Contributing intellectual property to IP exchanges is another way to obtain value from the assets. Such exchanges came about nearly 2000s that have struggled to become sustainable business entities. The basic reason for this is that online exchanges, in order to thrive, have to solve transacting a company’s intellectual property better than alternate mechanisms. This is particularly difficult to execute for IP, given its heterogeneity and fuzzy edges. Another challenge for IP exchanges is they typically need a lot of transactions in order to meet their revenue and profit targets.
Some of the first exchanges were yet2.com and PL-X in the 1990’s. Others have come and gone in the intervening years. In 2017 the variety of exchanges includes The Intellectual Property Exchange (IPXI), IPNexus, Unified Patents, Asia IP Exchange, and Stanford University Intellectual Property Exchange. IP exchanges aim to establish a marketplace solution for the time-consuming and prohibitively high transaction costs often involved in getting permission to use IP protected content and technology. Today, many obstacles exist in traditional mechanisms for content and technology licensing, such as the difficulty of locating and negotiating with the appropriate rights holders, which commonly result in under-utilization of content or technology piracy. IP exchanges seek to improve access to content and technology by providing an online marketplace where rights holders can link up all types of assets and negotiate licenses more efficiently with users. The system is designed to give rights holders an efficient on-line distribution channel.
There exist three specific challenges related to IP exchanges: IP valuation; transaction mechanisms tailored to IP; and the realities of a sustainable IP-based business model. The first issue is that of IP valuation. Without a common, credible method for evaluation, negotiations are slow and fail to complete. There is a reason that no simple valuation tool has come forward to fill this gap. IP valuation is hard and no standard agreed upon method exists, as seen in the valuation section of this book. The second issue is that IP exchanges must provide supporting mechanisms and services to enable transactions that enforce and value IP rights, without allying IP contamination. Doing this is an expensive process. Provision of some features of intellectual property management such as mechanisms for dealing with counterparty risk, and exploring opportunities related to the IP while maintaining property rights exist. Solving these problems requires an enormous amount of orchestration across a wide set of service providers (technology, insurance, clearinghouses, and valuation experts), and thus takes time and money to obtain. Finally an IP exchange must operate under a sustainable IP-based business model. Such a business model would include one set of activities for large operating companies and another set of activities for companies that have non-operating IP-based business models. For both agendas IP exchanges must facilitate a repeatable fluid process, not a one-off transaction. Because of these difficulties the sustainability of IP exchanges is still in question.