A Mad Rush to Patent an NFT (Part 2)
A breakdown of some key elements of Dapper Labs's patent for its NBA Top Shot NFT platform
Part One describes how Dapper Labs chose a seldom-used procedure to obtain accelerated grant of its patent for its NBA Top Shot NFT;
In Part Two, I highlight that the key features of Dapper Labs’s patent are:
defined number of instances of each Top Shot Moment;
multiple scarcity levels of Top Shot Moments; and
the visual distinctiveness of different scarcity levels.
In Part One, I analyzed the procedural steps that occurred at the U.S. Patent Office that led to the extremely fast grant of Dapper Labs’s ’709 Patent covering the technology underlying its NBA Top Shot NFT. In this second part, I undertake a (semi-technical) analysis of the substance of the ’709 Patent, i.e. to find out what is actually protected by the patent.
The comparison below is of a figure from the ’709 Patent (top) and a screenshot of a NBA Top Shot Moment (bottom) (each Top Shot NFT is called a Top Shot Moment). The resemblance between the two images is easy to see and Dapper Labs’s intention to obtain patent protection for its technology underlying NBA Top Shot is immediately apparent.
As is the case for every patent, the legal boundaries of the protection afforded by the ’709 Patent are primarily defined by the patent claims. Reading a patent claim is a great way of putting oneself to sleep (I have extensive first hand experience of this, having read my share of patents after a heavy lunch). Nevertheless, I will be ambitious and try to break down Dapper Labs’s patent claims in an easy-to-understand, non-sleep inducing manner. (As always, this analysis is not intended to be legal advice, nor investment advice)
The principle patent claim of the ’709 Patent reads as follows (feel free to skip the non-bolded portions and read just the bolded passages or simply ignore the claim entirely and skip to the breakdown that follows the claim):
1. A computer system for displaying a 3D virtual display element comprising n-surfaces, where n is a number greater than 1, representing a digital collectable comprising content including a digital media file and data relating to the digital media file, comprising:
at least one processor;
a computer-readable storage medium having instructions stored thereupon which are executable by the at least one processor and which, when executed, cause the computing system to:
generate, according to a stored set of rules, a graphical user interface display comprising a first display portion and a second display portion, the first display portion configured to display content associated with a selected surface of the 3D virtual display element, the second display portion displaying a set of n icons, each representing a depiction of one of the surfaces;
in response to a selection of a first one of the icons associated with a first surface, cause the first display portion to display content associated with the first surface; and
an administrative module configured for specifying rules and metadata relating to an event, the instructions being further configured to: create a data structure in the memory comprising an event input via the administrative module, the data structure comprising an event identifier, content related to the event, rules specifying the display characteristics of the 3D display element, including the number n of sides for the 3D display element, a designation of the content to be rendered on various ones of the n sides of the 3D display element, a specified number of instances of the digital collectible to be created, rules for classifying a scarcity level of the digital collectible based on the number of instances of the digital collectable and rules for generating a visual indicator for display in association with the 3D display element to visually distinguish a digital collectible of a first scarcity level from a digital collectible of a second scarcity level.
The screenshot below is taken from a recent NBA Top Shot pack opening video, of which there are plenty on Youtube. To understand the patent claim, we connect the highlighted terms of the claim with visual elements shown in the screenshot.
The easy to understand elements of the claim:
“3D virtual display element” / “digital collectable”: the screenshot includes five 3-D cubes, each being a NBA Top Shot Moment/NFT;
“Event identifier” / “content related to the event”: Each Moment corresponds to a play that occurred during an NBA game and is identified by the date on which the game took place (see region highlighted by the green square). Each Moment also includes a video of the play, which is the “content related to the event”;
The three key elements of the claim:
i) “a specified number of instances of the digital collectible to be created”: A limited number of copies each Top Shot Moment is released to the public, which of course provides the collectability of these Moments and adds to their value. For example, there are 12005 copies of the Chris Paul Moment (top left) that can be collected (see region highlighted by the orange square). Each copy has a unique serial number, and this particular Chris Paul Moment bears serial no. 10545 out of the 12005 copies.
