IP: What price is right?
Founded in 1999, The Property & License Exchange (PL-X) is a marketplace for the transaction of intellectual property rights, including know-how, patents, copyrights and trademarks. The PL-X Exchange deploys the tools of financial markets to transform legal instruments into liquid financial assets. Using risk reduction tools, PL-X claims to provide global buyers and sellers with the safest market for finding, pricing and transferring intellectual property rights.
PL-X's TRRU, or Technology Risk Reward Unit, system provides an objective market-driven valuation based on real options theory and live market data. TRRU combines current market variables, such as the value of a particular technology, with the Black-Scholes Options Pricing Model to create common ground from which buyers and sellers can converge on a fair market value. The suggested price helps both buyers and sellers expedite valuation, bidding, and ultimately, final negotiations when conducting a technology transfer deal.
TRRU is based on the realization that a patent, like a call option on a stock, is a right to an asset that may or may not have future value. Patents are typically offered for sale or licensed in units of related patents covering a single product line. and they are valued based on their financial risk and reward. Since patents and options behave very similarly, PL-X can use established financial tools to compute reasonable market values for patents listed on PL-X.
The company describes the process of a typical transaction:The seller lists an intellectual property (IP) offering in the PL-X Global IP Catalog. The seller identifies the key attributes, proven applications, potential applications and competitive advantages for the asset. The seller also includes the contractual terms including upfront fee, royalty payments, royalty rate and milestones.
PL-X.com provides the seller with a TRRU valuation of the asset (based on market-driven data), a risk measure and a tool for pricing the asset that allows the seller to determine upfront fees and guaranteed downstream royalties.
Buyers search PL-X's Global IP Catalog for solutions to fulfill their technology needs. The catalog is searchable by more than 100 attributes, as well as solutions and applications. Potential buyers perform the scientific due diligence. Buyers/licensees make preliminary bids for right to license or purchase the asset. Seller/licensee accepts the provisional offer, modifies bid, or invites new ones.
Once seller accepts a provisional offer, both sides enter the online secure deal room and negotiate the details of the technology license/sale and escrow closing documents. Subscribers can take advantage of neutral, internationally compliant contracts created by a council of leading authorities in IP licensing.
Once contract details are complete, the deal moves into escrow. Both parties conduct physical and further scientific due diligence offline. Chicago Title oversees the transfer of an upfront fee to escrow, securing the buyer's bid and securing the seller's key documents and other goods for the due diligence process.
Once due diligence is completed, Chicago Title oversees the closing of escrow including the wire transfer of funds and the safe delivery of documents to all parties involved.
The buyer and qualified seller receive their patent validity insurance certificate. The transaction is insured for up to $10 million in the event that the patent is declared invalid or unenforceable.
The deal closes and all deal data is archived.