Intellectual Property Exchange International, Inc.
Shanghai International IP Forum 2011
“Creating Best Practice in the IP
Marketplace by Adding Transparency and
Efficiency”
November 22, 2011
1
Agenda
1. Unit License Right™ (ULR) Contract
2. Discussion: “Creating Best Practice in the IP
Marketplace by Adding Transparency and Efficiency”
3. IPXI Status and International Strategy
2
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
more efficient IP asset
management and R&D
decisions
Arbitrary or unilaterally
determined IP value
Market-based pricing reflecting
the value of a technology and
increasing buy-side confidence
PRICE DISCOVERY –
ensuring fair and reasonable
pricing
Lack of standards, including
course of dealing, contract
terms, and pricing
Standardized tradable license
rights accessible to all market
participants
LEVEL PLAYING FIELD –
accelerating technology
transfer and innovation
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 access, liquidity, and
increasing transaction
volume
3
ULR Contract Characteristics
IPXI Overview
ULR Contracts
Financial/Economic
Characteristics
Legal Characteristics
• Non-exclusive
• Non-discriminatory
• Standardized/Commoditized
• Consumable
• Market-priced
• Price-discoverable
• Potentially liquid
• Supply/Demand discovery
US Patent 7,885,897
US Patent 7,987,142
4
Unit License Right™ (ULR) Contract - Specification
SECONDARY MARKET PRICE DISCOVERY
Initially through the IPXI Bulletin Board,
supported by third party liquidity providers.
Illustrative data:
5
Licensor/Licensee Benefits
IPXI Overview
Licensor Benefits
Licensee Benefits
•Efficient monetization of patent portfolios
•Dramatically reduced legal cost
•Efficiently obtain unit-based licenses to patent
portfolios at market price
•Avoids forced cross licensing
•In-licensing standard contracts
•Outsourced marketing
•Ability to resell unused ULR contracts to
accommodate reduced future needs
•Outsourced auditing
•Fair and level playing field for all prospective
licensees
•Outsourced enforcement
•Timely reports on licensee usage
•Formal mechanism by which licensees request
that IPXI investigate alleged infringement
•Market determined fair and reasonable licensing
terms
•Selection Committee screening and public
comment period promote quality portfolio and
rational pricing
•Flexible rights structure
•Amnesty for compliance
6
IPXI Governance
ULR Contract Lifecycle
BOARD
Executive
Committee
Membership
Committee
Selection
Committee
Enforcement
Committee
7
Auditing
Committee
Rules
Committee
Timeline and Task Allocation*
Time Period
Task
Responsible
Party
Submit formal UOS
IP Sponsor/IP Advisor
Review UOS proposal, including prior art search and vetting
Selection Committee
UOS public review and comment period
IPXI Membership
Assess UOS proposal comments submitted by Selection Committee and IPXI Members
IPXI/IP Sponsor/IP
Advisor
Modify UOS proposal based on assessment
IPXI/IP Sponsor/IP
Advisor
Review modified UOS proposal, and final decision regarding acceptance or rejection of
UOS proposal
Selection Committee
Form Special Purpose Vehicle (SPV)
IPXI
License IP exclusively to SPV
IPXI/IP Sponsor
Accept ULR Contract is listed on www.ipxi.com
IPXI
Prospectus materials drafted and marketing of ULR contract begins for Dutch auction or
private placement
IPXI/IP Sponsor/IP
Advisor
Initial offering of ULR Contract
IPXI
Secondary market for ULR Contract trading is opened
IPXI
Days 1 - 30
Days 30 - 90
Days 60 - 90
Days 90 - 110
Days 90 - 150
Day 151
*For discussion purposes only; subject to modification
8
Submission Process
ULR Contract Lifecycle
•
Proposals for ULR contracts are generally submitted by IP owner or its Advisor
•
IPXI may solicit IP for a ULR contract from prospective Sponsors and encourage
pooling of certain IP
•
Submission is via a Unit Offering Scenario (“UOS”) document, which will include
patents to be licensed, target market, potential licensees, anticipated pricing, known
encumbrances, license-back requirements, etc.
