Pros and Cons of an IP Share Market

There are numerous stakeholder positions to be consider when pondering the IP Share Market.  It may be best to begin by contrasting the IP Share Market concept with that of Idea Futures or Prediction Markets, where the public may place bets on specific ideas.

Contrast IP Share Market (Investing) to Prediction Markets (Gambling)
In Idea Futures and Prediction Markets, people place bets that a specific statement will come true, usually by a particular date.  They can gamble money for or against, and the value of an idea is a function of the expected payoff.   Examples are Foresight Exchange or the Iowa Electronic Market.

As opposed to Idea Futures and Prediction Markets, shareholders would actually own a percentage of the IP, so they are more vested in the outcome of their investment.  Futures trading has pushed forward some sectors with revenue (such as the Oil Futures), but, I contend, because it is betting, not investing, the prices are volatile and subject to outside influences who might bring the valuation down toward other agendas.

The IP Share Market model changes the mindset from a game (gambling) to serious work (investment) with shared interest and profit.  This difference would seem to orient everyone's motivation toward positive momentum, and not merely place bets for (or against) a proposed idea. 

Contrast IP Share Market (Investing) to Special Purpose Entities
There exists a mechanism for companies to isolated the appearance of risk by creating spin-off, Special Purpose Entities (SPE's).  However, due to Enron and other fiascos.  SPEs involve sole interest by one company, or shared interest by partnering companies.   Since 12/03, SPEs must be consolidated by the primary beneficiary anyway, owing to FIN 46.  By contrast, the IP Share Market would appear more nimble.

Reasons For an IP Share Market
There is a lot at stake for doing this right; specifically, in terms of the challenges, the reasons for include

• Unlocking Mountains of IP without losing it
• Generating Revenue for Translational R&D
• Efficiency: Making Every R&D Dollar Count
• New Models for Collaboration

There is also a lot at stake for companies who participate; they can earn a reputation as a lister (offeror) whose IP generates good ROI, or a poor reputation if their IP does not yield returns. Thus, there is intense motive for honesty in the listing and the pricing of shares at the IPO.

Pros of an IP Share Market
There are numerous possible benefits to society adopting an investment market for driving intellectual property.  Let me be clear, as I envision the market, the IP Share Market would be

• Open and free to use by IP Share Listers (Offerors)
• Profit-generating per transaction
• Regulated by the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA)
• A privately held firm.

The benefits to the Offerors, as I see them, include (but are not limited to):

• Valuation of IP
• Market Research
• Semi-Democratization of Priorities
• Increased Liquidity
• Resources for Development
• Improved Product Delivery
• Marketing

The benefits to the investor, as I see them, include

• Risk Management

Let’s say I have $5000 to invest in Company X. I can invest $2500 in the promising IP from Company X.  If that IP does well, I can further invest $2500 in Company X.  If the IP does not do well, I only lose a certain $2500.

• Diversified Investment Opportunities
• Siloized Investment Risk
• Greater Return on Investment
• Decreased Product Cost
• Improved Healthcare/Better Drugs
• Improved Standard of Living

An investor may focus risk in one highly promising piece of IP, or they might spread the risk among many possibly good pieces of IP.

Cons of an IP Share Market

The Cons, as them, to the offeror, include:

• Cost of Listing (I propose Listing is free)
  
• Exposing IP
• Creating Informing Competitors

• Risk of Misleading prospectus (aka “lying”)

I would be keenly very interested in your thoughts/comments/questions.  Suggest your own Pros and Cons!  Let's have a dialog.  Please feel free to start a thread. (Please identify yourself by your line of work.  Which stakeholder position(s) are you representing?

• Inventor/Researcher
• Individual Investor
• Venture Capitalist
• CEO
• CIO
• Board Executive
• Trade Regulatory Commissioner
  
• Retailer
• Health Care Provider
• Consumer

I'm looking forward to hearing from you!