A Chat with Richard DuFour on CBOE’s Investment in Intellectual Property Exchange International (IPXI)

A Chat with Richard DuFour, Executive Vice President at the Chicago Board Options Exchange (CBOE) on CBOE’s Investment in Intellectual Property Exchange International (IPXI)

Last week, Nicole Rohr of John Lothian News spoke with Gerard Pannekoek, CEO of the Intellectual Property Exchange International, about the launch of Intellectual Property Contract on that exchange. JLN Options editor Sarah Rudolph followed up by speaking with Richard DuFour of CBOE, one of the backers of the endeavor, about their role in the exchange.

Q: How/why and when did CBOE decide to invest in IPXI?

A: We have been aware of the IPXI development efforts for 2-3 years. Our discussions regarding our recent investment began last spring. At the core of CBOE’s culture is the development of new, innovative products. When we saw what IPXI was trying to do it made a lot of sense to us. The IP space has changed dramatically over the past few decades and now represents a significant asset class. The changes have a number of facets: the role of IP in the economy, the laws governing IP, the digitization of products, etc. These changes have focused attention on the inefficiencies inherent in the traditional ways in which IP was transferred. IPXI recognized the need for standardization and transparency in this process. CBOE believes there is tremendous potential in this endeavor.

Q: What products might CBOE launch related to the IPXI and patents?

A: The first step is the successful launch of ULR’s by IPXI. This might be thought of as the proof of concept phase. CBOE will do what it can do assist IPXI during this phase. Later when there is an active market in ULRs there will be the potential for trading derivative products on IPXI and/or on CBOE.

Q: In the past, several entities have leveraged their patents to sign lucrative deals with companies they said were infringing. Is this likely to diminish or increase with the growth of IPXI and tradable patent instruments?

A: I would expect that the availability of an efficient public marketplace for IP, with market determined prices, would diminish the frequency of suits in the IP area. However, you will probably always have the issue of whether or not a particular product violates someone else’s IP.

Q: Will these instruments be understandable for traders who have little experience with patent law?

A: I believe that the market will initially be used by commercial sellers and users of patents. Over time, sophisticated investors, such as hedge funds, will see the opportunity to make very targeted investments: for example, the opportunity to invest in a specific product or application, rather than the whole company. One might more easily understand this than the entire company.

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