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What could an ex-coroner, a title company and a mathematical formula for calculating heat-transfer rates have to do with intellectual property? Plenty, if Dr. Nir Kossovsky has anything to do with it. Dr. Kossovsky, a former deputy Los Angeles coroner and a professor of pathology at the University of California at Los Angeles Medical School, has moved out of the morgue to take a post as chairman and chief executive officer of Pasadena, Calif.’s Patent & License Exchange Inc., on the Web at www.pl-x.com/. His company is the newest entry in a rapidly expanding online IP marketplace that includes another recent start-up, IP.com, of Rochester, N.Y. IP.com helps companies place inventions in the public domain, to forestall others from acquiring patents to block their use. PARALLEL METHODOLOGY The focus of Kossovsky’s company is patent marketing, using the sophisticated Black-Scholes Option-Pricing Model, a variation on a previously known method of calculation used in physics to determine the rate of heat transfer from an object. Inventors of this formula, as applied to the “call” price of stock options, won the Nobel Prize for economics in 1997, revolutionizing options trading in the process. Black-Scholes — and ancillary patent valuation tools used by pl-x — are “very sophisticated and elegant,” said Patrick H. Sullivan Sr., head of the ICM Group, Palo Alto, Calif.-based IP consultants. But Sullivan, who is associated with the site www.ventius.com, suggested that pl-x’s offering may be a little too sophisticated and complicated for the everyday IP transactions of most corporations. Black-Scholes is “a high-end Mercedes Benz that can be driven only by left-handed people,” he said, while many companies and their lawyers will be perfectly content most of the time with a patent valuation system more along the lines of a ’56 Chevy. He said that he’s discussed Black-Scholes with many of his corporate clients, and “they look at me like ‘Are you crazy? We wouldn’t use that thing.’” But Sullivan acknowledged that pl-x is “taking a really good method of evaluation and providing people with access to it.” Kossovsky has brought in a crew of IP heavyweights, including Jeffrey Brandt, of JLB Consulting Inc., who played a key role in developing the business method patent portfolio of Walker Digital Corp. and Priceline.com. Former Patent Commissioner Bruce Lehman sits on the board, and pl-x is using the patent mapping software developed by Aurigin Systems Inc., of Cupertino, Calif. Blue-chip investors include Japan’s Softbank, the accounting firm Ernst & Young L.L.P. and Eastman Chemical Co. Chicago Title is offering escrow services and Swiss Re Group, of Zurich, Switzerland, is providing up to $10 million worth of patent validity insurance for a transaction. Dr. Alexander Arrow, a physician-turned-financial analyst, is pl-x’s chief financial officer. Arrow and Kossovsky view patents as financial instruments akin to call options. That is what made them decide Black-Scholes, rejiggered into a proprietary system they call Technology Risk Reward Unit (TRRU), would provide a way to measure a patent’s value. The result of the calculation is a value that functions like a manufacturer’s list price, they said. Despite Sullivan’s caveats about complexity, Kossovsky predicted wide acceptance for his company. He insisted that his company’s standardized contracts and the predictable results from the TRRU valuation system will save lawyers time and duplication of efforts. Meanwhile, he may end up being one of his company’s best customers, with five applications pending for the technology that enables TRRU valuations. Prosecution of those patents is being handled by San Jose, Calif.’s Skjerven, Morrill, MacPherson, Franklin & Friel.

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