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An intellectual property marketplace <br />is emerging

Marketplaces have developed for many fungible products. Corn, for example, trades on a board of trade. Various types of corn are traded, and it is categorized so it may be efficiently traded.

Intellectual property rights, including patents, trademarks and copyrights, are harder to treat as fungible assets since each is, to a large extent, unique. Patents can prove to be particularly problematic. A facially valid patent may, upon further review, be unenforceable or even invalid. However, as our economy evolves from a manufacturing economy, with a focus on land and production facilities, to a knowledge economy, efforts are underway to develop a system that will facilitate the efficient trade of intellectual property rights.

While many intellectual property rights realize their value through traditional means, such as by manufacturing a product, companies occasionally find themselves with intellectual property rights that they are not fully utilizing. In such a situation, companies must choose between allowing the asset to sit idle and realizing the asset's economic value through its sale or licensure.

To some extent, the sale or licensure happens through marketing efforts related to individual intellectual property rights. In other circumstances, intellectual property brokers serve as agents, not unlike in the real estate field, and they will, for a fee, obtain licensing agreements. Typical broker fees run in the 30 percent range.

Other opportunities are presented by "patent assertion companies," also known as "patent trolls." The term "patent troll" results from the fact that these companies purchase intellectual property rights and assert them through litigation or threat thereof. The patent trolls never actually intend to manufacture a product, which can lead to resentment by established companies. On the other hand, if an independent inventor does not have the means to manufacture a product or enforce his or her rights against infringers, selling the intellectual property to a patent troll is a way to realize economic value. Patent trolls help even the playing field and preserve the incentive for people to be creative and invent even if they will not have the ability to bring their invention to the marketplace.

Ocean Tomo, a Chicago based company, has begun to provide another mechanism for realizing economic value through its series of intellectual property auctions. The most recent auction, held in Chicago in October, resulted in the sale of more than $7 million worth of intellectual property. Bids could be submitted in writing before the event, or in person and by phone during the auction. About half of the patents on the auction block were sold during the event. The others did not sell because their reserve prices were not met. Typically, sales also occur after the auction when a bidder who failed to meet the reserve arranges a side deal with the seller.

A final mechanism for realizing economic value is through the formation of an intellectual property exchange not unlike a board of trade. Ocean Tomo is in the process of forming such a company, known as IPX.

Although efficient trading of intellectual property faces obstacles, mechanisms have emerged to allow intellectual property owners to realize economic value from otherwise idle intellectual property, and more opportunities appear to be on the horizon.

- Alan Singleton is a corporate and intellectual property law attorney based in downtown Champaign. He can be reached at (217) 352-3900 or singleton@singleton.law.pro.

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