New Exchange Brings Innovation

Terry Flanagan

When the IPXI goes live later this year, it will be the first of its kind to trade the asset class of intellectual property.

“The idea for an IP market has been around for quite some time, and has been talked about at industry conferences, but the key always was, how you do it,” said Gerard Pannekoek, chief executive officer of Intellectual Property Exchange International, or IPXI. “The model we designed over the years resembles a patent portfolio. The IP owner puts together a prospectus with the IP they will bring to market, including descriptions, litigation history, existing licensees, a detailed description of the marketplace, ultimately leading to an offering of a certain number of unit license rights, at a particular price.”

A unit license right, or ULR, is the right for the owner of the unit license right to use the technology that is described in the prospectus to manufacture the sale of one product. It becomes a consumable instrument, like a carbon credit; once you polluted an amount of carbon, the allowance will be taken out of the account. The IPXI will work the same way.

The IPXI will launch during mid-2012 with the goal of creating “a marketplace for a unique portfolio of financial products and services that facilitate investment and risk management in IP assets, helping buyers and sellers to efficiently allocate IP rights,” according to the company, which is to be based in Chicago.

The IPXI announced in December that it had completed a $10 million round of financing led by a group of U.S. and European-based investors, including CBOE Holdings, the operator of the Chicago Board Options Exchange and CBOE Stock Exchange, as well as Royal Philips Electronics, a global healthcare and lighting manufacturer.

The round of financing will allow the IPXI to fund the building of its infrastructure, which will be set up to issue ULR contracts, which will provide for a more transparent way to monetize and license patents and other intellectual property.

The IPXI can have comparisons drawn with the carbon market, which is estimated to be a $1.2 trillion marketplace in the next few years, according to Pannekoek. In the U.S. alone, estimates for the licensable value of patents are well over $9 trillion.

“You are seeing institutional investors getting involved in one way or another in the IP world, and by purchasing IP, there is a recognition that this is the next asset class and may be a significantly bigger than the carbon market we have,” said Pannekoek. “There is tremendous opportunity and room for something like the IPXI. If you look down the road a few years from now, there will be a number of different derivative products to come from this, and this can become a new asset class.”

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