As blockchain technology reshapes industries from finance to digital art, the intersection of intellectual property law and decentralized innovation presents both unprecedented opportunities and complex legal challenges. Giovanna H. Fessenden, Digital IP Counsel at Hamilton Brook Smith Reynolds (HBSR), brings a unique perspective to this evolving landscape, having guided clients through the intricate world of blockchain IP protection since the early days of Initial Coin Offerings (ICOs).

With deep expertise spanning patent strategy, open source compliance, and digital asset protection, Fessenden has positioned herself at the forefront of Web3 legal innovation. Her practice focuses on helping blockchain companies, NFT platforms, and DeFi protocols navigate the delicate balance between fostering open-source collaboration and protecting proprietary innovations. In an industry where technical breakthroughs occur at lightning speed and regulatory frameworks continue to evolve, her strategic approach to intellectual property has become increasingly vital for companies seeking to establish competitive advantages while maintaining compliance.

In this comprehensive discussion, Fessenden shares insights from her extensive experience, addressing critical questions about patent landscapes in crypto, NFT royalty enforcement challenges, and the compliance complexities that arise when open-source innovation meets proprietary IP protection. Her perspective offers valuable guidance for both established companies and emerging startups navigating the complex legal terrain of blockchain technology.

‍1. Intellectual Property Strategy for Blockchain Innovations As someone who's been at the forefront of blockchain IP protection since the early ICO days, how has the patent landscape evolved for crypto and blockchain technologies? What are the key IP considerations companies should address when developing NFT platforms, DeFi protocols, or cryptocurrency wallets?

Core innovation in blockchain still happens at the protocol layer and that’s where some of the most exciting IP opportunities remain. Software patents are designed to protect technical solutions to technical problems, and that’s exactly what we see at the protocol level. Over the years, the patent focus has shifted more toward consensus mechanisms and architectures that address challenges like transaction speed, scalability, security, and regulatory compliance.

With NFTs, some of the biggest challenges involve cross-chain interoperability and royalty enforcement. Because royalties are often only enforceable at the protocol and marketplace level, there’s an opportunity and a need for technical innovation and protection in those areas.

For DeFi protocols and wallets, capturing market share is a key objective. That means IP strategies need to support both adoption and interoperability. I often recommend a hybrid IP strategy combining open source licensing to foster widespread adoption with targeted patent protection for truly novel technical solutions. Open sourcing your protocol can encourage cross-chain collaboration and ecosystem growth, while patents can protect critical innovations like optimizing transaction throughput, reducing gas fees, balancing on-chain/off-chain processes, enhancing privacy, or enabling regulatory compliance through on-chain and off-chain proofs.  

2. NFTs and Digital Asset IP Protection With your extensive experience in NFT legal frameworks, what are the most critical intellectual property pitfalls you see companies making in the Web3 space? How should creators and platforms structure NFT royalty agreements and licensing to avoid copyright and trademark disputes?

Automated royalty payments via smart contracts offer tremendous promise, but in practice they often fall short especially in cross-chain environments. We’re starting to see new technical solutions emerge, including AI-powered smart contracts and decentralized identity (DID) layers that can help provide blockchain-based attestation of royalty terms and enable auditable, transparent royalty flows.

That said, privacy remains a major concern. Royalty-based smart contracts often involve personal data, which can create tension with data protection laws like the EU’s GDPR. GDPR grants individuals the right to access, correct, or erase their data, rights that don’t easily align with the immutable nature of blockchain. Technologies like zk-SNARK-based privacy architectures offer promising workarounds, enabling confidential yet verifiable transactions that support legal compliance.

From an enforcement perspective, it’s essential to embed clear royalty terms directly into the NFT metadata and to maintain auditable transaction records.  This creates a stronger legal foundation in the event of a dispute or litigation.

3. Open Source Compliance in Crypto Development Given your expertise in open source software compliance and the crypto industry's heavy reliance on open source protocols, what compliance challenges do blockchain companies face? How do you advise clients on balancing open source innovation with proprietary IP protection, especially when preparing for ICOs or acquisitions?

Open source blockchain protocols are great for fostering adoption but they also come with some IP risks. Forking is a key issue.  When a project is forked, it can dilute your brand, fragment your user base, and even introduce competitive clones that may be nefarious.  To help mitigate this, I often recommend incorporating technologies like hashgraph. Its unique consensus mechanism and data structure are specifically designed to prevent forking, helping preserve platform integrity while maintaining decentralization.

When preparing for an ICO or acquisition, having a well-developed IP portfolio is essential. You want to secure patents around your core technical innovations whether that’s in smart contract automation, zero-knowledge proofs, staking reward algorithms, or other differentiators. Think not only about what your technology looks like now, but where it’s headed. In today’s first-to-file patent system, timing matters so filing early is key.

Regulatory and compliance issues are also critical. I advise clients to engage securities counsel early, and to conduct regular open source software audits.  Standards like OpenChain can help streamline open source license compliance. Ultimately, your IP and compliance strategies should evolve in tandem with your technology and go-to-market plan.