Unit License Rights and the Rise of IP Finance
The world’s first patent exchange is set to open in the near future, with initial listees to be named next month according to IAM magazine. IPXI, or Intellectual Property Exchange International, will be “a marketplace that facilitates the investment in and risk management of IP-related assets.” This market will function much like the Chicago Climate Exchange (CCX) and is conveniently being run by CCX’s former President & COO, Gerald J. Pannekoek.
The basic structure of the exchange will allow investors to trade licenses in patents and other IP holdings. These licenses will then be divided into Unit License Rights (ULRs) whereby investors can buy and sell like any other form of stock. This listing house will not just incorporate private enterprise portfolios but also conceivably the portfolios of many university’s technology transfer offices. For now, membership is open to organizations that are able to submit portfolios for listing that have a combined estimated minimum market value of $50 million, as well as a sizeable and successful licensing history.
It will certainly be interesting to not only see what companies/organizations decide to be the original participants on this exchange but also to see the institutional demand for this type of investing. Certainly IP valuation and monetization is very intriguing and hopefully will offer benefits to large patent holding companies. However, much like other derivatives, monetizing intangible assets is not without risk. While companies such as Ocean Tomo (who is also spearheading the launch of IPXI) have had success in the creation of an index based around patent rights (see Ocean Tomo 300), other so-called “patent trolls” like Intellectual Ventures have not faired so well. In fact, one such company, IP Bewertung, recently filed for bankruptcy after failing to market their patent holdings successfully. In the end, with all emerging investment vehicles, market demand and knowledge of the assets will decide whether IPXI is ultimately successful.