IP Exchange Targets Institutions
Institutional investors will soon have a new venue on which to trade intellectual property rights. The first exchange for licensing and trading IP rights – IPXI – launches from Chicago with a marketing pitch for its offering June 5.
“We will market the offering to all institutions from prop firms to hedge funds – anyone with an appetite for long positions on technology,” said Ian McClure, IPXI director. The contracts “are a direct investment in the (IP) rights instead of the companies themselves, and can help investment managers mitigate risk that would be associated with the management of a company or its operations.”
Targeted investors and traders include institutional members, who do not pay for memberships. “There is no barrier to entry to trade on our platform,” McClure told Markets Media.
The first product listed will be Unit License Right (ULR) contracts on a large portfolio of patent assets related to organic light-emitting diode (OLED) technology for display screen apps. Following the initial webinar which begins at 10:00 a.m. CT on June 5, the exchange will post its offering memorandum.
The marketing period will last until the offering is fully subscribed, then Tranche A will close, and trading can begin on IPXI’s electronic trading platform the following day. In the meantime, institutional investors can participate by placing indications of interest in the offering.
IPXI has 55 global members, including four announced last week including a Japanese patent law firm, a Swedish consultancy, a patent analytics firm, and a U.S. Mid-Atlantic law firm with expertise in finance, manufacturing, IP and technology.
Purchasing members include prop trading firm Group One Trading and I Buy Tech Patents LLC. They fall into one of two categories. One group is operations users in the space who would adopt the technology, in this case OLED for display screen applications – makers or sellers of panels or electronics such as TVs, mobile devices and tablets. The other group is institutional investors who make technology investments or trading firms interested in IP exchange-listed products.
There are no competing exchanges and IPXI is not under the purview of the CFTC or SEC, said McClure, who added that the nascent firm went through the Department of Justice for a business review on its own volition.
IPs are monetized by buyers and sellers of patents and interdealer brokers, but IPXI is commoditizing the patent rights to be traded on its proprietary platform. Others in the marketplace competing for business would be intermediaries like patent pools, or patent aggregators that re-sell or re-license, such as Acacia Research. IPXI could be a marketing mechanism for these entities, McClure said.
The biggest challenge initially faced by IPXI was education needed to marry the financial (exchange) world with the intellectual property world. “It’s taken nearly four years for us to educate both sides of the market to achieve critical mass,” McClure said.
The market characteristic of transparency takes the formerly clandestine nature out of the process of seeking a technology patent, where all disclosure has been done with an eye toward litigation. “We’re trying to change that psychology,” he said. Benefits to institutions are the market behaviors and market efficiencies that did not exist previously in the intellectual property world.