Why IP tokenization as no longer just a concept
Over the past few years, tokenization has moved beyond the realm of experimental blockchain projects and into the strategic planning of technology startups. While early discussions focused primarily on tokenizing financial assets or real estate, intellectual property (IP) is increasingly becoming a core target for tokenization initiatives.
For startups expanding internationally, tokenizing IP offers a compelling promise: liquidity, fractional ownership, streamlined licensing, and global accessibility. However, the legal landscape surrounding IP tokenization remains fragmented, jurisdiction-dependent, and, in many cases, misunderstood.
This article explores the legal considerations startups must address when tokenizing IP, with a particular focus on the United States and the European Union, while also highlighting relevant developments in Asia. Drawing from real-world examples, it outlines practical strategies for founders seeking to scale globally without undermining the very assets that define their competitive advantage.
What does it mean to tokenize Intellectual Property?
At its core, IP tokenization refers to representing certain economic or governance rights associated with intellectual property through blockchain-based tokens. These tokens may reflect:
- royalty participation rights,
- licensing revenue streams,
- access or usage rights,
- or, in limited structures, fractional economic interests tied to IP-backed entities.
Crucially, tokenization does not automatically transfer ownership of IP itself. Ownership of patents, trademarks, copyrights, or trade secrets remains governed by national IP laws – not by smart contracts or distributed ledgers.
This distinction is often blurred in marketing materials and pitch decks, creating legal exposure for startups and confusion for investors.
The structural question: What exactly as being tokenized?
Before examining jurisdictional rules, startups must answer a foundational legal question:
Are we tokenizing IP rights themselves – or economic interests derived from IP?
In practice, most legally sustainable models fall into one of the following categories:
- Tokenized revenue participation
Tokens represent a contractual right to receive a share of licensing fees or royalties. - Tokenized access or usage rights
Tokens function as licenses or permissions (common in software, gaming, and media). - Tokenized equity or debt linked to IP-holding entities
IP remains with a special-purpose vehicle (SPV), while tokens represent equity-like or debt-like claims.
Each structure triggers different regulatory, tax, and compliance obligations across jurisdictions.
United States: Securities Law and IP ownership pitfalls
In the U.S., the primary legal risk surrounding IP tokenization is securities regulation.
Under the Howey test, many IP-related tokens – especially those tied to future revenue – are likely to be classified as securities. This is particularly true when:
- token purchasers expect profits,
- returns depend on the efforts of the issuing startup,
- tokens are marketed as investment opportunities.
Startups that tokenize IP-derived revenue without proper exemptions risk enforcement actions by the SEC.
Beyond securities law, U.S. startups must also carefully manage chain-of-title issues. If IP ownership is unclear, fragmented, or improperly assigned (for example, still owned by founders individually rather than the company), tokenization may amplify – not solve – existing vulnerabilities.
Several blockchain platforms learned this the hard way. For example, early NFT marketplaces such as OpenSea faced scrutiny not because of blockchain mechanics, but because of uncertain copyright and licensing representations made by token issuers.
European Union: Fragmentation beneath harmonization
The EU presents a different, but equally complex, challenge.
While initiatives such as the Markets in Crypto-Assets Regulation (MiCA) aim to harmonize crypto regulation across member states, intellectual property law remains largely national.
This creates tension between:
- EU-level financial regulation, and
- country-specific IP ownership, licensing, and enforcement rules.
For example:
- A tokenized licensing model compliant with German copyright law may not align with French moral rights doctrines.
- Trademark tokenization involving brand usage may conflict with consumer protection rules in certain EU states.
Platforms like Sorare – which tokenized digital sports collectibles – have had to navigate both IP licensing agreements and national regulatory scrutiny, illustrating how legal compliance cannot be abstracted away by blockchain architecture.
Asia: Innovation-friendly, but not risk-free
Asia offers some of the most advanced experimentation in IP tokenization – particularly in Singapore, South Korea, and Japan.
Singapore, in particular, has positioned itself as a jurisdiction where:
- IP-backed financing is encouraged,
- regulatory sandboxes allow structured experimentation,
- and tokenized assets are evaluated pragmatically rather than ideologically.
Several Asian startups have explored tokenizing patent portfolios to unlock liquidity for R&D-heavy businesses. However, even in these jurisdictions, tokenized IP interests are typically treated as contractual or financial instruments – not ownership transfers.
The lesson for global startups is clear: regulatory openness does not eliminate the need for rigorous legal structuring.
Cross-border reality: Why “Global Tokens” are a legal myth
One of the most persistent misconceptions in IP tokenization is the idea that blockchain enables jurisdiction-agnostic ownership.
In reality:
- IP rights exist only because national laws recognize them.
- Enforcement happens in courts, not on-chain.
- Token holders may have rights that are economically meaningful – but legally unenforceable without proper contracts.
For startups expanding globally, this means:
- IP must be centrally owned and properly registered.
- Token rights must be mirrored in off-chain legal agreements.
- Jurisdiction-specific disclosures are unavoidable.
Ignoring these realities often results in tokens that are technically elegant but legally hollow.
Practical legal checklist for startups tokenizing IP
Before launching any IP tokenization initiative, founders should address the following:
- Audit IP ownership
Confirm that all IP is properly assigned to the company or SPV. - Define token rights precisely
Avoid vague language like “ownership” unless legally substantiated. - Assess securities exposure
Especially critical in the U.S. and EU. - Align smart contracts with legal contracts
On-chain logic must reflect enforceable off-chain terms. - Plan for jurisdictional expansion
Token rights should anticipate future market entry, not restrict it.
Conclusion: Tokenization as a tool – not a shortcut
Tokenizing intellectual property can unlock powerful strategic advantages for startups expanding globally. However, tokenization does not replace IP law – it amplifies it.
Founders who treat IP tokens as a legal shortcut risk undermining investor confidence, regulatory compliance, and long-term scalability. Those who approach tokenization as a carefully structured legal and financial instrument, grounded in jurisdictional realities, are far more likely to succeed.
In a global market where intangible assets define enterprise value, the future belongs not to startups that tokenize fastest – but to those that tokenize wisely.
Yuliia Leshchenko,
CEO of Name & Fame LLC, an IP expert with international practice across the U.S. and Ukraine, specializing in technology, AI, Web3, and brand-focused IP strategy. The expert recently published a book on Web3, IP, and AI: Amazon link.