CERTAINTY---only granting rights to decentralized autonomous organizations can solve---otherwise legal uncertainty kills innovation and drains resources from DAOs---that’s Katopis.

Current legal precedent teaches that the U.S. IP system is geared toward human participation —read “natural persons.” Machines need not apply. As the Copyright Office Compendium explains, “The copyright law only protects ‘the fruits of intellectual labor’ that ‘are founded in the creative powers of the mind,’” citing the U.S. Supreme Court’s 1879 Trade-Mark Cases. However, the issues of inventorship, ownership, and assignment are too often conflated. A corporation may have employees who are the true inventors, but they may have an obligation to assign the resulting patent instrument to the organization. The legal inquiry at the heart of this issue is whether a DAO may be the digital tree that provides “the fruits of intellectual labor.”

A distinguishing feature of DAOs is that as a collective, it represents a group of human individuals (“the organs”), often the token holders. The existence of natural persons in such a collective has the potential to allow them to escape the legal pitfalls that befall machines and monkeys when attempting to generate IP. As discussed above, the Patent and Copyright Act rely on traditional doctrines of creative activity by “natural persons” for conception, authorship, and other “ministerial” acts (e.g., 35 U.S.C. § 115 lists the requirements for any individual to submit an “inventor’s oath or declaration.”)

DAOs currently exist without specific standards and charters, giving rise to much legal uncertainty regarding many questions about their character, rights, and liability. Accordingly, DAOs present the following policy questions for IP stakeholders:

Whether a DAO may be inventor or author of an innovative work?

Whether a DAO may be the owner of IP rights, either through an assignment or license?

Whether a DAO may enforce its IP rights, such as through an infringement action?

The answers to some of these questions seem to be clear, if not legally trivial. If a DAO may own real property (e.g., real estate or a copy of the Constitution) or may own and license digital assets (e.g., NFT art), it seems obvious that a DAO collective may also vote to acquire, assign, and license IP rights. In fact, patent ownership is at the heart of VitaDAO, per its white paper.

In contrast, it is entirely less obvious whether a DAO may be an inventor under the Patent Act. At present, DAOs vary tremendously by their code, organizational structure, governance, and functions. For the purposes of this blog, let us assume that presently a DAO’s legal structures will not provide it with the necessary attributes of personhood necessary for it to be an inventor. Specifically, a DAO cannot legally sign an oath to accompany a patent application. In the alternative, this begs the question of whether the DAO collective’s individual human organs can participate jointly in inventorship on behalf of the entity?

Can a DAO’s human organs, or any such collective, jointly invent as a team?  The image of the lone inventor is widely considered a modern anachronism. The modern reality of research and development makes clear that teams collaborate toward inventive goals. U.S. patent law has long recognized joint inventors. The Patent Act (§ 116) expressly provides for joint inventors, even when “each did not make a contribution to the subject matter of every claim of the patent.” The team size listed as the inventors of a patent has steadily increased over the years. Observers note that the Patent Act (§ 116) neither provides a bright line test for joint inventorship nor a specific requirement that joint inventors work within a physical proximity or at the same time.

A recent blog reported that it is increasingly common to see many co-inventors of a patent. Consider two recent Microsoft U.S. patents, U.S. Patent No. 7,013,469 and 7,017,162 that each have 51 co-inventors. The listing of 51 co-inventors is not terribly far afield from the PleasrDAO’s reported membership of 74 persons. It is an unprecedented question whether a DAO, as a collective, can have its human organs jointly decide—via a collective voting mechanism—on the elements of an invention that would survive as a patent claim. This element of human intervention appears to satisfy some of the necessary patent law requirements, per Thaler v. Vidal.

U.S. patent law recognizes the “true and only” inventors. Accordingly, several legal theories suggest that a DAO’s collective patenting activity should be permitted. First, patent law recognizes that every contributor to an invention, no matter how minor or how distant in time and space, has a right to be acknowledged as a co-inventor. Second, in 2004, Congress specifically enacted legislation to encourage joint inventorship. With the CREATE Act, Congress amended 35 U.S.C. § 103 (non-obviousness) to encourage joint collaboration by entities by allowing:

subject matter developed by another person and a claimed invention shall be deemed to have been owned by the same person or subject to an obligation of assignment to the same person if [a joint research agreement exists].

This legislative proposal was later incorporated into the America Invents Act (“AIA”). In sum, the CREATE Act holds that some type of “joint research agreement” or equivalent contractual relationship exists among the parties. As many know, blockchain systems often include code providing for a smart contract. Again, while these systems are not standardized, they may be coded in a way that satisfies the statutory requirement and the joint agreement requirement. (Pro tip: blockchain counsel know that, all too often, smart contracts are neither smart nor binding).

This conclusion further contrasts the fundamental differences between AI and blockchain worlds. At present, no DAO has attempted to patent an invention or to register a copyright for a work. Any such attempt will likely be messy and will immediately provoke a legal challenge. But resistance is futile, but, these attempts are inevitable. Recall that it was only within the past few years that some other novel fundamental questions (e.g., AI questions) burst through the legal frontier. Though we have barely scratched the surface of blockchain and DAOs, the bleeding-edge of this technology—and novel legal challenges—may be arriving sooner than we expect.