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The IPXI® - An Alternative to the License Agreement? Maybe!


The potential efficiency of the ULR Contract system is three-fold. First, the IPXI acts as a central marketplace for transacting IP licenses and provides a platform for licensors and licensees to transfer technology on standardized terms. Secondly, the IPXI provides access to technologies for consumers of all types. This means that small companies, research organizations and universities have the same access to ULR Contracts, and thus the technologies covered by the contracts, as Fortune 100 companies. Finally, the IPXI identifies, evaluates, markets and audits IP licensing transactions through its ULR model, and provides a rules-based approach to directed enforcement. This approach outsources to the IPXI much of the transactional costs typically associated with IP licensing. Which means, for example, the traditional tasks of the licensor of royalty auditing and IP enforcement by the licensee, will now be performed directly or indirectly (e.g., community rules approach) by the IPXI. In these ways, the IPXI marketplace is designed as a platform that allows IP owners to monetize their IP assets more cost effectively.

Conversely, on the buy-side, the IPXI marketplace is designed to give buyers, licensees, investors and industry access to new licensing, trading, investment and, potentially, arbitrage opportunities. For example, many universities and small/medium sized organizations own significant IP assets that are unused or under monetized. Currently, there is no effective way to market these assets to interested licensees or investors without significant time and monetary investment on the part of the seller.

Similarly, there is no single location, website or other portal where one can go and seek out those available technologies, no less a platform to acquire the technologies via a cost effective, arms-length transaction. This function is precisely IPXI’s niche.

Now before one jumps in and starts listing all of their IP on the exchange, they will need to understand that these services do not come cheap. As presently constituted, both ULR Contract sponsors (i.e., licensors) and buyers (i.e., licensees) must each pay an annual membership fee of $5,000, and sponsors must pay a $100,000 listing fee per patent or patent portfolio. In addition, a sponsor is assessed 20% of the ULR Contract price as a commission to the IPXI. These and other guidelines and regulations governing the IPXI are contained in its “Unit License Right Contract Market Rulebook” that was release in May 2012. The rule book, which outlines all of the parameters and working guidance for the exchange, can be obtained by visiting the IPXI website at www.ipxi.com

As one would expect, the IPXI has encountered scrutiny and skepticism. Proponents of the IPXI highlight the growing pains experienced by other exchanges until they became accepted in their industries, such as the Chicago Climate Exchange and New York Mercantile Exchange. However, with ongoing commitments from large corporations, universities and federally funded labs, the IPXI appears to have taken root and, in fact, is already growing. Initially, the IPXI signed ULR Contract sponsorship agreements with five entities: Philips, Com-Pac International, Rutgers University, Northwestern University and the University of Utah. Each organization agreed to issue one or more ULR Contract with a market value of at least $50 million. More recently, Sony USA, Ford Global Technologies, MetaPower Inc., the University of Notre Dame, the Regents of the University of California, the U.S. Department of Energy and various national laboratories and have committed to the IPXI as sponsors. As of May 25, 2012, the IPXI’s total membership includes 27 organizations, 13 of which have committed to ULR Contract sponsorship roles.

Nonetheless, a myriad of questions about profitability, accessibility to smaller companies due to the cost to participate and the interaction of the IPXI with traditional IP valuation, licensing and even litigation paradigms will continue to be debated. Most licensors and licensees will likely take the “wait and see” approach to gauge how these issues and market acceptance play out. If the IPXI’s novel approach succeeds, a new significant IP monetization pathway will become available to licensors and, as a result, a wide breadth of technologies that are not currently available or financially practical will be accessible to licensees.

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