U.S. patent application number 14/453074 was filed with the patent office on 2014-11-27 for financial instrument based on content and methods for valuation.
The applicant listed for this patent is Ocean Tomo, LLC. Invention is credited to Jonathan A. Barney, Keith M. Cardoza, Jason L. Gardner, Cameron Gray, James E. Malackowski, Stephen C. Yelderman.
Application Number | 20140351170 14/453074 |
Document ID | / |
Family ID | 39674723 |
Filed Date | 2014-11-27 |
United States Patent
Application |
20140351170 |
Kind Code |
A1 |
Malackowski; James E. ; et
al. |
November 27, 2014 |
FINANCIAL INSTRUMENT BASED ON CONTENT AND METHODS FOR VALUATION
Abstract
The present invention is a system and methods by which an
investment vehicle can be established that is directed to one or a
very limited specific form of content. More specifically, the
system and methods of the present invention creates a financial
instrument directed to specific content--such as a specific
technology or specific artistic or literary work--that may be
issued, thereby providing investors with the opportunity to invest
in the specific content or aspect of that specific content.
Inventors: |
Malackowski; James E.;
(Chicago, IL) ; Gray; Cameron; (Chicago, IL)
; Cardoza; Keith M.; (Chicago, IL) ; Barney;
Jonathan A.; (Chicago, IL) ; Gardner; Jason L.;
(Chicago, IL) ; Yelderman; Stephen C.; (Chicago,
IL) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Ocean Tomo, LLC |
Chicago |
IL |
US |
|
|
Family ID: |
39674723 |
Appl. No.: |
14/453074 |
Filed: |
August 6, 2014 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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12449268 |
Nov 10, 2009 |
8831985 |
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PCT/US08/01341 |
Jan 31, 2008 |
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14453074 |
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60887575 |
Jan 31, 2007 |
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Current U.S.
Class: |
705/36R |
Current CPC
Class: |
G06Q 50/184 20130101;
G06Q 40/06 20130101; G06Q 40/04 20130101 |
Class at
Publication: |
705/36.R |
International
Class: |
G06Q 40/06 20120101
G06Q040/06; G06Q 50/18 20060101 G06Q050/18 |
Claims
1. A computerized method for defining and evaluating a
content-based financial instrument comprising the steps of:
receiving by a processor a target content of a company for the
content-based financial instrument; selecting by the processor one
or more intellectual properties of the company related to the
target content to obtain an underlying intellectual property of the
content-based financial instrument of the company; issuing by the
processor the content-based financial instrument of the company;
publishing by the processor on one or more display units of an
electronic trading system the content-based financial instrument of
the company including a value for the content-based financial
instrument of the company; accepting by the processor a purchase
established by an investor of the content-based financial
instrument of the company; determining by the processor a payout
for the content-based financial instrument of the company, wherein
the payout is determined by one or more conditions for the
underlying intellectual property; and initiating the payout to the
investor on a delivery day.
2. The computerized method for defining and evaluating a
content-based financial instrument according to claim 1, wherein
the one or more conditions is a license to the underlying
intellectual property.
3. The computerized method for defining and evaluating a
content-based financial instrument according to claim 2, wherein
the payout is a percentage of revenue received from the
license.
4. The computerized method for defining and evaluating a
content-based financial instrument according to claim 1, wherein
the one or more conditions is a sale of a good or a service covered
by the underlying intellectual property.
5. The computerized method for defining and evaluating a
content-based financial instrument according to claim 4, wherein
the payout is a percentage of revenue received from the sale.
6. The computerized method for defining and evaluating a
content-based financial instrument according to claim 1, wherein
the payout has a maximum cash value.
7. The computerized method for defining and evaluating a
content-based financial instrument according to claim 1, wherein
the underlying intellectual property is one or more patents.
8. The computerized method for defining and evaluating a
content-based financial instrument according to claim 1, wherein
the underlying intellectual property is one or more patent
applications.
9. The computerized method for defining and evaluating a
content-based financial instrument according to claim 1, wherein
the underlying intellectual property is one or more trademarks.
10. The computerized method for defining and evaluating a
content-based financial instrument according to claim 1, wherein
the underlying intellectual property is one or more copyrights.
11. The computerized method for defining and evaluating a
content-based financial instrument according to claim 1, wherein
payout is non-monetary.
Description
[0001] This application claims priority to U.S. patent application
Ser. No. 12/449,268 filed on Nov. 10, 2009, which is a national
application of PCT/US2008/001341 filed Jan. 31, 2008, which claims
priority to U.S. Provisional Application Ser. No. 60/887,575 filed
Jan. 31, 2007.
FIELD OF THE INVENTION
[0002] The present invention relates generally to financial
instruments. More particularly, the present invention relates to a
financial instrument based on a specific technology or other form
of content that is suitable for trading on an exchange network.
BACKGROUND OF THE INVENTION
[0003] More and more of the ever growing human enterprise is
devoted to scientific engineering, and artistic inquiry,
exploration, and experimentation. These efforts result in various
forms of what will be termed for purposes of this application,
"content". Content is created, developed, or formulated in a
variety of contexts and by individuals or business entities,
including non-profit and for-profit institutions and companies.
