Exchange Looks to Accurately Value Patents

" Welcome back everybody Bryant sold here at the CME group and I guess an appropriate place to have our next discussion because a lot of frustration of investors out there who have lost money in stocks that lost money in homes bonds aren't giving any return. You know gold near a thousand bucks and people don't know what's going to go up again so. Maybe no -- have money out there and not really sure what to do with it well a new asset class is slowly starting to emerge that is intellectual property. -- We're joined now by guy really the forefront of that whose firm ocean Tomo is trying to lead the charge to make patents. In investing class they're doing that by. Creating an online exchange to Malick -- CEO ocean -- Jim it's good to see you again -- to you I've chatted in the past about patents as an asset class and and we both argued about. Liquidity they're hard to buy and sell the hard to value. You law and ocean Tomo creating and a patent exchanged going to work like this house going to work soon."

" We're creating the intellectual property exchange international IPX night it's really an initiative that started about two and a half years ago at the suggestion of the state of Illinois office -- economic development. So is -- the state came to us and basically set at Chicago's a long history of exchanges look behind us look at the most recent and the climate exchange. They recognize that innovation is driving the economy and they want to have the intellectual property exchange to create that price discovery. So we hope to launch the first quarter of next year with four new products and we're quite excited others are to be due to Blue Jackets yelling patents -- each other. How to go there will be an over the counter element it'll probably be in offices behind closed doors we still -- someday to have an electronic floor. We could actually witness the trading as it occurs and the price discovery be too good to see -- here's the thing -- and you guys -- on this as well but the critics have said okay five by a contract for sugar it's the same kind all the contracts are the same. The problem patents is they're all you need. So how do you create the the sort of the the standardized valuation of the get a good -- or bad -- so that's a great question because patents are by definition you unique you have to be legally it can't be with so it's a share of stock in -- we contend is that if you read everything about your favorite company through all the ST -- violence. You would know less about how that company operates in if you simply read the patent and the file history that's provided by the US government. Secondly we think -- related assets such as being done right now -- to copyrights. You can take and trait technology classes which may consist of a thousand what 10000 patents that all cover a given standard opinion opinion -- such suggesting that because that might so could you. Let's say he took got Kennedy got when -- you off you know the Jimi Hendrix music catalog right example okay so let's say that that was going to be too expensive for somebody to buy the whole thing was for example. Could you could affect shop all the patent if you will to create instruments that would all be maybe 120 of that whatever -- people could could buy into. More that's a good idea it's a little bit of a weak analogy but we'd like to think of it it's an IPO for a patent we quality units license right. And if you don't you can acquired these units to use in your own consumption. I want to make this invention I need a certain number of units or licenses to do so or it back we hope some day you'll be able to buy those units to -- Buy low sell high class okay off the topic of the exchange want to get things you guys do if you value patents we just had to be to -- Motorola. You know there there's a company that probably has 3040000 -- okay and in the sit on the books. At the company like that could realize the value of those -- you don't need it anymore right the General Mills that'll be submarine patents that for some reason that it Needham. If you can Solomon you guys who -- transact. Do you think or wind you think -- to start to see companies may be more fully realize the value this stuff just sit on their books. Collecting dust -- a couple points it is sitting there collecting dust in many cases unfortunately though it's not on the books in the form of the financial statements because we don't -- through the aren't -- process. We pioneered the auction concept in 2006. And brought the first real price discovery and would -- in the market. What we've seen since then is institutional investors come in looking to acquire the intellectual property not just for their own benefit. But for an investment purpose and as a result of that would -- large companies like Motorola. Moved from being patent collectors would they simply file on what comes out of our daily. The portfolio managers keep what they need sell what they don't the -- and you're greater than those companies that made the verbal buying up patents patent -- that they call they're you know so the detract from the trolls -- They're supporting patents to. Use against companies well. There is a recent phenomenon of large financial buyers entering the market to gather assets was still not yet declaring their intended purpose not only do we see this in terms like intellectual ventures. But we're starting to see various governments around the globe. Dedicate significant capital France dedicates 750 million dollars to develop an IP economy China instead becoming out with a billion dollar fund to acquire these assets. Alternately we believe that lead to enhanced deficiency repeating the -- you do the most benefit. Interesting -- you -- it tells you thanks very much to see again thank you Brian how are so you know digging budget Jim and I want to panel last year it was interesting came out in the discussion at the Milken conference. About patents. That Alan Greenspan was saying 80% of the value of all the S&P 500 companies is intangible. Assets interesting stuff -- Greenspan."

" I don't know. And I interviewed one of venture capitalist recently said that before they make an investment they spend. Dissed them alone. Pull about a 100000 dollars on doing intellectual property research to make sure everything all -- have been dotted."