IP in Innovative Economy Krakow, Poland September 6, 2012 © 2012 IPXI, Inc. About IPXI® • The world’s first financial exchange that facilitates nonexclusive licensing and trading of IP rights with marketbased pricing and standardized terms. • Developed with significant input from leading corporate, university, and laboratory IP owners. 2 Member Overview Corporate University Laboratory Associate CDC Propriété Intellectuelle Columbia Technology Venture Brookhaven National Laboratory Article One Partners Com-Pac International Northwestern University Lawrence Livermore National Laboratory Bridges & Mavrakakis, LLP Ford Global Technologies, LLC Regents of the University of California Pacific Northwest National Laboratory DeWitt, Ross & Stevens S.C. JP Morgan Chase & Co. Rutgers University DLA Piper, LLP MetaPower, Inc. University of Chicago Innography Palo Alto Research Center Incorporated University of Notre Dame Kerr & Wagstaffe, LLP Philips Intellectual Property & Standards University of Utah Marsh, Inc. Sony Corporation of America McGladrey, LLP Nordic Patent Institute North Point Advisors, LLC Ocean Tomo, LLC Pantros IP PATENTSHIP Patentanwaltskanzlei Red Chalk Group Sullivan & Cromwell, LLP TAEUS International Corporation 3 IPXI Update • 28 new members since IPXI’s funding announcement in December 2011 (34 in total and growing) • Founding Members – 6 U.S. University Founding Members – 3 U.S. National Laboratory Founding Members – 7 U.S. and Foreign Corporate Founding Members • First working version of the Rulebook approved by the Executive Committee • $500 million+ in IP commitments 4 IPXI Market Rulebook – Working Edition 1.0 • Approved by IPXI Executive Committee • Available by request 5 IPXI Governance Board of Directors Executive Committee Rules Committee Selection Committee Business Conduct Committee 6 Enforcement Committee Market Operations Committee IPXI Core Objective A more efficient and transparent IP marketplace IP Market Problem IP Exchange Result Incomplete or insufficient market information Detailed prospectus, published pricing, consumption data reporting, bid/ask TRANSPARENCY - enabling Arbitrary or unilaterally determined IP value Market-based pricing reflecting the value of a technology and increasing buy-side confidence PRICE DISCOVERY – Lack of standards, including course of dealing, contract terms, and pricing Standardized tradable license rights accessible to all market participants LEVEL PLAYING FIELD – Time and transaction cost inefficiencies associated with bilateral licensing Central marketplace with market enhancing solutions, such as standard contracts, outsourced auditing, and alternative dispute resolution processes EFFICIENCY - providing easy 7 more accurate IP asset management and R&D decisions ensuring fair and reasonable pricing accelerating technology transfer and innovation access, liquidity, and increasing transaction volume Unit License Right™ Characteristics • Non-exclusive licensing • Non-discriminatory terms • Standardized rights within each offering • Retired upon use 8 ULR™ SAMPLE UNIT LICENSE RIGHT SPECIFICATION SECONDARY MARKET PRICE DISCOVERY USP X,XXX,137 A/B/C General Description: USP X,XXX,123 A/B/C Value Seat Insert USP X,XXX,137 A/B/C Expiration: 12/31/17 Patent(s): USP X,XXX,137 and continuations, continuations-in-part and foreign counterparts OFFERING DATA Fields of Use: All Restrictions: All Secondary Market sales through IPXI Issuer Right to Use: Yes including all subsidiaries Unit Basis: Each ULR covers one automotive or light truck engine Total Offered Quantity: 50 million ULRs offered in 10 unit lots Term of Rights: Until used Opening: Dutch Auction (50% minimum quantity & price) Encumbrances: Prior Licensing History IPXI Price Banding: +/- 1% Amnesty: Full Tranche U137A: 10 million ULR U137B: 10 million ULR U137C: 30 million ULR Authorized 10,000,000 Issued 10,000,000 U137B U137C Follow-on (each) 10,000,000 30,000,000 10,000,000 2,250,000 - Consumed 6,688,658 - SECONDARY MARKET DATA Tranche U137A U137B U137C Follow-on (each) Priced at $0.50 per unit $0.75 per unit $1.00 per unit Follow-on Offerings Through Term (2017) 10 million ULR each Tranche U137A Deemed Market Price 9 Bid $0.625 $0.750 - Ask $0.630 $0.750 - % of Issued URLs _ 28% 0% - Licensor / Licensee Benefits Licensor Benefits Licensee Benefits • Efficiently monetize patent portfolios • Efficiently obtain licenses to patent portfolios at market price • Reduce transaction costs • Ability to resell unused ULRs to accommodate reduced future needs • Avoid forced cross licensing • Outsource marketing • Fair and level playing field for all prospective licensees • Outsource auditing • Outsource enforcement • Fair and reasonable market determined licensing terms • Receive timely reports on licensee usage • Selection Committee