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In a previous post, I argued that there are a lot of examples where aggregate market data are useful despite the fact that they often obscure a lot of pricing variability associated with heterogeneous products. In other words, market prices are averages of aggregated data that actually obscure a lot of pricing variation. Nevertheless, these data are extremely useful for management, in making investments, and a lot of other areas. My point is that aggregated IP/patent transaction data would be very useful to a lot of people and organizations. Here is just one interesting example of the value of market data from my own background…

In a former career, I worked as an economist analyzing global trade in fruits and vegetables mostly in support of World Bank and USAID projects to develop agriculture in emerging economies. I worked on several teams that built models which were used to focus hundreds of millions of dollars of investments in agricultural production, packing, transport, and marketing of fresh products throughout the world. Our clients had a very simple need. They needed to know what products to produce, how much, and where to sell them to make the most profit. Naturally what they can produce is constrained by their climate and location. But there were always several different products they could produce effectively and it was critical to know which would be the best investment. The data that are available to build market profitability models aggregate data in ways that obscure huge variations in what are actually very heterogeneous products and markets. For instance, for pricing and volume data we would often have a category like, “Grapes: Fresh”. Just think about the variety of grapes that are offered and the different venues, and formats where you buy them. “Grapes: Fresh” doesn’t really capture much variety. Yet, we were able to use this data very effectively to predict the volume of product that our clients could profitably deliver into every market around the world, in any given week. Any grape expert can tell you that the pricing data we were using obscured the very important reality that it matters a lot what kind of grapes you deliver, and in what format, for determining the price. However, this didn’t prevent us from using this data and combining it with that expert knowledge to be able to answer our client’s most important question.

The same is true for IP. Just because a product is not perfectly heterogeneous does not mean that aggregated/averaged market pricing information is not useful. In many cases, this data is essential in establishing fluid global markets. I am convinced that the same will be true for patents and other intellectual property. Once we can finally observe the market prices for large numbers of transactions (licenses and sales), this data will greatly reduce the “friction” associated with these transactions and a fluid global market in IP will finally emerge.

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