ii) “rules for classifying a scarcity level of the digital collectible”: Some types of Moments are more scarce than others Moments such that there are different scarcity levels. The top-right Allen Iverson Moment has a “Rare” scarcity level and therefore has fewer available copies (see region highlighted by the blue square), while the other four Moments are of the “Common” scarcity level. NBA Top Shot currently has four different scarcity levels: Common, Fandom, Rare and Legendary.
iii) “a visual indicator … to visually distinguish … a first scarcity level from … a second scarcity level”: Finally, the 3-D representation of a Moment of a given scarcity level has a visual appearance that is different from the appearance of another Moment of a different scarcity level. The top-right rare Allen Iverson Moment has blue highlighted corners on its front face (indicated by the red arrows), while the common Moments do not have such highlights. The below Giannis Antetokounmpo Moment, which has the Legendary scarcity level, has highlighted green corners on all sides that gives it an even more distinct look when compared to the rare Moment.
The public records at the U.S. Patent Office for the ’709 Patent (available through Public Pair) reveal that the patent examiner came to the conclusion that the combination of the above-described elements of i) defined number of instances of each Moment, ii) multiple scarcity levels of Moments and iii) the visual distinctiveness of different scarcity levels caused the invention covered by the claim to be patentable over the prior art that the examiner had identified. The patent essentially prevents any other party from putting together a digital collectible scheme that includes a combination of these elements recited in the claim of the ’709 Patent.
Returning back to the language of the patent claim, the astute reader may have noticed that I have not treated the term “a data structure in the memory”. In the case of NBA Top Shot, all of the Moments are stored on the Flow Blockchain, which is a blockchain developed in-house by Dapper Labs. However, since the language of the claim uses the generic term “data structure”, the patent protection itself is arguably not limited to any form of blockchain. In fact, although the description portion of the ’709 patent is quite lengthy - coming in at over 10,000 words long - the words “blockchain”, “decentralized”, “non-fungible”, or “crypto” are not to be found in the patent. (Does this say anything about the importance of blockchains?)
To appreciate the scope of the protection provided by the ’709 Patent, and thereby also appreciate its value, the following exercise is useful. Imagine you are an NFT developer (i.e. you are competing with Dapper Labs) and a large corporate potential client with a valuable intellectual property (IP) portfolio were to approach you to build a NFT platform based on that client’s IP. For example, another sports league or a TV/film studio wanted your help to launch its own NFT. Of course, the client would want this new NFT to enjoy similar success to NBA Top Shot and may well expect that you would draw some “inspiration” from the format of NBA Top Shot.
How likely is it that during the process of designing this new NFT, you will create a version that includes the combination of elements covered by the ’709 Patent: i) limited number of instances of each collectible; ii) multiple scarcity levels; and iii) each scarcity level being visually distinctive? Since this combination of elements has been patented by Dapper Labs, the final design will need to avoid this combination so as to circumvent the ’709 Patent. If you find that this avoidance requirement imposes significant constraints in the design process, then you can also appreciate the competitive edge that Dapper Labs possesses from its ’709 Patent.
Dapper Labs has also filed a follow-up patent application called a “continuation” application. This follow-up application allows it to pursue further (and potentially broader) patent protection for its technology underlying NBA Top Shot. I will certainly explore continuation applications in a later article. At this time, suffice it to say that Dapper Labs finds that more value can be had from expanding its patent portfolio in the NFT space.
In Part One, I pointed to the recent announcement that Dapper Labs is partnering with Spanish soccer league LaLiga to develop another NFT. When this new NFT launches, it will be interesting to see whether the elements covered by Dapper Labs’s ’709 Patent will also featured prominently in this new LaLiga NFT.