Scientific or engineering research and development efforts
typically produce technology-based content. Prototypes, machines,
systems, processes, data, software, and inventions represent just
some of that which results from these efforts. Artistic or literary
efforts produce content that is manifested in a wide variety of
forms such as works of fiction and non-fiction, movie and
television treatments, screenplays, visual displays, software,
choreography, and architectural works.
[0004] Governments have sought to encourage these many efforts by
putting in place laws that extend legal protection to certain
aspects of the content. Copyright law protects certain artistic and
literary content automatically upon its expression in a tangible
form. Trade secret law protects information (such as that which
could be developed during the course of any of the above forms of
inquiry) that has value and is not publicly disclosed. Patent law
allows patents to issue for various forms of inventions that meet
certain statutory guidelines.
[0005] The specific content that results from these many various
creative and inventive efforts has widely ranging potential or
actual value and thereby presents many, widely ranging investment
opportunities. Only limited mechanisms, however, are available by
which investors can invest in this wide range of opportunities. The
mechanisms by which investors can make highly focused investments
in a very specific area of technology or other type of content is
even more limited. An "investor", for purposes of this application,
may be any person or entity such as for-profit or non-profit, pubic
or private company. The very specific content that is or may be of
interest to an investor and to which an investment opportunity
shall be directed shall be termed, for purposes of this
application, "target content".
[0006] One traditional option available to an investor who wishes
to invest in certain content is to buy the publicly traded shares
of a company that is known to be developing that certain content.
The content may be in, for example, a specific area of technology.
However, most publicly traded companies do not develop a single
form of content, such as one specific form of technology. The
research and development efforts of a publicly traded company are
typically directed to many different types of technologies, in part
to spread the risk of the company over many areas. As a result, by
buying shares of such a company, an investor is in reality
investing in the many different specific forms of content, not just
the target content, that has been or is being developed or created
at the company. The price of the shares therefore reflects the
potential and actual value of all content--for example, a target
technology and one or more other technologies--but also all of the
other efforts and overhead of the company. An investor currently
cannot isolate an investment to a single target technology from all
of the other technologies of one or more companies.
[0007] Mutual funds or other collective investment opportunities
are identified at times as having a certain technology focus in the
stocks or securities which are offered. For example, some mutual
fund companies offer "select" portfolios such as in energy, or
medical delivery, or medical equipment and systems, or software, or
wireless technologies. However, such portfolios again only offer
investment opportunities in the publicly-traded shares of
companies, some, but not all of the content which they have
developed is in the portfolio area. Again, such funds do not permit
highly focused investments in a very specific technology or other
form of content.
[0008] Certain companies--typically privately held companies, such
as start-up companies--focus on the development of one, or more
very limited range of content, such as that which is related to a
specific technology. Only in certain circumstances do such
companies permit third party investments. Furthermore, investing in
a privately held or a start-up company is often considered to be a
high risk gamble. Such investments are renowned for poor investment
liquidity, that is, lacking the ability for the investment to be
easily converted through an act of buying or selling with minimum
loss of value. Typically, because of the high risk involved, the
conventional instruments that are available to investors to invest
in start-up companies are designed to have a certain degree of
technology diversity, and do not facilitate investments in highly
focused content areas. Such instruments are of limited appeal to an
investor with an interest in investing in a target technology.
[0009] Accordingly, none of the options available to an investor
provide investments that are specific to content or offer investor
diversity within a highly specific content area. Therefore, what is
needed is a system and methods that permits investors to make
highly focused investments in content of a very specific nature.
The present invention satisfies the demand.
SUMMARY OF THE INVENTION
[0010] The present invention is a system and methods by which an
investment vehicle can be established that is directed to one or a
very limited specific form of content. More specifically, the
system and methods of the present invention creates a financial
instrument directed to specific content--such as a specific
technology or specific artistic or literary work--that may be
issued, thereby providing investors with the opportunity to invest
in the specific content or aspect of that specific content.
[0011] The system and methods of the present invention permits the
content to which the financial instrument is directed to be defined
and a target within the content to be determined. The content and
target content can be specified by the issuer of the financial
instrument, who either has an interest or does not have an interest
in the content, or target content. An issuer who has an interest in
the financial instrument may be an investor or owner of, for
example, a group of patents covering the target content area.
[0012] The issuer may be further defined as an investor or third
party as well as those individuals or entities that post the
financial instrument and do not necessarily incur liability for
that which occurs to the financial instrument. The term issuer may
also include exchanges or marketplaces. An investor is anyone who
buys the financial instrument (sometimes based on specialized
knowledge) in hopes of potential profitable returns, such as a
private individual, a business, or a legal entity, for example, a
trust. A third party is anyone who offers the financial instrument
in the hopes of generating revenue, for example, to fund further
exploration in the content. A third party may include a creator or
developer of the content, a speculator, a hedger, or an owner of
the content. As an example, an owner of content may be an inventor
or assignee of a patent. A speculator is anyone who is engaged in
commercial or financial speculation, such as an investor who has a
strong view about future market conditions and wants investments
that will generate substantial returns should those conditions
materialize. A hedger, in contrast, has concerns about the impact
of adverse market conditions on other existing investments or
further business operations.
