A Mad Rush to Patent an NFT (Part 1)
The story of Dapper Labs's steps to obtain a patent for its NBA Top Shot NFT platform
In Part One, I describe how Dapper Labs chose a seldom-used procedure to obtain accelerated grant of its patent covering its NBA Top Shot NFT;
In Part Two, I break down some of the key elements of Dapper Labs’s patent.
Vancouver-based Dapper Labs can certainly make a strong claim that it is the OG of the non-fungible tokens (NFT) game. Long before NFTs like Bored Apes and Lazy Lions became wildly popular, Dapper Labs was already allowing, back in 2017, people to collect and breed digital cats in the form of Ethereum-based CryptoKitties. It then partnered with the National Basketball Association (NBA) and, just about a year ago, launched arguably the most successful mainstream NFT platform in the form of NBA Top Shot.
Dapper Labs’s success led me to take a look at their patent portfolio to see if it reveals any clues as to the future of NFTs. While Dapper Labs has few patent filings, its most recent granted patent, U.S. patent no. 11,099,709 (hereafter the “’709 Patent”), offers several insights into how an innovative company uses the patent system to protect its creations.
During law school, a law professor told me that there are two sets of facts to each legal case - the first is the facts regarding the substance of the case (ex: what the patent actually protects) and the second covers the procedural steps that led to the legal outcome (ex: how a party navigated the patent system to obtain the granted patent). In the case of Dapper Labs’s patent, the procedural aspects are just as interesting as the substance of the patent itself.
Part One of this article examines what conclusions can be drawn from the procedure that led to Dapper Labs obtaining grant of its ’709 Patent. Part Two explores what invention is actually covered by the ’709 Patent.
Patent Granted with Lightning-fast Speed
Addressing the procedural facts first, the amount of time that elapsed between the day that Dapper Labs filed its initial patent application (filed on April 13, 2021 as U.S. application no. 17/299,430) and the day it obtained grant of its ’709 Patent (granted August 24, 2021) is the shortest I have ever seen in my 10+ years of patent practice. In other words, I have never seen anyone obtain a granted patent anywhere near as quickly as the four months that it took Dapper Labs to get its ’709 Patent. (I know that the second ever episode of Suits makes it seem that a granted patent can be obtained in a matter of days, but trust me, it is typically a multi-year process).
Dapper Labs opted for the seldom-used TrackOne accelerated examination in order to speed up the processing of its patent application. TrackOne essentially allowed Dapper Labs to have its patent application land at the very top of the pile of patent applications being handled by patent examiners at the U.S. Patent Office.
Very few U.S. patent applications are subject to accelerated examination. According to the U.S. Patent Office’s statistics, there are approximately 600,000 utility patent applications filed annually in the U.S., but there is an annual quota of a mere 15,000 patent applications that can undergo TrackOne accelerated examination (this quota was only recently increased from the previous quota of 12,000 applications per year). Therefore, only about 2.5% of applications filed in any year can be accelerated in this way. Dapper Labs’s patent application was one of them.
Secondly, TrackOne accelerated examination is expensive, costing an additional $4200 USD in patent filing fees. The following screenshot is taken from a fee worksheet found in Dapper Labs’s file records at the U.S. Patent Office, and you can see that the $4200 fee dwarfs the other fees that are typically paid at patent filing. Few patent applicants are willing to spring for this additional fee; the typical strategy is to defer fees where possible to reduce immediate cash outlays. These high costs are one of the reasons why few companies choose TrackOne.
Moreover, Dapper Labs was under a time crunch. Typically, the patent application must be filed before public launch of the invention for which patent protection is sought. However, a handful of countries, including the U.S., allow a patent application to be filed within one year of the publication of the invention (often called the one-year grace period). Having launched NBA Top Shot around October 2020, Dapper Labs only had until October 2021 to file its patent application at the U.S. Patent Office, a deadline which it met by completing the filing in April 2021.
The choice to undergo the costly TrackOne accelerated examination is one of the clearest signs of Dapper Labs’s desire to obtain patent protection as quickly as possible. We can speculate as to why Dapper Labs was so motivated to get a granted patent.
My hypothesis is that the tremendous success of NBA Top Shot wildly exceeded Dapper Labs’s own expectations. The fact that the patent application was filed after the public launch of NBA Top Shot may be an indication that Dapper Labs had not initially expected this much success. Otherwise, Dapper Labs would have filed its application prior to public launch to reserve its rights to obtain patent protection in foreign jurisdictions. In response to the immediate success of NBA Top Shot, Dapper Labs then raced to stake its claim in the NFT space by obtaining patent protection for the underlying technology in the accelerated manner described above.
Given the eye-watering pace at which the entire NFT industry has been evolving throughout 2021, Dapper Labs may also have felt that getting the grant of a patent (versus simply having a pending patent application) would further show that it is a leader in the NFT space. The granting a patent for its technology can help attract investors, as well as impress potential customers. Dapper Labs recently landed $250 million in funding and signed up Spanish soccer league LaLiga (home to powerhouse teams such as FC Barcelona and Real Madrid) and the granting of its ’709 Patent may well have been a factor in these further wins for Dapper Labs.