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IPX International, the pioneering financial exchange designed to facilitate the transparent trading and licensing of patent rights, is set to publish its first rulebook. The move comes as the exchange’s membership has surged since the announcement of its first founding members in December 2011. Back then it was confirmed that two companies – Philips and Com-Pac International – along with three academic institutions - Rutgers University, Northwestern University and the University of Utah - had signed up. That number has now increased to over 25, around half of which are founding members and so entitled to take part in developing the rules under which the exchange will operate. The identities of all IPXI members will be made public shortly, perhaps as early as next week.
After what has at times been torturously slow progress, IPXI’s CEO Gerard Pannekoek can now look forward to the first offerings being submitted to the exchange. “We are looking to get four to five done this year,” he told me when I spoke to him yesterday. It is only now that the first rulebook has been drawn up that planning for this can begin in earnest, he explained: “Every exchange in the world has to have a rulebook before it can start trading because members have to commit to abiding by what it says.” That’s why being a founding member is so important, he said; as one, you are guaranteed representation in all the discussions about how the exchange will work and will have an input into the decision-making. “Our founding members have the right to be on the rules committee and all have been involved in a number of very long and detailed sessions to create what should be seen as our rulebook 1.0,” Pannekoek stated. What has been agreed has also been closely scrutinised and signed off by a well-known IP law firm, he added.
Offerings listed on IPXI will be in the form of what are known as unit licence rights (ULRs). Patents available for license on the exchange are divided into a defined number of ULRs and licensees buy access to a licence through them. ULRs can be sold on if the licensee finds it has too many; alternatively, it can purchase more if necessary. Each unit price is clearly posted and the patents themselves are fully accessible. The contracts involved are standardised. The aim is to make the process much more efficient, timely and less expensive than the vast majority of bilateral licensing deals. IPXI gets a percentage of each deal done. Founding corporate members of the exchange commit to making ULR contract submissions within a year of signing up; those from academic and research institutions have three years.
Pannekoek is confident that with a strong base of members and a rulebook in place, more IP owners will now join the IPXI fold. “When we made the announcement in December, all of a sudden many of the people we had been talking to got a lot more interested – they saw that the exchange had teeth and they could go to their managements and say that it was going to work,” he explained. Based on his previous experience at the Chicago Carbon Exchange, Pannekoek believes something similar should happen now: “I look back at that launch and I remember that it was excruciatingly difficult to get the first signature. But when we did it took a month to get the second, then a fortnight later we had 40. Within a year 800 had signed up.”
It is now a case, Pannekoek claimed, of IP owners asking themselves why they are not involved with the exchange: “Ultimately, our biggest challenge is to ensure that the first offering is successful, but it is now obvious that we are getting some legs. Sitting on the side lines and waiting will not be a benefit when there is now the opportunity to get involved in the exchange’s design.” The current rulebook, he said, should be seen as a first draft. “I am convinced that we will move onto to 2.0 and then 3.0,” Pannekoek stated, before confirming that companies that sign up now as founding members can make sure their voices are heard. However, once the first formal IPXI offering is announced, founding membership will no longer be available.
IPXI has always had the potential to revolutionise licensing. The issue has been whether enough IP owners would want to get involved for it to develop momentum. For a long time it looked like that may be a struggle, but signing up Philips and the other four founding members last December was a major breakthrough. The task now is to keep the momentum going and to get some offerings out there. Whichever way you look at it, though, Gerard Pannekoek has done an extraordinary job. He came to IPXI with no background in IP, but three years later he has secured major funding for the exchange and has convinced close to 30 entities to become members. With more set to follow them, IPXI is now much better placed to become the game changer Pannekoek believes it can be. That is a long way from happening yet, of course; but, if it does, Pannekoek will certainly have earned a prominent place in the IP market history books.
A copy of the rule book is available from IPXI.
Licensing, Patents, IP business, IP valuation