November 9, 2008

Thoughts on building an IP marketplace

In light of recent Ocean Tomo success and the ever growing interest in IP and intangibles (especially as it makes out 80 percent of market cap.. or what did Pat say ;) ) there are many ideas floating around and lot of effort put into thinking about an IP-marketplace. This will be a first post of hopefully many as I will try to focus on the financial / transactional side of IA / IP.

One could go on in eternity regarding the contextual nature of IP valuation and whether accounting principles are up to date - but that is not my intent. In this post I'm thinking about the actual markets. In light of CDOs I won't debate the future existance of securitzed IP to generate leverage - that is bound to happen. What I am interested in is governance, transparancy and liquidity.

First of all I would like to tip my hat to Ocean Tomo - true pioneers and deserve all appraisal. But what if (or when?) success (i.e. hight returns) leads to competition (as market theory has shown) and we all of a sudden have multiple OT's where some only take 8% of the cut and others 7% etc. Where would the buyers and sellers want to be?

How would markets attract both buyers and sellers if they require physical presence?
Would it be entirely online-based with a search function for all markets?
Would biotech complexity always be handled at high end 10% marketplaces with nice prospectuses?
Will we see an overall "garage sale effect"? (i.e. steep fall in percentage of lots sold as companies would try to sell all kinds of "crap" IP - perhaps to boost liquidity in light of the turmoil).

I personally trust market forces on this one out. But wait a minute - there might be a regulatory issue overruling it all as Ocean Tomo have some interesting pending applications.
As interesting they are on their own I see the following two key issues:
1) How will the infamous Bilski ruling affect these applications
2) If granted - will OT go open (á lá DNA), closed or somewhere in between?

Interestingly, they are not alone in this field. Wonder how Bilski influences this one?

Finally, some food for thought. It could be an interesting system if:
1) All corporations understand the potential in leveraging IP (i.e. not only as a legal necessity)
2) IP markets start growing
But the markets and securitization are privately owned (and governed ?) and you have to pay a royalty for calculating a value on IP you want to acquire.

Please share your thoughts on where the "IP market" ship is heading.
All aboard !?

Marcus Malek

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