Richard Lloyd

Six years after it officially launched, IPXI yesterday announced the closure last Friday of its first two offerings involving two tranches of patent assets from JP Morgan. Last October the patent exchange revealed that it was offering potential investors and licensees the opportunity to buy unit license rights (ULRs) covering the patents. The buyers of ULRs, which are akin to shares in a traditional initial public offering, can either use them like a traditional patent licence or trade them via IPXI’s platform.

The patents in the two offerings involve technology related to prepaid stored value cards (SVC) with each ULR representing the right to produce 100 cards. Each ULR has been priced at $5 with up to 750,000 expected to become available.

Gerard Pannekoek, the CEO and President of IPXI since 2009, described the marketing and sales process involved in the JP Morgan process as like a “typical IPO roadshow”. He admitted that more time had to be spent educating the market about the IPXI model than he had expected. The advantages of selling a financial services product, however, were that potential buyers could more readily get comfortable with IPXI’s trading model than those, for instance, in the tech sector; and that the vast majority of buyers were based in the US.

IPXI is yet to close the first offering that it announced in June last year involving a portfolio of more than 600 patents covering organic light-emitting diode technologies developed by Philips. Pannekoek revealed that that offering was still several months away from closing and had been delayed by the complexity of the technology involved and by the fact that most of the interest was from Asia which had increased the amount of time spent marketing.

Having launched in 2008 IPXI currently has 68 members of which 20 have made a commitment to make a number of offerings over the next few years. One upcoming offering involves standard essential patents for a multi-party offering, while another is expected to comprise patent assets from a university.

Pannekoek predicted that trading would be slow to build before ultimately leading to a liquid marketplace. “It will increase slowly and we’ll be patient about building liquidity and focusing on making this model known to the business community,” he said.

When IPXI announces more offerings the hope has to be that the time and effort which have been put into educating potential buyers and traders of ULRs will begin to bear fruit. As the patent and investor communities get more comfortable with the concepts of deal-making and pricing transparency that underpin the exchange, this should speed up the time it takes to get from offering to trading. One thing is for sure, the IPXI team is not going to be able to spend months or even years marketing every patent package that becomes available.