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
gpannekoek@ipxi.com
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.