[0013] At the time the financial instrument is created, the target
content to which the financial instrument is directed may be
largely unknown and highly speculative. For example, the target
content may be the result of the creative efforts of a single
individual, or the creative efforts of a single university
laboratory or software engineering group, or the one or more patent
applications that may be filed for the work of one inventor, or
those that are filed for an entire department at a specific
university. The target content may also be one or more patents,
copyright registrations, trademark registrations, or other grants
issued for intellectual property. The intellectual property may be
that which is already being commercialized and therefore generating
some revenue. Target content, as a result, may be susceptible to
performance at a point in time in the future. Once it is believed
or it is established that the target content may or does have a
value that is more readily susceptible to measurement, a
performance metric, for example, can be used to place a value on
the content.
[0014] The present invention also includes an electronic trading
system over which investors can, preferably in real time, commit to
buy and trade offerings of the financial instruments based on
content. The system preferably operates over either a private
electronic communications network or over a public communications
network such as the Internet, or both. Investors, who preferably
enter into appropriate contracts that define the terms of the
financial instrument, can through the system, buy the
instrument.
[0015] According to the present invention, the content is the
general subject matter of the financial instrument. Content can be
the known results or the potential results in an area, or from
certain scientific, artistic or literary efforts. Content generally
includes information, experiences, and technology as well as
tangible and intangible property. Content can be manifested in many
forms and in many different kinds of contexts, including electronic
content presented via computers and mobile devices, printed
materials such as books and newspapers, television, movies and
radio as well as live performances of drama and music such as those
presented in a theatre or performances of speeches or interactive
experiences such as games or sporting events. It is that area in
which the issuer wishes to establish the financial instrument. For
example, it can be an area of technology, (e.g., nanotechnology,
hydrogen fuel cells, recombinant technology, etc.), the actual or
potential source of such technology (e.g., a specific university or
group of universities, a specific laboratory or group of
laboratories, etc.), inaction with respect to the content in a
technology area (e.g., farmer does not cultivate land in soybeans),
a mix of action or inaction with respect to the content in a
technology area (e.g., a university laboratory focuses its research
efforts on a specific technology and not some other technology) or
a specific type of artistic or literary work.
[0016] For purposes of this application, intangible property is a
collection of rights that can be owned but which has no physical
substance. As with forms of tangible property, intangible property
content can be defined as all or some limited portions of the
property. By definition, intangible properties cannot be seen,
touched or physically measured. For purposes of this application,
the term "intangible property" includes intellectual
property--patents, copyrights, trademark rights, trade secrets, the
rights of publicity--and other non-tangible properties and
interests, such as those that arise of documents describing new
technologies including written disclosures, algorithms, laboratory
notebooks, (including descriptions, manuscripts, and treatments
from which novels, screenplays, and movies may be produced),
exploitation rights and exploration rights (including prospector's
claims, mineral rights, water rights, and air rights), fishing
rights, taxi medallions, and naming rights. Intangible property may
also include domain names, naming rights, customer lists,
knowledge, know-how, research and development, collaboration
activities, leverage activities, relationships, and systems such as
taxi medallion systems.
[0017] Once the content of the financial instrument is defined, a
target within the defined content is determined. Again, target
content may be known or may be nothing more than what may occur in
the future. Target content can be, what is termed herein as "actual
target content," such as one or a group of related patents, or,
what is termed here as "potential content," such as the possible
filing of a patent application or the possible grant of a patent or
patents. There are a largely very wide range of forms of target
content within any given defined content. Examples of target
content with the defined content include: nanotechnology copyrights
within technology; patents directed to devices having flexible
elements within nanotechnology; subject matter directed to a target
audience within copyrightable subject matter; laboratory results
within an experimental test; an author of published materials; a
publisher of books; patents within hybrid electric vehicles, among
others.
[0018] Target content can be determined simply by specificity of
the issuer of the financial instrument, and may be susceptible to
performance in the future. Besides the issuer of the financial
instrument determining the target content, target content can be
determined also by a variety of approaches wherein performance has
been executed. In one embodiment, the target content is determined
by utilizing a classification system, for example, the class
schedule, subclass schedule, or technology center identifiers of
the United States Patent and Trademark Office ("USPTO"), or
Standard Industrial Classification ("SIC") based product field
codes.
[0019] The present invention provides another approach for
determining target content through the use of an analytical method.
An analytical method advantageously provides flexibility and may be
more appropriate for emerging content. For example, if the content
is apparel, then the target content may include all emerging
patents within apparel content. The target content, or all emerging
apparel patents, may be determined based on both the USPTO
classification system and citation relationships noted in the
specific patents with respect to other patents. Such an approach
could have the advantage of more accurate placement of patents
within the target content.
