people. Even if a drug is created, it will be dropped by its creators as soon as its patent expires — another situation Kerdemelidis is trying to remedy with pay-for-success contracts.

Kerdemelidis explains that IP-NFT is potentially more flexible in crossing The Valley of Death because it can be traded on IP markets in real-time, like MolceuleDAO, and ownership can be distributed throughout stakeholder groups like patients while being linked to clinical trial data or protocols before being spun off into a company.

Challenges of IP-NFT

While some of the flexibility and social aspects of projects using IP-NFT are attractive, DAOs and NFTs are not everyone’s comfort zone.

DAOs have different governance models that can be exploited in unique ways, notably by a person or organization buying up tokens used for governance. Considering patent trolls, it’s not out of the question. Debates around the best voting system for DAOs are also not settled, and accountability can be challenging with decentralized voting. However, Kerdemelidis assured us that better tooling, templates, and conventions could solve this.

The legal architecture, too, is a mixture of established models and new experiments.

Chris Byrnes says the legal architecture of IP-NFT is “a private contract layer on top of court-tested and decades-old Open Source and Creative Commons licenses.” He adds that wrapping IP-NFTs with IP licenses is more experimental but that there is no known legal or regulatory precedent, making IP-NFT commons risker activity than traditional IP commons. To date, there are no rulings on IP-NFT networks and open-access licenses. So while admittedly experimental, there are some established frameworks that DAOs and IP-NFT can work within.

DAOs are new, we’re exploring an unknown frontier. Yet, considering the diversity of people involved or wanting to be involved in psychedelics, from ancient shamanistic lineages and hippies from the 60s, to venture capitalists and therapists of the 2020s — fractionalized ownership might have a place in the future of psychedelics and its surrounding industries.

Interested in more like this? Check out Decentralizing the Future: Crypto and Psychedelics

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