ItemData.cs

using UnityEngine;

[CreateAssetMenuAttribute] // Had to add this
public class ItemData : ScriptableObject // And inherit from this, and everything started working.
{
    public string name; // Note: Name needs to be a unique identifier.
    public string description;
    public GameObject prefab;

    public ItemData Copy()
    {
        ItemData itemData = new ItemData();
        itemData.name = name;
        itemData.description = description;
        itemData.prefab = prefab;
        return itemData;
    }
}