What are risks of IP-NFTs?

The statements set forth herein must not be construed as representations, warranties, guarantees, promises or legal advice, and they must not be relied upon by any person as a basis for decision making. We are not your lawyers. No legal opinion is expressed in this documentation and it is neither intended to nor creates an attorney-client relationship. Get legal advice.
When IP-NFTs are minted, they merge two different fields of risk: traditional IP risk and all of the risks that come with web3 experimentation.

Who controls the IP?

A classic risk for traditional IP, both because of inefficient default IP laws as well as jurisdictional conflict of laws, is risk of dispute over control. We strongly recommend that you have a clear understanding of who controls any piece of IP that you want to mint into an IP-NFT. If disputes arise over who has legal control over an IP-NFT, the whole DeSci economy suffers.
To mitigate this risk is to transfer to the IP-NFT into a single legal entity co-managed by several people, e.g. a Series LLC minted on Wrappr. Make sure the LLC wrapper has clear mechanisms for determining how the IP can be commercialized. By using a wrapper corporation that sets forth clear terms and conditions regarding IP control and housing the IP in an IP-NFT, many of the traditional risks of IP control can be avoided.
Check out our model FAM agreement for one way we propose for handling IP control in a more radical approach for the future of DeSci.

To patent or not to patent?

There are many implications of capturing potential patentable subject matter through a DAO, protecting it, fractionalizing it, and then trying to patent some part of it.
When exactly was the IP put “on sale”? Was the IP “publicly disclosed” to the DAO, and if so, when? Who has legal control of the trade secret? What does it mean to be an inventor in DeSci?
We cannot do much to answer those questions. They all depend on how the specific IP was created, who had access to it, where those involved reside, as well as any issues arising under applicable private agreements.
Whether or not to pursue a patent is also commercially case specific. Something that IP holders should strategize and discuss, but ultimately decide for themselves.
There is a substantial risk that IP holders make bad decisions about whether or when to file a patent. This risk may be mitigated somewhat through the wisdom of the crowd in managing IP assets together using IP-NFTs, fractions, and DAOs.

Entity wrappers for risk-mitigation

Are DAOs general partnerships? Will using IP-NFTs expose my IP to new risks? Is there a way to limit my liability from the risks that seem inherent to economic experimentation? Maybe.
Entities like NextRound and Otoco or Wrappr are experimenting with ways to limit liability for crypto wallet holders, such as minting Series LLCs or UNAs to DAO wallets and LeXpunK DAO Defense Protocol documents as NFTs.
Some bioDAOs and people in bioDAOs in bio.xyz use them. Use them at your own risk.