[0020] Yet another approach for determining target content uses
relevance scores. In one embodiment, a relevance score is used with
respect to the relevance of a patent to seed patents. Seed patents
are the group of patents known to belong to certain target content.
If an issued patent, or patent publication, has a relevance score
that meets or exceeds the seed patents, then it may be added to the
seed patents of the target content. Thus, the seed patents increase
in number as the target content expands, but is also contemplated
that the seed patents can be fixed over time.
[0021] The relevance score of a patent may be calculated based on
the average of more than one relevance score of the patent to the
seed patents. Relevance between two patents can be quantified based
on a variety of factors to produce a relevance score such as those
disclosed in U.S. patent application Ser. No. 11/236,965, entitled
"Method and System for Probabilistically Quantifying and
Visualizing Relevance Between Two or More Citationally or
Contextually Related Data Objects" by Jonathan Barney, the
disclosure of which is hereby incorporated by reference in its
entirety. Also incorporated herein by reference are the relevance
scores between patents available from PatentRatings LLC of Irvine,
Calif.
[0022] Yet another approach for determining target content uses a
relevance threshold. In one embodiment, target content has an
established relevance threshold based on seed patents. As the
target content develops, additional patents having a relevance
score that is above the relevance threshold of the seed patents is
added to the seed patents of the target content.
[0023] Yet another approach for determining target content uses a
common identifier. For example, the target content may be all of
the patents identifying the same inventor or assignee.
[0024] Valuation is the method for assessing whether an investment
is worth its price. The value of the financial instrument may
change over time. A value placed on the financial instrument may be
established by the issuer, based in part by payout conditions.
Payout conditions include the terms of the possible payout on the
delivery date. The delivery date is the day on which the instrument
expires or a payout is received by an investor.
[0025] A value placed on the financial instrument may also be a
rationally based method such as using performance metrics. The
value may be determined by performance metrics on the date the
instrument issues or the date an investor establishes a position in
the financial instrument, both which maybe different from the value
determined at the date the instrument is delivered.
[0026] The performance metrics value the financial instrument based
on measurable target content. Therefore, in embodiments where the
target content is susceptible to performance, performance must
actually be executed before the financial instrument can be valued
using performance metrics. Target content can be determined simply
by specificity of the issuer of the financial instrument, and
thereby be susceptible to performance. Besides the issuer of the
financial instrument determining the target content, target content
can be determined by a variety of approaches wherein performance
has been executed.
[0027] Performance metrics evaluate the state of the target content
to place a value on the financial instrument that is offered and
exchanged through the exchange network. In embodiments where a
master financial instrument based on content is tied to a plurality
of concurrently trading financial instruments based on content, the
master financial instrument reflects a value of each instrument of
the plurality. Performance metrics may encapsulate the progress of
target content worldwide. Various performance metrics can be used
based on human analysis, computer models, or a combination of both.
According to the present invention, performance metrics include
closed-source analytics, open-source analytics, or market-based
analytics.
[0028] Closed-source analytics include an analytical approach for
estimating the value of the target content. Closed-source analytics
typically include private analyses such that the exact methods and
implementations, for example coefficients and/or source code, used
to calculate the performance metric of the financial instrument may
not be publicly available, or may be protected by trade secret,
patents, copyright or other forms of intellectual property
protection. Closed-source analytics typically issue the performance
metrics on a regular basis, such as individually or cumulatively,
by a recognized performance metric publisher.
[0029] Examples of closed-source analytics include performance
metrics such as the Maintenance Value (MV) of a patent, available
from PatentRatings, LLC of Irvine, Calif., incorporated herein by
reference; performance metrics disclosed in U.S. patent application
Ser. No. 10/397,053, entitled "Method and System for Valuing
Intangible Assets" by Jonathan Barney, the disclosure of which is
hereby incorporated by reference in its entirety; and performance
metrics based on patent value such as that which used to be offered
by "The Patent Board" of Chicago, Ill.; "1790 Analytics LLC" of
Mount Laurel, N.J.; and "IPscore" from the European Patent
Office.
[0030] Open-source analytics include public analyses for estimating
the value of the target content, such as performance metrics based
on publicly available information. Individual or cumulative
performance metrics of content may be issued on a regular basis for
consistency. It should be noted that any closed-source analytics
could be standardized and opened for public use.
[0031] Examples of open-source analytics include performance
metrics such as measuring: patent registration data in the United
States and other national, regional or international government
office; all of the rights arising out of a patent grant, or all of
the rights associated with a copyright registration or a trademark
registration; a group of rights less than all of the rights
arising, for example, from a patent grant or copyright or trademark
registration; an exclusive license to practice one or more of the
statutory or judicial-based rights that a patent, copyright, or
trademark provides; patent value; patent maintenance value; and
sales such as sales of films, movies, books, or songs.
