Time for an IP Share Market?

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

Feb 1, 2009
James Lyons-Weiler

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.