Intellectual Property Exchange International, Inc.
|Intellectual Property Exchange International|
|Key People||Gerard Pannekoek, CEO|
James E. Malackowski, Co-Chairman
|Products||Unit License Right (ULR) contracts|
Chicago-based Intellectual Property Exchange International, Inc. (IPXI) was the world’s first financial exchange for licensing and trading intellectual property rights. The exchange closed in March 2015.
The IPXI marketplace was designed to allow owners of IP to monetize their IP assets more efficiently and give them access to risk management tools to hedge their exposure. It also invited investors to speculate on the value of emerging technologies and invest directly in those IP rights instead of in the equity of the companies managing those technologies, with the ability to trade those rights as the value appreciated.
IPXI’s membership included some of the world’s leading innovative companies with IP assets representing a variety of technology markets, university research institutions and national laboratories. By the time it shut down, it had more than 70 member firms signed on including names such as Ford, JP Morgan Chase and electronics giants Sony and Philips.
IPXI President and CEO Gerard Pannekoek, told staff and members in a memo that the exchange was forced to close because the "time was just not right, and the obstacles – including potential licensees who challenged us to litigate instead of work with them – simply too insurmountable. IPXI’s business model offered fairness and transparency and relied upon patented technology users to be good corporate citizens. In the end, potential licensees made it clear that the only way IPXI would really get their attention was through litigation, and that’s exactly what our business model tried to overcome."
Unit License Right (ULR) Contract
IPXI's products were based on an instrument called a Unit License Right contract, or ULR. A ULR contract is an exchange-tradable non-exclusive license right product offered at a market-based price and with standardized terms. The contracts were priced and sold on a technology-unit basis, where each unit-base was determined by IPXI in collaboration with the sponsor, according to the underlying technology. This allowed the use of the technology to be easily monitored.
Each purchaser of a ULR contract was granted the right to use the underlying technology for an established number of instances: for example, the right to manufacture and/or sell a certain number of product units incorporating the patented technology. As soon as one instance of use occured and was reported to IPXI, the ULR contract was consumed and retired from the purchaser's registry account. If a ULR contract is not consumed in its entirety, a purchaser could choose to trade the ULR contract on IPXI's electronic trading platform.
Through the ULR contract model, IPXI wanted to operate an exchange under two core principles that do not exist in traditional bi-lateral licensing: transparency and efficiency. IPXI determined the quality of all patent rights listed as ULR contracts.
ULR contracts were introduced in the form of initial offerings, similar to an IPO of a company. Once an initial offering was priced, IPXI maintained a secondary market on its electronic trading platform, where purchasers and sellers could trade the products.
The secondary market let market participants trade the ULR contracts. The secondary market also increased the primary market demand for ULR contracts, maximizing revenues to the contract's sponsor. IPXI issued follow-on primary market offerings of ULR contracts as demand required.
Finally, a rules-based approach to directed enforcement allowed IP rights to be enforced with different choices to fund litigation, including either self-funded enforcement, IP insurance or third-party funded enforcement.
IPXI was founded in 2007 by Ocean Tomo. The development of the exchange began with support from the State of Illinois in 2006. Two public town-hall meetings were held with several hundred corporate IP owners, inventors and others participating. Fourteen national and international corporate and university IP managers attended the initial rulebook meeting in March 2010. Beyond these formal meetings, hundreds of IP ecosystem participants have contributed to the development of the exchange and the initial product, the ULR contract.
In December 2011, IPXI completed funding for its U.S. operations from strategic investors including Royal Philips Electronics and CBOE Holdings. IPXI’s founding members met frequently in early 2012 to develop and approve the release of the IPXI Market Rulebook Working Version 1.0. IPXI plans to launch a new version of its IPXI Market Rulebook and its first offerings on the exchange in 2013.
By February 2013, IPXI had more than 45 members. Among the IPXI’s 20 Founding Members were: Ford Global Technologies, LLC; J.P. Morgan Chase & Co.; Philips Intellectual Properties & Standards; Sony Corporation of America, and Hewlett-Packard Company. The founding members committed to sponsor offerings on the exchange with an aggregate target market value of more than $750 million.
In March of 2013, IPXI announced that the U.S. Department of Justice Antitrust Division had concluded an eight-month business review of the exchange and issued its Business Review Letter highlighting many "innovative and efficient" aspects of the IPXI's licensing model. The exchange initiated the business review process to provide certainty to its members and market participants that IPXI's model did not warrant enforcement action by the DOJ, IPXI said.
The exchange successfully held its first two initial offerings of unit license rights on July 18, 2014. The offerings were based on patent rights to prepaid stored value card (SVC) technology owned by JPMorgan Chase Bank, N.A.
- Gerard J. Pannekoek, President & CEO; Co-Chairman
- James E. Malackowski, Co-Chairman
- Robert A. Moore, Managing Director
- Ian D. McClure, Director
- IPXI: Trading Patents in 2012. CNBC.
- IPXI. IPX International.
- New IP exchange offers transparent and efficient alternative to litigation. Swiss Derivatives Review.
- An Intellectual Property Exchange. The Economist.
- CBOE backs new intellectual property bourse. Financial Times.
- U.S. Department of Justice Concludes Eight-Month Review of IPXI Licensing Model. press release.
- Chicago at center of new IP exchange. Crain's Chicago Business.
- IPXI® Prices First Offerings; Intellectual Property Market Opens for Trading. IPXI.