[0032] Market-based analytics include market for estimating the
value of the target content, such as performance metrics based on
trading data. For example, in embodiments where the financial
instrument operates as a futures contract on a market-traded
underlying asset, the performance metric may be based on the
trading data resultant from market activity for the underlying
asset. Additionally, if shares of (or licenses to) individual
patents are publicly traded, the performance metric could be based
on the market-determined value of the patents of a particular
target content. Another approach is to publicly trade groups of
patents or shares of licensing revenue from a group of patents, and
use a performance metric based on the values of the groups of
patents in target content.
[0033] Data can be produced from the evaluation of the financial
instrument from the performance metrics. Data can also be produced
from the trading activity of the financial instrument. This data
can be produced consistently such as daily, weekly, or monthly. The
data can further be stored in a database for reference or analysis,
for example, to formulate trading strategies or to view the trading
patterns of a particular financial instrument either currently or
historically. It is further contemplated that this financial
instrument data may be used to further asses and value the
instrument created, issued, and offered under the system according
to the present invention.
[0034] After the financial instrument is created and issued, an
investor establishes a position taking into consideration risk.
Risk denotes a potential negative impact to value that may arise
from some current or future event. For example, investment risk is
the probability that an investment's actual return will be
different than expected. This includes the possibility of losing
some or all of the original investment. Depending on the position
established, the type of investment risk will vary.
[0035] Positions established by the investor include the trading
events that occur to the financial instrument. Trading events
include: buy, sell, buy to open, buy to close, sell to open, and
sell to close. Trading events are generally used to distinguish
between establishing versus closing a position.
[0036] A long position can mean that the investor of the financial
instrument owns the financial instrument and will profit if the
price of the financial instrument goes up. Similarly, a long
position in a futures contract or similar derivative means investor
of the financial instrument will profit if the underlying asset
increases in value.
[0037] A short position means the investor of the financial
instrument leverages the financial instrument. Similarly, a short
position in a futures contract or similar derivative means the
investor of the financial instrument has the obligation to buy the
future at a later date.
[0038] Buy is to exchange, trade or purchase for money or its
equivalent. Sell is to exchange or deliver for money or its
equivalent. "Buy to close" closes a short position. "Sell to open"
opens, or establishes, a new short position. "Buy to open" opens,
or establishes, a new long position whereas "sell to close" closes
a long position.
[0039] On the delivery date, the instrument provides a payout based
on the payout conditions. The payout can be a gain, loss, or
neither with respect to the investor's initial buy. The payout can
be monetary or non-monetary. Monetary payouts include revenue from
a license, for example. Non-monetary payouts include one or more
property rights, a license, or abandonment of a property right, for
example. Payouts can also be structured such that they are treated
as a charitable deduction, gift or inheritance, or receive other
favorable taxing treatment.
[0040] The payout may also be correlated to the performance metric
used to determine the state of the target content. The payout could
also be derived as a percentage of the revenue received from a
licensing or sale of the target content, such as intellectual
property. In one embodiment, the financial instrument based on
content operates as a contract to provide a cash amount on an
expiration day.
[0041] The issuer of the financial instrument may be responsible
for the payout, for example, one or more patent assignees of the
target content, or from a speculator without a direct ownership
interest in the financial instrument.
[0042] It is also contemplated that the payout may be capped at a
maximum cash amount. Examples of payout structures include binary,
linear, capped linear, call and put, among others. With a binary
payout structure, the financial instrument specifies a strike
price, or the price where the contract requires delivery of the
payout; the investor of the financial instrument receives a
predetermined fixed payout if and only if the performance metric is
above the strike price on the expiration day.
[0043] With a linear payout structure, the investor of the
financial instrument receives a payout that is linearly correlated
to the performance metric on the expiration day. With a capped
linear payout structure, the content financial instrument specifies
a cap; the investor of the content financial instrument receives a
payout that is linearly correlated to the performance metric on the
expiration day, up to the maximum cash amount. With a call payout
structure, the content financial instrument specifies a strike
price; the investor of the content financial instrument receives a
payout that is linearly correlated to the performance metric, if
and only if the performance metric is above the strike price on the
expiration day. With a put payout structure, the content financial
instrument specifies a strike price; the investor of the financial
instrument receives a payout that is linearly correlated to the
performance metric, if and only if the performance metric is below
the strike price on the expiration day.
[0044] Other payout structures are also contemplated such as those
resultant from the various combinations of the exemplary payout
structures included above.
[0045] The financial instrument according to the present invention
may be a cash instrument or a derivative instrument, although any
form of medium is contemplated. Securities may be broadly
categorized into debt securities, such as banknotes, bonds and
debentures, and equity securities such as common stocks.
Derivatives may generally take the form of contracts such as
futures, forwards, options, and swaps.
[0046] The financial instrument could be designed to trade on one
or more public exchanges or marketplaces such as a public futures
exchange. According to the present invention, financial instruments
could be traded as over-the-counter instruments, as securities
subject to the Securities Exchange Commission ("SEC"), as futures
subject to the Commodity Futures Trading Commission ("CFTC"), as
another instrument, such as a bond, registered with another
regulatory agency, or as traded instruments available only to
qualified investors, such as through SEC notice filing practice.
