An Android in the Jury Room

By Matthew J. Donigian*

I. Introduction

The foreperson is considered an essential component of the American jury.[1]  After being selected foreperson, a juror is delegated the responsibility of harnessing the fact-finding power of the jury to reach an efficient and just verdict.  Although jurisdictions employ different methods when selecting a foreperson, the foreperson almost always functions as the jury’s leader and exercises her power by organizing discussion as she sees fit.  In recent years various jurisdictional foreperson selection processes have been scrutinized by empirical studies that aim to discover if the foreperson’s role gives her unequal influence in a jury’s verdict.  These studies indicate that the foreperson does possess considerable power and that certain methods of selecting a foreperson may be injecting inequity into the system.

Recently, amazing progress has been made in the fields of computing and artificial intelligence (AI), which may allow for an artificial intelligence to take over many of the administrative tasks that are currently taken care of by the foreperson.  Since the advent of the first digital computer—ENIAC—in 1947, the ratio of cost to processing power in computers has increased exponentially.  This reality has produced stunning advances in computing power over the last half century.  In 1986, the Cray X-MP supercomputer was capable of .220 gigaflops of processing power at the cost of about $15 million.[2]  Compare this to the HPU4Science cluster, which has 6,000 gigaflops (6 teraflops) of processing power and cost about $30,000 to build in 2011 using commercially-available gaming computer hardware.[3]  In addition, groundbreaking advancements in machine audio-visual recognition capabilities, natural language processing, and general increases in the sophistication of artificial intelligence are making technological feats once relegated to science fiction novels not only possible, but affordable; two stunning examples of this technology are the Forum and Blog Threaded Content Analysis project that is capable of analyzing “large volumes [of] social media content” and providing summaries useful to intelligence operations[4] and Google’s self-driving car.[5]

Exponential increases in computing power will inevitably allow an artificial intelligence to perform the responsibilities of a jury foreperson.  Handing over the responsibility of controlling the logistical affairs of the jury to an artificial intelligence may prevent the inequities created by unequal delegation of power to the jury foreperson.

II. Problems with the Human Foreperson

As expected, jury forepersons have more influence than other jurors during

deliberations.[6]  Forepersons also participate much more than other jurors, and “account for about 25%-31% of speaking during deliberations . . . .”  In addition, the foreperson makes “twice as many novel statements of facts or opinions” when compared to other jurors.

Jury forepersons are selected differently depending on the jurisdiction.  In most states the jurors themselves are free to choose the foreperson at the beginning of the trial, while in some states the judge selects the foreperson before deliberations begin.  Depending on the selection method employed, different sources of bias may have an effect on which juror is ultimately selected.  For example, when a judge selects a foreperson they may give preference to a juror “who nods at the right times and seems to interpret the case in the same way that judge does.”[7]  In states where jurors select their own foreperson there is evidence that education, occupation, and expertise influence the jurors’ choices.

Does the bias injected by the selection of a foreperson detract from the ideal the jury is meant to live up to?  This question largely depends on what ideal we have in mind.  In the not-so-distant past juries were almost exclusively composed of the wealthier elements of society, and the Supreme Court’s recently adopted ideal of the cross-sectional jury is in stark contrast to the composition of juries at the founding.  In Thiel v. Southern Pacific Co., the Court explains why the cross-sectional jury upholds democratic ideals: “[j]ury competence is an individual rather than group or class matter.  That fact lies at the very heart of the jury system.  To disregard it is to open the door to class distinctions and discriminations which are abhorrent to the democratic ideals of trial by jury.”[8]

III. Technology Required to Create an AI Foreperson

A foreperson requires three major abilities in order to perform her function.  First, a foreperson must be able to hear jury deliberations.  Second, a foreperson must be able to think about what is said by other jurors and process that information.  Third, (ideally) a foreperson should be able to use this information to direct the jury’s discussion.  If a computer is to play the role of foreperson then it must be able to perform all of these functions as well as a human.

A. Speech Recognition

Jury deliberations present several challenges that voice recognition software must overcome if an artificial intelligence is to take over the role of foreperson.  The three most puzzling obstacles are the format of jury deliberations, which may often involve speakers talking over one another in varying volumes and voice types, the speed at which deliberations may take place, and the constant turnover of new jurors each time a trial takes place.

