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Time for an IP Share Market?

Direct investment in market-valued intellectual property could drive translational success.

By | February 1, 2009

Thirty years of investment in the pharmaceutical, biotechnology and life sciences industries have yielded returns that fall short of their potential. The prognosis is even worse: Investors' confidence rests on massive consumption of products and services made available by today's investments, but it is impossible to predict where the winners will arise.

Investors take myriad risks. They do not know the future value of the company's stock or how their investment capital will be used, and while they may believe forward-looking statements about the priorities and direction of a company, they have no real idea whether the use of their investment will match their motivation to invest, or be used to take the company in another direction.

Such risks would be lessened by investment in IP (Intellectual Property) rather than in companies. There are no significant technological barriers to the development of a highly granular, information-rich IP Share Market.

The IP Share Market would be a public investment market for direct investment accounts in specific IP. Investors would be able to search a database of IP opportunities that would list applications and advantages over existing IP and track the value over time, allowing decisions to be based on standard investment criteria. This type of market is substantively different from existing IP Markets, where individuals and companies list their IP for licensing or sale. Companies participating in this market would be bound to apply the revenue to the development and translation of the specific IP in the proposed application areas.

While the democratizing of investment revenue use might be anathema to existing corporate dogma, it does make sense. Companies would generate revenue for their best ideas, and would benefit from embedded free market research on which programs are perceived to be most important and valuable. Potentially, they would have input from thousands of consumers on their ideas and technologies, well before bringing the product to market. Knowledge of the market value of their IP would also enable value-based licensing.

The IP market could change the relationship between consumers and companies, for example, the dialog on drug prices might be affected by mass investment in the most promising specific IP. Companies could measure rates of returns on specific projects even as they are developed, turbo-charging programs towards profitable translation, and possibly reducing the price of the final product. Contrast this with current R&D funding decisions, which are uninformed and speculative, or based on expensive market research.

Acquisitions and mergers are violently transformative processes. Knowing the market value of specific pieces of IP will allow companies to engage in processes that, in the past, seemed impossible. With an IP Share Market, companies with capital could more easily license or purchase outright missing pieces of their strategic integrated product because the market value of the IP would be established. Combinations of orphan IPs could be brought together to generate new approaches. Relatively painless, outright equitable IP swaps can be envisioned. An IP Share Market would counter divisive forces that prevent synergy by allowing companies to compete for collaborations, via licensing, or outright purchase, of market-valued IP. Overall, an IP Share Market would dramatically increase the rate of development and tech transfer in a revenue-driven manner.

The biotechnology and pharmaceutical sectors could serve as a model for all IP-rich technology sectors, generating wealth and placing it in the hands of individuals with the ideas and visions to drive their programs forward, and securing a healthier future for us all.

James Lyons-Weiler is the Director of the Bioinformatics Analysis Core at the University of Pittsburgh and Adjunct Faculty in the Department of Biomedical Informatics.

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Comments

Avatar of: anonymous poster

anonymous poster

Posts: 3

February 19, 2009

This market will be so controlled by those "insiders" who helped develop the newest tech. They would have the ability to pre-invest in complementary industries based on their exclusive knowledge. Currently the platform awards those scientist handsomely based on pure proven performance. For instance imagine all the medications that have had bright futures in the development and only to have them pulled off the market because of known defects. Imagine the gains that would have been made had the investment in the IP market been allowed. Maybe those med's would have had so much bully power from gains in the IP and Stock markets that they would still be on the market. \nThis idea is controversial.

February 22, 2009

Thank you for the feedback re: the concern that people with more knowledge about complementary technologies could disproportionately benefit from their understanding of the IP they choose to express confidence in by investing.\n\nI'm not at all sure that what is described is the same as insider trading. The concern of insider trading seems to apply to any current model of investment where individuals who work in a company are free to buy & sell shares of stock of that company. If they do so in advance of a precipitous drop (or increase) in value due to the disclosure of bad (or good) news, they can be charged with insider trading. If they are given privileged information about another company and act on it, they are also at risk of being charged.\n\nThe IP Share Market would, and I propose should, reward people with the know-how needed to put the translational pieces together. There is, I think, a need. If those with the know-how about pieces X, Y and Z, know enough, as you say, to pre-invest in pieces Y and Z, knowing that X is coming down the line, they still burden the risk of putting their funds into Y and Z. If the R&D in X (or Y or Z) that their investment propels does not work out (for reasons such as no one but they understand how it all should work), then they have tripled their losses. It would be to everyone's advantage, including the company listing IP X, to reveal the potential connections to IP Y and IP Z. \n\nMorever, everything about the IP Share Market seems to bias toward providing open and accurate sharing of all relevant information. Honesty in listing is automatically enforced because IP Listers do not wish to gain a bad reputation. A good reputation (meaning proven, eventual payoff for investors) would be highly coveted.\n\nEither way, as an open market with public trades, the IP Share Market would almost certainly have to be regulated by the Commodity Futures Trading Commission.

February 27, 2009

Two decades back I went to a shop selling bakery products. I commented something to the elderly shopkeeper regarding his method of doing business or some such thing. The elderly shopkeeper opened my eyes by saying: "What is there in selling? It is an IDEA that sells." I have never forgotten that statement. In fact he opened my eyes to the world and how it runs. Ditto business, finance, and I dare say, life! It is an IDEA that invents, innovates, runs industry, gives power and authority. Today Intellectual property is driving economies. IP share market is the IDEA of the moment. It will innovate society, drive economies, create wealth and result in well being of earth's populace and I dare say save this earth too from the throes of wanton destruction which mankind in overenthusiasm of S&T mantra has pushed this planet into. IP Share Market is a brilliant idea which technocrats and industralists should seriously look towards for a holistic approach to economic, social and political activities of our precious world and optimum utilization of its resources.

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