The financial instrument may also be exempted from regulations such
as those that a government or other regulatory body imposes.
[0047] Furthermore, more complex financial instruments may be
created based on a combination of two or more financial instruments
based on content. Complex financial instruments may include a
master financial instrument based on content tied to a plurality of
concurrently trading financial instruments based on content.
Complex financial instruments include, for example, index or
cash-flow based fixed income instruments, equity financial
instruments, asset-backed instruments, index-linked instruments,
index swap instruments, and total return swap instruments.
[0048] A financial instrument based on content could be implemented
as a tradable security interest in the current or future status of
intellectual properties of a particular entity, where the
intellectual properties are directed to content such as technology,
and more specifically target content such as electric car
technology.
[0049] As an example, the financial instrument may be issued by one
or more patent owners. A company developing electric car technology
(Company A) could sell a financial instrument based on its electric
car intellectual property such as patents, applications, or even
future applications. The payout of the financial instrument could
be derived as a percentage of the eventual revenue received from
the licensing or sale of intellectual property in that target
technology by Company A. The proceeds of the financial instrument
sale could be used to support Company A's research and development
activities, thereby increasing the likelihood of a breakthrough and
giving investors more direct exposure to the financial benefits of
that breakthrough.
[0050] As another example, competing company (Company B) could also
buy Company A's financial instrument to hedge against the risk that
Company A's research could prove more successful than its own. For
some companies, buying of a financial instrument may be a
cost-effective alternative to undertaking research in an area
outside the company's area of expertise, freeing up resources to
pursue the company's specialty more aggressively.
[0051] An object of the present invention is to provide a new
financial instrument based on content.
[0052] An object of the present invention is to facilitate
investing in content.
[0053] Another object of the present invention is to facilitate
investing in actual content.
[0054] Yet another object of the present invention is to facilitate
investing in potential content.
[0055] Another object of the present invention is to provide a new
instrument for financing innovation and funding important
research.
[0056] Yet another object of the present invention is to provide an
investment that can be used in pension vehicles.
[0057] Another object of the present invention is to encourage
innovation.
[0058] Yet another object of the present invention is to better
facilitate management of the risk involved with taking ambitious
approaches towards technological challenges.
[0059] An added object of the present invention is to permit an
investor to buy or sell financial instruments based on content,
thereby leveraging specialized financial knowledge.
[0060] Another object of the present invention is to hedge the
economic value of content.
[0061] Yet another object of the present invention is to provide
new hedging strategies against traditional equities and commodities
positions, for example, to hedge against the risk of competing
content and lower the cost of capital.
[0062] Another object of the present invention provides a financial
instrument designed to facilitate convenient trading with low
transaction cost.
[0063] Another object of the present invention is to provide an
objective assessment of the cumulative value of target content.
[0064] Another object of the present invention is to speculate on
the future value of content.
[0065] Yet another object of the present invention is to enable the
efficient investment in a long term prospect of target content.
[0066] Yet another object of the present invention is to permit
investment in content according to performance metrics that are
fair, realistic and auditable.
[0067] An added object is to produce commercially useful valuations
of financial instruments based on content.
[0068] Another object of the present invention is to allow an
investor to create a portfolio pertaining to target content through
a combination of financial instrument long and short positions. For
example, an investor may directly invest in target content, such as
oil exploration technology, and hedge his or her exposure to the
success of that content through a short position, while investing
in other target content, such as alternate fuels technology,
through a long position.
[0069] Further aspects of the invention will become apparent from
consideration of the drawings and the ensuing description of
preferred embodiments of the invention. The embodiments described
below are in specific reference to content, target content and
valuation, although a person skilled in the art will realize that
other types of content, target content and performance metrics, for
example, those directed to trademarks or copyrightable subject
matter or other intangible property rights are possible and that
the details of the invention can be modified in a number of
respects, all without departing from the inventive concept. Thus,
the following drawings and description are to be regarded as
illustrative in nature and not restrictive.
BRIEF DESCRIPTION OF THE DRAWINGS
[0070] FIG. 1A is a flow chart of one embodiment of a method for
creating a financial instrument based on content according to the
present invention;
[0071] FIG. 1B is a flow chart of one embodiment of a method by
which a financial instrument based on content according to the
present invention may be traded;
[0072] FIG. 2 is a flow chart of one embodiment of a financial
instrument based on content according to the present invention;
[0073] FIG. 3 is a flow chart of one embodiment of a financial
instrument based on content according to the present invention;
and
[0074] FIG. 4 is a schematic diagram illustrating one preferred
embodiment of an exchange system for implementing the present
invention.
DETAILED DESCRIPTION OF EMBODIMENTS OF THE INVENTION
[0075] The embodiments described below are in specific reference to
content, target content, and valuation, although a person skilled
in the art will realize that other types of content, target content
and performance metrics, for example, those directed to trademarks
or copyrightable subject matter or other intangible property rights
are possible and that the details of the invention can be modified
in a number of respects, all without departing from the inventive
concept.
