I might be stretching it a bit to call it a stock market (this early), but developments are on the horizon to push IP in that direction.
The success of public auction events such as the Ocean Tomo auctions has sparked a new concept that will continue the trend toward liquidity of IP value. The Intellectual Property Exchange International (IPXI), of which Ocean Tomo is the founder and majority owner, is “the world’s first financial exchange with an intellectual property focus.” With its official opening slated for sometime in 2009, it purports to exploit the intrinsic structure of IP by treating it like annuities for purposes of investment and trading. IP owners will be able to place their property on the market for potential investors and hedge funds to invest in the right to royalties and other income streams that result from the investment. The Exchange guarantees that confidentiality and disclosure issues will be handled with utmost importance. This model will provide even more transparency to the market than Ocean Tomo’s IP auctions have, and the opportunity to monetize IP in completely new ways.
IPXI will be unleashing a few products this year that will revolutionize the IP market by facilitating the commoditization of IP rights.
The first of these is something which IPXI is calling the Unit License Right (ULR). Essentially, this is a license, but instead of conducting private bilateral negotiations, IPXI purports to be a one-stop-shop that acts as a medium between seller and all potential buyers. Much like an underwriter for an IPO, IPXI underwrites all ULR’s to investors (buyers) for a non-exclusive license to use a technology (patent). IPXI then manages the transfer of rights, even in the secondary market, and the enforcement of those rights. Essentially, IPXI creates the market for IP rights, extracting the transaction costs associated with IP transfers. All eyes will be on IPXI and the development of the ULR model in the coming months/years, as it could shape how IP transactions are conducted in the future.
The second product of note is the Tradable Technology Basket (TTB). This is the most interesting, and probably the most novel, of IPXI’s products. These “baskets” purport to combine the phenomenon of patent-pooling with the growing idea of hedge-fund-investing in IP. The baskets will be pools of patents in a certain area of technology (Blu-Ray technology, for example). IPXI will showcase these baskets to potential investors, who will invest in them much like a fund would invest in the futures market for commodities. Indeed, on IPXI’s website it states that “TTBs will do for the IP markets what the commodities exchanges and futures did for the commodities markets.” This will be the closest thing to an IP stock market that we have seen yet. An investment in a TTB will be an investment in a right to receive future income derived from a basket of area-specific technologies. In this light, IP is treated much like an annuity, and its value (stock price) will be watched and measured closely by investors. Move over S&P 500.