Posted by: mulrickillion | November 23, 2011

The Intellectual Revolution

Six Questions – Hong Kong Traders,  23 Nov 2011 —

James Malackowski

James Malackowski

Established in 2003, Ocean Tomo is a leading financial institution providing financial products and services related to intellectual property, including expert testimony, valuation, research, ratings, investments, risk management and transactions. The Chicago-based firm has developed its own set of indices and indicators to assess the value of IP products, including the Ocean Tomo Patent ratings and the Ocean Tomo 300 Patent Index (OTPAT), which is listed on the New York Stock Exchange. The company is also involved in several projects in Asia, where it’s collaborating with the Chinese mainland city of Shenzhen to develop a public equity index there. With China’s IP market moving at “light speed,” Ocean Tomo Chairman and CEO James Malackowski says Hong Kong has the potential to become Asia’s IP trading hub.

How significant is the role of intellectual property in today’s global economy?

In the last few years, we have gone through an intellectual revolution that’s no less significant than the industrial revolution a hundred years ago. In fact today, if you look at average corporate value, 80 per cent of that value is based upon intangible assets, where 20 years ago that was only 20 per cent. So we literally have inverted the economy, now driven by intangibles, a large part of that is intellectual property.

It was initiated in the Western economy but it is now clearly a global initiative. There is no business today that can thrive without some proprietary position. Otherwise it comes down to manufacturing cost. It’s too competitive and the margins are too small.

What are some of the key components for creating a thriving IP marketplace?

There are a few common building blocks that are necessary to create any economy, and it is true for intellectual property as well. First, you need to have a valuation skills set, so that owners and investors, who look at intellectual property, are thinking with a common point of view, as to what is that asset worth. Second, you have to have education with policy and with business practice, so that it’s understood how the intellectual property can be used in the commercial markets. And then third, you need transparency of pricing and trading. And often, that comes with either auctions, public auctions, or eventually, a traded exchange for intellectual property.

IP is now at a tipping point where there is now a great understanding and appreciation for its value. There is recognition of its value in public equities but it’s only now started becoming traded as an asset in its own right. And so the next five years are a very exciting time for the intellectual property market.

When did OceanTomo start looking at Asia as a potential IP market?

From the very beginning, we understood IP as a global marketplace. And we think of it as a triangle with three anchor points: the United States, Europe, and Asia. And from the very beginning, we started to reach out to identify those specific geographies where the intellectual property marketplace is developing.

There are activities obviously here in Hong Kong, China, Singapore, Taiwan, Japan and Korea. The question is which of those activities will rise to the forefront to become the central marketplace. And I actually believe that’s a question that will play out for the next year or two. Hong Kong is very interesting because it has a number of unique advantages. It’s the gateway to China, the largest marketplace, it has a strong rule of law and it has a very mature financial services industry. In some respects, the opportunity to own the Asian IP central market is Hong Kong’s to capture.

Why is Hong Kong an ideal platform for IP trading? How can Hong Kong act as a bridge to China’s IP market?

The rule of law is an advantage. Arbitration laws are to some extent similar around the globe. The real advantage is the financial sophistication of the marketplace and that relationship with China. Those are very meaningful benefits. I think the other advantage is the insight by the government, by the Hong Kong Trade Development Council and other organisations that see the opportunity for IP to drive the economy, and that’s a strong catalyst as well.

The marketplace in China is moving forward at light speed. The progress that’s been made in the last five years is dramatic. The vision for a marketplace is strong in several regions, notably Shenzhen, Beijing and Shanghai. We believe that in five to 10 years, the Asian marketplace generally and China in particular will be the largest centre for Ocean Tomo’s business.

Is there a role for the public sector to help develop the industry?

I believe the most important thing is to act. That this is not the marketplace where you can say ‘let me sit back, let’s see how it develops and we’ll enter in two to three years.’ In my opinion, by then, it’s too late. There will be a central Asian marketplace that will link or connect with the other two legs of the triangle, in the US and Europe, and that’s going to happen very soon.

And the advantage of the first mover is significant. So first and foremost I think the opportunity is to partner with those organisations in the US and Europe, begin to establish the basic framework for a transparent market, and to move forward quickly.

How do you foresee the development of the IP industry in Asia in the next few years?

In the next decade, the market will be fully developed. It’s the next two to five years where we’ll see the dramatic growth. And the uncertainty is where that will be. Will that in fact be in Hong Kong for all the reasons we discussed? Or will it be in a neighbouring country? I don’t know the answer. I’m excited to watch and I think the biggest determinant will be that call to action: who steps to the plate and who actually starts to cooperate with the other regions.

Related Link
LESI Global Technology Impact Forum
Ocean Tomo – The Intellectual Revolution


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