[0076] The present invention is a system and methods by which a new
financial instrument based on content may be created and issued.
FIG. 1A is a flow chart of one embodiment of a method 100 for
creating a financial instrument based on content according to the
present invention. The content to which the financial instrument is
directed is defined at step 110. Content is the general subject
matter of the financial instrument. Content can be the known
results or the potential results in an area, or from certain
scientific, artistic or literary efforts. Content generally
includes information, experiences, and technology as well as
tangible and intangible property. Content can be manifested in many
forms and in many different kinds of contexts, including electronic
content presented via computers and mobile devices, printed
materials such as books and newspapers, television, movies and
radio as well as live performances of drama and music such as those
presented in a theatre or performances of speeches or interactive
experiences such as games or sporting events. Content is that area
in which the issuer wishes to establish the financial instrument.
For example, it can be an area of technology, (e.g.,
nanotechnology, hydrogen fuel cells, recombinant technology, etc.)
or the actual or potential source of such technology (e.g., a
specific university or group of universities, a specific laboratory
or group of laboratories, etc.), or a specific type of artistic or
literary work.
[0077] To permit investments to be made with respect to a very
specific area or aspect of the content, a target is determined
within the content at step 120. Again, target content can
advantageously be that which is known or may be that which may
occur in the future. For example, the target content may be the
patent applications or the patents that may be filed or may issue
for a certain widely acknowledged inventive university
investigator. Target content, accordingly, can be, what is termed
herein as "actual target content," such as a group of related
patents, or, what is termed here as "potential content," such as
the possible filing of a patent application or the possible grant
of a patent or patents. There are many forms of target content
within a given defined content. Besides the issuer of the financial
instrument determining the target content, target content can be
determined also by a variety of approaches wherein some performance
has been identified, for example, through the use of a
classification system, an analytical method, relevance score, a
relevance threshold, or a common identifier.
[0078] A value is placed on the target content at step 130.
Valuation is the method for assessing whether an investment is
worth its price. The issuer may place a value on the financial
instrument that the issuer deems is appropriate. Alternatively, a
possibly less subjective method can be used such as using
performance metrics. The value of the financial instrument may,
depending on the specific nature of the instrument, change over
time. The value may be determined at the date an investor invests
or establishes a position in the financial instrument, which maybe
different than the value determined at the date the instrument is
delivered. The delivery date is the day on which the instrument
expires or a payout is received by an investor.
[0079] The performance metrics value the financial instrument based
on measurable target content. Therefore, in embodiments where the
target content is susceptible to performance, performance must
actually be identifiable before the financial instrument can be
valued using performance metrics. Target content can be determined
simply by specificity of the issuer of the financial instrument,
and thereby be susceptible to performance. Besides the issuer of
the financial instrument determining the target content, target
content can be determined by a variety of approaches wherein
performance has been executed, such as closed-source analytics,
open-source analytics, or market-based metrics.
[0080] FIG. 1B is a flow chart of one embodiment of a method 150 by
which a financial instrument based on content may be traded. After
the financial instrument is created and issued at step 100 (see
FIG. 1A), the instrument is offered at step 125. The investor
establishes a position at step 140. An interested investor
establishes a position taking into consideration risk. Positions,
such as a long position and short position, are established by the
investor and include the trading events that occur to the financial
instrument. Trading events include: buy, sell, buy to open, buy to
close, sell to open, and sell to close. Trading events are
generally used to distinguish between establishing versus closing a
long or short position. On the delivery date, the instrument
provides a payout at step 150, which can be a gain, loss, or
neither with respect to the investor's initial buy. The payout may
be correlated to the performance metric used to determine the state
of the target content. The payout may be structured as either a
linear function or a non-linear function of the performance metric.
The issuer of the financial instrument may be responsible for the
payout.
[0081] FIG. 2 is a flow chart showing one embodiment for trading a
financial instrument 200 based on potential content that has no
current established value according to the present invention. A
university, for example, may create a financial instrument shown at
102 to raise capital for research in nanotechnology devices by a
renowned researcher with the hopes of developing a novel system,
process, or device. The content is nanotechnology defined at step
210 and the target content is the potential of a novel system,
process or device related to nanotechnology determined at step 220.
Thus, the target content is unknown and highly speculative. If
performance metrics are used at step 230, then the value of the
financial instrument is based on those metrics at step 234.
[0082] In this example, the university does not use performance
metrics at step 230 and, as a result, sets a value that the
university believes is appropriate at step 232, based in part by
the payout conditions. The university issues ten (10) instruments
at $1000 each. The university establishes the payout conditions of
5% ($50 for one instrument bought) if the university receives a
government grant and 10% ($100 for one instrument bought) if a
patent application is filed in any country, either occurring within
five years from the issue date of the financial instrument.
Therefore, an investor will receive 20% ($200 for one instrument
bought) if both a grant and patent application are achieved.
[0083] The investor establishes a position at step 240 with respect
to the financial instrument. If a grant is offered and received by
the university at step 242, performance metrics can be used to
value the target content at step 236. For example, the metric may
be the value of the grant with respect to the average of all other
grants given by the government in the field of nanotechnology.
