Chicago-based Intellectual Property Exchange International (IPXI), which bills itself as “the world’s first financial exchange focused on intellectual property,” is laying the groundwork for what it anticipates will be a formal launch later this year. The exchange will allow owners of IP to monetize their assets much as firms do now on the major stock exchanges, while giving investors access to trading, investment, and arbitrage opportunities. “We are trying to address some of the causes of inefficiency in intellectual property — lack of standardization, efficiency, transparency, and prejudice against smaller IP holders,” explained Gerard Pannekoek, president and CEO of IPXI, during a recent webinar sponsored by the firm.
Pannekoek used Ford Motor Company as a hypothetical example of an IP holder who might participate in IPXI. “Say Ford needed a market for a valve designed for automobiles and light truck engines that burn ethanol,” he posited. “The IP owner would form a Special Purpose Vehicle (SPV) jointly with the exchange to assign the patent portfolio and grant the right to sublicense Unit License Rights (ULRs). So, Ford would contact us, create the SPV, and then proceed with the help of an IP advisor or investment bank to put together a prospectus.” Such a process, he explained, is best compared to a public offering — of patents. “Instead of a bilateral transaction, they list the IP on the exchange and start with an initial offering of Unit License Rights (the right for a buyer to use a technology or patent in the manufacture or sale of a product); potential buyers might be Nissan, BMW, or Mercedes, for example. All they have to do in principle is call their broker, and depending on their anticipated needs for months or years to come instruct them to purchase a number of unit license rights consistent with their anticipated use. So, for example, if BMW expected to build 5 million trucks requiring this valve, they would instruct their broker to purchase 5 million units.”
Pannekoek anticipates that the units would be offered in several tranches on a sliding price scale, with each tranche having a higher cost per ULR. “This is a typical arrangement; it rewards early buyers,” he explained. The exchange will then create a secondary market, providing buyers with the opportunity to either purchase additional ULRs from other market participants or, in the event they have overbought, to sell them to other users or institutional investors. A detailed article on the new IP exchange, including analysis of its utility for TTOs, appears in the May issue of Technology Transfer Tactics. To start a subscription, including access to the entire three years of archived articles filled with success strategies and best practices, CLICK HERE.