•
Submission is vetted by IPXI staff and reviewed by the Selection Committee based
on quality criteria of IPXI
•
Sixty-day period of open market peer review, including evaluation by third-party
review sources.
•
Reassessment of submission and pricing based on peer and third-party review and
comments
9
Submission Procedures: Unit Offering Scenarios
ULR Contract Lifecycle
Unit Offering Scenarios (“UOS”) shall include:
•
An abstract of the technology and business opportunity
•
Identification of the full portfolio, highlighting any core patents within the portfolio
•
Market identification, including:
- Proposed field of use
- Proposed unit basis
- Identification of known prospective licensees
- Market adoption time, trends, rate, and size
- Proposed royalty rate based on sale of units
•
Identification of any encumbrances, including most favored licensee obligations
•
Terms of Amnesty (if any)
•
Criteria (if any) for determination of a Failed Offering
•
Identification of third party sources which may assist the Selection Committee in
its decision making process
10
Discussion
Discussion: IP Exchange Model and Corporate IP Strategy
Creating Best Practice in the IP Marketplace by
Adding Transparency and Efficiency
Topics/Discussion Points:
1. Transparency
2. Transaction efficiency
3. Fair and reasonable pricing
4. IP Validity
11
Concern: Fair and Reasonable Pricing
Discussion: IP Exchange Model and Corporate IP Strategy
•
The structure and functionality of IPXI provides a market which promotes fair and
reasonable pricing of IP rights
Primary
Markets
Submission
Process
Secondary
Markets
Fair and
Reasonable
Pricing
12
Concern: IP Validity
Discussion: IP Exchange Model and Corporate IP Strategy
•
•
In addition to the submission review process, IPXI provides arbitration and reexamination facilities aimed at effectively and efficiently mitigating IP validity concerns
Arbitration addresses infringement and claim interpretation concerns and may include
a mechanism for expedited claim construction
Submission
Process
Public
Comment
Arbitration
Mitigation
of Validity
Concerns
13
IP Strategy Economics: IPXI vs. Other Monetization
Methods
Monetization
Method
Total
Revenue
Potential
Penetration
of
Discounting
Addressable
of Fair
Market
Value
Upfront
Payment
Received
Broker Fee
or
Commission
Expenses
Incurred
before Net
Total
Revenues
Realized
Auction/Broker
Model
$42.5M
N/A
65%
See Total
Revenue
Realized
25%
None
$11.1M
Third-Party
Licensing
Program
$42.5M
75%
None
$1M
57%
$3M
$11.7M
Self-managed
Licensing
Program
$42.5M
50%
None
None
None
$3.5M*
$17.75M
None
23%
(Including IP
advisor)
$105,000
$32.6M
IPXI ULR
Contracts
$42.5M
100%
None
* Inclusive of certain internal cost allocations
14
ULR Contract Cash Flow and License Right Scenario
Intellectual Property Exchange
International, Inc.
20% of ULR
Contract
Revenues
IP Sponsor
Exclusive License
Special
Purpose
Vehicle
Buyer B
Buyer C
Advising
Fee
IP Advisor
Buyer A
80% of ULR Contract
Revenues
Total ULR Contract Revenues
See Disclaimers.
Confidential
15
Market Ready
IPXI Overview
16
IPXI International Development Update
• Partnering with private stakeholders and government delegates to
establish support in building IPXI model in multiple jurisdictions
around the world.
• Significant progress made in:
• Europe
• Korea
• Singapore
• Continuing international development is 2012 Priority
17
IP as an Exchange Traded Unit – Accelerated Innovation
Accelerated innovation
– Efficient and transparent technology transfer
– More accurate R&D and intangible asset management decision-making
– Greater technology access for SMEs at fair and reasonable prices
– An alternative for universities and research laboratories
– Level playing field
18
Intellectual Property Exchange International, Inc.
Disclaimer: The models in this presentation were prepared prior to market opening. IPXI and related parties, accordingly, do not guarantee any market projects presented
herein. Models shall not to be relied upon in making a decision to participate in the market.
The concepts covered by this presentation 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.