Suppose the government grant was $5,000 and the average of all
other grants given by the same entity was $2500. The performance
metric substantiates a high value for the instrument.
[0084] If a patent application is filed at step 244, performance
metrics can be used to re-value the target content at step 238.
Established value is not achieved if a patent application is never
filed in any country within the five years from the issue date of
the financial instrument. The investor receives a payout at step
254 according to the payout conditions of the instrument.
[0085] FIG. 3 is a flow chart showing one embodiment for trading a
financial instrument 300 based on actual content that has value
established according to the present invention A third party issues
a financial instrument as an investment opportunity for investors
that wish to invest in all patents related to nanotechnology.
[0086] The third party creates the financial instrument 104 by
defining the content as technology at step 310. With technology as
the defined content, the target can be defined as patents in any
one of the classes according the USPTO classification system that
are within technology, such as: superconductor technology (class
505), combinational chemistry technology (class 506), nuclear
technology (class 976), or nanotechnology (class 977). For purposes
of this embodiment, the target content is determined at step 320
all the patents in nanotechnology (class 977). Target content may
also be defined based on a relevance score, relevance threshold, or
common identifier. A performance metric is used at step 330 to
place a value at step 334 on the financial instrument, here the
Nanotechnology Market Value Index (NMVI) as reported by a
recognized performance metric publisher.
[0087] The third party issues five thousand (5000) instruments at
$500 each. The payout condition is $10 times the published NMVI on
the delivery date defined by the financial instrument. An investor
establishes a position at step 340 and buys two instruments
totaling $1000 with a value of the instrument is 40. On the
delivery date, the published NMVI is 60. Therefore, the investor
collects $600 as a payout at step 350 for each instrument totaling
$1200.
[0088] FIG. 4 is a schematic diagram illustrating one preferred
embodiment of an exchange system for implementing the present
invention. The system preferably operates over either a private
electronic communications network or over a public communications
network such as the Internet, or both. Investors who preferably
sign appropriate contracts that guarantee performance would be
permitted to buy financial instruments based on content using the
system, which is implemented on a general purpose or specially
designed electronic computer.
[0089] System 500 includes program memory 505, central processing
unit (CPU) 510, investor database 520, modems 532 and 534 and
display driver 536. Preferably, all of these components are
connected directly to an address/data bus 535 according to well
known computer system implementations. System 500 also includes an
input for financial instruments based on content 550 and
connections to multiple display units 562, 564, 566, either
directly (566) or via the Internet 568 (562, 564).
[0090] Program memory 505 preferably stores the various components
of the computer software that operate the present invention. CPU
510 performs the various functions associated with trading as well
as facilitates access to the various components of the system via
address/data bus 535. The CPU also processes the positions
including trading actions taken by the investor.
[0091] Investor database 520 preferably includes information about
individual investors. Preferably, this database is secure whereby
dissemination of any information therein is strictly
controlled.
[0092] System 500 receives data regarding the financial instrument
based on content 550 via modem 532, for example. The financial
instrument data may come from the issuer directly or from an
alternate source. Communication with the various investors is
implemented via display driver 536, modem 534 and the various
displays 562, 564, 566.
[0093] Specifically, as shown in FIG. 1, if system 500 of the
present invention is operating under a private network scenario,
display 566 is connected directly to modem 534. Alternatively, or
in addition, communication with investors may occur over a public
network such as the Internet 568 whereby display 562 and display
564 can be accessed.
[0094] The steps of creating a financial instrument based on
content may be embodied in machine-executable instructions. The
instructions can be used to cause a general-purpose or
special-purpose processor which is programmed with the instructions
to perform the steps of the present invention. Alternatively, the
steps of the present invention may be performed by specific
hardware components that contain hardwired logic for performing the
steps, or by any combination of programmed computer components and
custom hardware components.
[0095] The present invention may be provided as a computer program
product which may include a machine-readable medium having stored
thereon instructions which may be used to program a computer (or
other electronic devices) to perform the creation of the financial
instrument based on content according to the present invention. The
machine-readable medium may include, but is not limited to, floppy
diskettes, optical disks, CD-ROMs, and magneto-optical disks, ROMs,
RAMs, EPROMs, EEPROMs, magnetic or optical cards, or other type of
media/machine-readable medium suitable for storing electronic
instructions. Moreover, the program to perform the creation of the
financial instrument based on content may also be downloaded as a
computer program product, wherein the program may be transferred
from a remote computer (e.g., a server) to a requesting computer
(e.g., a client) by way of a communication link (e.g., a modem or
network connection).
[0096] While the disclosure is susceptible to various modifications
and alternative forms, specific exemplary embodiments thereof have
been shown by way of example in the drawings and have herein been
described in detail. It should be understood, however, that there
is no intent to limit the disclosure to the particular embodiments
disclosed, but on the contrary, the intention is to cover all
modifications, equivalents, and alternatives falling within the
scope of the disclosure as defined by the appended claims.
* * * * *