With the importance of Intellectual Property to a company’s bottom line, maximizing that value continues to command a prominent role. “Monetizing” an IP asset, such as a patent, is typically done by licensing, where the patent owner, or licensor, and the party wishing to use the patented technology, the prospective licensee, negotiate conditions and terms of use of the patented technology.
The Chicago-based Intellectual Property Exchange International (“IPXI”), debuting in 2012, bills itself as “[T]he world’s first financial exchange focused on IP rights.” The IPXI will strive to eliminate current licensing inefficiencies like cost, lack of transparency and time consumption, by creating an open market for IP assets, where the intangible IP asset will become a commodity via a Unit License Right (“ULR”) contract. A ULR contract is the IPXI mechanism by which IP asset owners will be able to license technology in a non-discriminatory manner using a standard form license and on publicly disclosed terms. Each ULR contract will give the buyer the right to use a pre-established unit of IP, such as the right to make or sell up to a certain quantity of product covered by the asset.
The process for listing an IP asset on the IPXI will be analogous to that of an initial public offering on other financial exchanges: an IP owner (or “Sponsor”) will submit the proposed asset for consideration and consultation, due diligence by a “Selection Committee” at the IPXI will take place, including publication on the IPXI website of the proposed ULR contract and a comment period by IPXI Members. Following any revisions to the draft proposal, the Selection Committee will render a final decision about the ULR contract. If in agreement, the Sponsor then will assign or exclusively license the asset to a special purpose vehicle (“SPV”) formed by an IPXI affiliate, which will serve as master licensor for offering the ULR contracts. (Think of the SPV as a specialist on a financial exchange that is trying to link up buyers and sellers of a certain commodity.) Parties to the ULR contract agree to arbitrate any disputes, with the SPV ensuring compliance with the ULR contract terms and overseeing any necessary arbitration.
The start up of the IPXI will not be without scrutiny and skepticism. Numerous questions concerning the interaction of the IPXI with traditional IP valuation, licensing and litigation paradigms certainly come to mind, and more skeptical eyes will be watching the IPXI to see how these issues play out. Moreover, as with traditional licensing, “one size does not fit all,” so the IPXI may not be right for every IP asset. Gibbons will stay at the forefront of all these developments. And for additional information about the IPXI, please go to the IPXI website at www.ipxi.com.
Ralph A. Dengler is Counsel to the Gibbons Intellectual Property Department. Todd M. Nosher, an Associate in the Gibbons Intellectual Property Department, assisted in the preparation of this post.