screening and public comment period promote quality offering and rational market pricing • Flexible rights structure • Potential amnesty for prior usage 10 Indicative Timeline and Task Allocation Time Period Day 1 Task Submit formal OS Document IPXI internal vetting Day 2 - 30 Review OS Document for preliminary acceptance or rejection by the Selection Committee Day 30 Preliminary acceptance of OS Document by the Selection Committee and execution of Submission Agreement Initiate pre-marketing activities Preliminary Offering Memorandum and Selection Committee findings available for Exchange Member review and comment Days 30 - 90 Use of external parties to further evaluate, including prior art search and valuation Assess all comments and reports Final Modification of OS Document, followed by its final assessment Final decision regarding acceptance or rejection of preliminary Offering Memorandum Day 90 Commitment fee is due and payable Grant of exclusive license option of relevant IP to Special Purpose Vehicle (Issuer) Form Issuer Days 91 -150 Market Authorized Product (Roadshow) Day 150 Exercise of exclusive license by Issuer Day 151 Initial Offering effective Day 152 Secondary Market 11 IPXI ULR vs. Other Monetization Methods Monetization Method Assumptions Estimated Revenues To IP-owner Sale through Broker or Auction* Third-Party Enforcement Program** Self-managed Licensing Program*** IPXI ULRs 75% Potential Market Penetration 75% Potential Market Penetration 50% Potential Market Penetration 15% Tranche Pricing Discount 75% Price Discount 57% of Licensing Revenues Paid as Fees $1M to $5M in Legal Expenses Incurred 20% of Licensing Revenues Paid to IPXI 15% Commission $1M to $5M in Legal Expenses Incurred Approximately $500,000 in Internal Costs Allocated to Licensing Program $100,000 Listing Fee and $5,000 Annual Membership Fee 15-20% of Total Licensing Revenues 20-30% of Total Licensing Revenues 40-50% of Total Licensing Revenues Approximately 68% of Total Licensing Revenues * 25% market discount reflects Purchaser expectations after acquiring the patent; 75% price discount reflects the typical discount necessary to assure sale to a single Purchaser in a limited market; 15% of licensing revenues payable as a fee to the brokerage/auction house facilitating the sale. ** 25% market discount based on expected ability of a specialized third-party enforcer to address the market of potential users of a patented technology; 57% of licensing revenues payable as fee to a third-party enforcer, based on a successful patent enforcement company’s financial information; $1M to $5M additional costs consistent with AIPLA’s estimate for patent litigation with potential damages of $1M to $25M+. *** 50% market discount based on the expected ability of a patent-owner to address the market of potential users of a patented technology; $1M to $5M litigation costs plus $500,000 of non-attorney costs related to the internal management of licensing or enforcement program has been added for this model. 12 IPXI ULR vs. Other Monetization Methods Revenues Expenses Net Income to Sponsor Monetization Method Total Revenue Potential Revenue after Revenue after Broker Fee/ Market Discount Price Discount Commission Risk to Sponsor Additional Expenses Total Income Realized Loss of Patent Ownership Out-ofpocket downside Sale through Broker or IP Auction $50M $37.5M $9.4M $1.4M $0 $8M Yes $0 Third-Party Enforcement Program $50M $37.5M $37.5M $21.4M $5M $11.1M Yes $0 Self-managed Licensing Program $50M $25M $25M $0M $5.5M $19.5M No $5.5M IPXI ULR $50M $50M $42.5M $8.5M $100,000 $33.9M No $0 13 IP as an Exchange Traded Unit – Accelerated Innovation • Efficient and transparent technology transfer • More accurate R&D and intangible asset management decision-making • Greater technology access for small/medium enterprises at fair and reasonable prices • An alternative for universities and research laboratories • Level playing field 14 Intellectual Property Exchange International, Inc. Gerard J. Pannekoek IPXI Holdings, LLC 10 South LaSalle Street, Suite 2130 Chicago, IL 60603 Phone: +1 (312) 275-2701 [email protected] www.ipxi.com Disclaimer: The concepts covered by this presentation and the information included herein are for discussion purposes only and are not intended to be all-inclusive on the topic of IPXI or related parties. Many of the concepts are illustrative only and do not necessarily represent final IPXI functions and processes. Additionally all of the information contained herein is confidential is and the recipient acknowledges that unauthorized disclosure or use of such confidential information, will cause the Company irreparable harm. Therefore recipient shall maintain Confidential Information in strict confidence at all times without the Company’s written consent.