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Intellectual Property Exchange International, Inc. 1 Shanghai International IP Forum 2011 Creating Best Practice in the IP Marketplace by Adding Transparency.

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Presentation on theme: "Intellectual Property Exchange International, Inc. 1 Shanghai International IP Forum 2011 Creating Best Practice in the IP Marketplace by Adding Transparency."— Presentation transcript:

1 Intellectual Property Exchange International, Inc. 1 Shanghai International IP Forum 2011 Creating Best Practice in the IP Marketplace by Adding Transparency and Efficiency November 22, 2011

2 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

3 Core Objective IP Market ProblemIP ExchangeResult 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 A more efficient and transparent IP marketplace 3

4 ULR Contract Characteristics IPXI Overview Legal Characteristics Non-exclusive Non-discriminatory Standardized/Commoditize d Consumable Financial/Economic Characteristics Market-priced Price-discoverable Potentially liquid Supply/Demand discovery ULR Contracts 4 US Patent 7,885,897 US Patent 7,987,142

5 Unit License Right (ULR) Contract - Specification 5 SECONDARY MARKET PRICE DISCOVERY Initially through the IPXI Bulletin Board, supported by third party liquidity providers. Illustrative data:

6 Licensor/Licensee Benefits 6 Licensor Benefits Efficient monetization of patent portfolios Dramatically reduced legal cost Avoids forced cross licensing Outsourced marketing Outsourced auditing Outsourced enforcement Timely reports on licensee usage Market determined fair and reasonable licensing terms Flexible rights structure Licensee Benefits Efficiently obtain unit-based licenses to patent portfolios at market price In-licensing standard contracts Ability to resell unused ULR contracts to accommodate reduced future needs Fair and level playing field for all prospective licensees Formal mechanism by which licensees request that IPXI investigate alleged infringement Selection Committee screening and public comment period promote quality portfolio and rational pricing Amnesty for compliance IPXI Overview

7 7 Membership Committee Enforcement Committee Executive Committee IPXI Governance ULR Contract Lifecycle Selection Committee Auditing Committee Rules Committee BOARD

8 Timeline and Task Allocation* Time PeriodTask Responsible Party Days 1 - 30 Submit formal UOS IP Sponsor/IP Advisor Review UOS proposal, including prior art search and vetting Selection Committee Days 30 - 90 UOS public review and comment period IPXI Membership Days 60 - 90 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 Days 90 - 110 Review modified UOS proposal, and final decision regarding acceptance or rejection of UOS proposal Selection Committee Days 90 - 150 Form Special Purpose Vehicle (SPV) IPXI License IP exclusively to SPV IPXI/IP Sponsor Accept ULR Contract is listed on IPXI Prospectus materials drafted and marketing of ULR contract begins for Dutch auction or private placement IPXI/IP Sponsor/IP Advisor Day 151 Initial offering of ULR Contract IPXI Secondary market for ULR Contract trading is opened IPXI 8 *For discussion purposes only; subject to modification

9 Submission Process 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 ULR Contract Lifecycle

10 Submission Procedures: Unit Offering Scenarios 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 ULR Contract Lifecycle

11 Discussion 11 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

12 Concern: Fair and Reasonable Pricing The structure and functionality of IPXI provides a market which promotes fair and reasonable pricing of IP rights 12 Fair and Reasonable Pricing Submission Process Primary Markets Secondary Markets Discussion: IP Exchange Model and Corporate IP Strategy

13 Concern: IP Validity In addition to the submission review process, IPXI provides arbitration and re- examination 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 13 Discussion: IP Exchange Model and Corporate IP Strategy Mitigation of Validity Concerns Arbitration Submission Process Public Comment

14 IP Strategy Economics: IPXI vs. Other Monetization Methods 14 Monetization Method Total Revenue Potential Penetration of Addressable Market Discounting of Fair Value Upfront Payment Received Broker Fee or Commission Expenses Incurred before Net Total Revenues Realized Auction/Broker Model $42.5MN/A65% See Total Revenue Realized 25%None$11.1M Third-Party Licensing Program $42.5M75%None$1M57%$3M$11.7M Self-managed Licensing Program $42.5M50%None $3.5M*$17.75M IPXI ULR Contracts $42.5M100%None 23% (Including IP advisor) $105,000$32.6M * Inclusive of certain internal cost allocations

15 ULR Contract Cash Flow and License Right Scenario 15 IP Advisor Intellectual Property Exchange International, Inc. Buyer A IP Sponsor Confidential Buyer B Buyer C Initial Listing and Membership Fee Advising Fee Exclusive License ULR Contracts Total ULR Contract Revenues 80% of ULR Contract Revenues 20% of ULR Contract Revenues Special Purpose Vehicle See Disclaimers.

16 Market Ready 16 IPXI Overview

17 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

18 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

19 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.

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