After several years in the making, IP rights trading platform Intellectual Property Exchange International (IPXI) has launched by offering its first unit licence rights (ULRs) to the market. In webinars held yesterday, IPXI representatives outlined the exchange’s business model and gave details of the rights on offer, as well as the methods used to price them.
This first batch of ULRs to be offered on the exchange give access to a portfolio of more than 600 patents and applications owned by Philips – one of the founding members of IPXI – with jurisdictional coverage focused on the United States, Europe, China, Japan, Taiwan and South Korea. The portfolio relates to organic light emitting diode (OLED) display technology, which has applications in mobile phones, personal computers and other devices. Each ULR contract will give its owner the right to utilise the licensed technologies for five square metres of OLED display panel.
Based on an estimation of the size of the potential market for Philips’ OLED portfolio, IPXI plans to offer a total of 750,000 OLED ULRs in three consecutive tranches, with the possibility of further offerings if demand is high enough. The estimated fair market price for each OLED ULR is $45.00 per contract, with those in the initial tranche of 20,000 being offered at a discount price of $36.00 per contract. Prices have been calculated using a combination of the market and income approaches to patent valuation. Indications of interest for purchasing ULR contracts will be solicited from potential purchasers and once sufficient indications of interest, or orders, have been received, IPXI will announce the closing of the first tranche. This will typically happen within a 24 to 48-hour period from the announcement.
Patent owners offering licences via IPXI will not be able to enforce the assets they have offered on the exchange without the agreement of IPXI. “We think many of the criticisms of the patent system relate to out of control enforcement,” said IPXI’s Douglas Kochelek during yesterday’s webinar. “So we manage the possibility of enforcement in two ways – first, the legal contract, the licence agreement between IPXI and the sponsor [ie, the patent owner]; and second, through IPXI’s market rules. The sponsor cannot bring a lawsuit without the consent of IPXI, and IPXI cannot without theirs.” Kochelek explained that any request to pursue litigation must go through a thorough, multi-tier approval process before a decision to file suit is finalised. “We think these steps really manage the enforcement process so that only meritorious cases are brought,” he added. “We think our enforcement provisions mitigate a lot of the trolling activity that people are rightly concerned about.”
Kochelek further suggested that ULRs could be considered as FRAND-compatible. “The prices we offer are market set, so that makes them almost inherently reasonable,” he said. “And we are non-discriminatory because anybody can come to the IPXI market to buy a licence right. We think IPXI presents a very RAND-friendly solution.”
Critics have questioned whether the patent marketplace is sophisticated enough for a public exchange at this stage. However, the patent system needs solutions that can ensure transparency and enhance liquidity. IPXI appears confident that its model will be a success, with managing director Robert Moore confirming during yesterday’s webinar that two other portfolios are to be offered up in coming weeks. At a time when US politicians are considering fundamental legislative reforms that could end up doing more harm than good to patent-owning businesses, IPXI’s exchange model potentially offers a market-based solution to some of the perceived flaws and abuses in the patent system.
After three years of persuasion, planning and projection, the IPXI exchange is about to become a reality. The theory is great; we will now see whether it works in practice. Much will depend initially on how well the Philips portfolio is received; but you have to think that with so much time to select a tranche of patents, to price them up and to gauge interest in advance, the ULRs for this offering will be snapped up. What will then be interesting is to see how quickly a secondary market for them develops; then we have to wait for the reception for the next two offerings mentioned by Moore. If these go down well and there is active trading on them, something pretty significant will have begun.
Competition/antitrust, Licensing, IP politics, Patents, IP business, IP valuation