These are major challenges for modern speech recognition software because in order to increase accuracy, current software must be sensitive to a user’s voice while remaining extremely insensitive to outside noise.  This makes the best speech recognition software on the market very good at recognizing the speech of a long-time user with a noise-cancelling microphone but inept at accurately recognizing speech in a multi-party conversation.

The most popular speech recognition software on the market today is Dragon NaturallySpeaking (Dragon).  Although it is amazingly accurate, Dragon is inadequate for application in the jury room for two reasons: first, Dragon owes much of its accuracy to its ability to be “trained” by a user by analyzing the user’s voice when reading preset written materials;[9] and second, Dragon recommends completing training exercises in a location with similar ambient noise to the location where a user will be dictating so that Dragon can better isolate the user’s speech from other noises.

Recent developments in speech recognition algorithms have led to the creation of speech recognition software that—while less accurately than trained software like Dragon—can analyze speech without being trained by a user and can be used in everyday life.  The most popular of this new wave of software are Apple’s Siri and Google Voice Search.  And while these technologies have much of the speech recognition capabilities that would be needed by an AI foreperson, they have been criticized as inaccurate, with one review claiming that Siri processes speech accurately in noisy conditions only eighty-three percent of the time.[10]  Since many queries that are processed by Google Voice Search and Siri are short and to the point, these numbers would likely be far lower when presented with the unique challenges of the jury room.

B. Critical “Thinking” and Natural Language Processing

In order for an artificial intelligence to perform the duties of foreperson, recognizing the speech of jurors is not enough.  The artificial intelligence must also be able to accomplish the more complex task of understanding the context and nuances of natural language.  Without this ability, the machine is simply replacing the court reporter instead of becoming an element of the deliberating body.  While this capability is still outside the reach of current technology, there are several projects that show promise that this accomplishment will become feasible in the near future.

IBM stunned the world on February 14, 2011, when “Watson,” a supercomputer, beat Jeopardy! Champion Ken Jennings in the first and second rounds of a three-round tournament.[11]  Accomplishing this feat required Watson to hear and answer a broad array of questions, many of which included slang terms or cultural references.  Watson was able to win at Jeopardy! largely because of IBM’s natural language processing technology that allowed the supercomputer to “understand” the context of the question being asked and  provided a degree of representation and reasoning based on the processing of the information.

Natural language processing capability is essential to any artificial intelligence foreperson.  A skilled foreperson should also be able to sense consensus and call for straw-poll votes when the debate has coalesced.  Although Watson’s capabilities suggest that this technology will be available in the future, it is not yet adequate for this application.  Watson’s current capabilities are focused on answering specific and structured questions like those in Jeopardy!, and although jStart (Watson’s commercialized version) has been used in more practical applications like processing patient discharge reports in plain-text and generating follow-up alerts for healthcare providers, it is not built to process the massive amount of data and ambiguity present in live-action juror deliberations.[12]

C. Interaction

Perhaps the most important part of an artificial intelligence is its ability to communicate useful information to humans.  If all Watson did was “think” about Jeopardy! questions it may produce interesting academic data, but its astounding capabilities would be lost on much of the population.  What makes Watson truly amazing is its ability to synthesize the previous two capabilities—speech recognition and natural language processing—and then render the correct answer.  IBM allowed Watson to “think” by giving it a plethora of academic resources, the entirety of Wikipedia, and other reference materials.

However, having access to a world of knowledge is not enough.  Watson also needed to be able to sift through this information to identify the knowledge that was pertinent to each question.  IBM’s DeepQA technology gave Watson this ability by allowing Watson to consider the different ways that a question could be interpreted and then use probabilities and a complex search algorithm to hone in on the most likely answers.

Technology like Watson is currently inaccessible to state and federal courts due to the extremely large investment required for Watson to perform at the level it did during Jeopardy!.  This investment is computing power, and Watson had an unbelievable amount at its disposal: 90 clustered IBM Power 750 servers (each retailing at over $85,000) churning out over 80 teraflops of computing power.  Even if Watson-like technology was more cheaply available, it still would not be able to perform the functions of a competent jury foreperson.

IV. Future Feasibility as Evidenced by Exponential Increases in Computing Power

Although computer hardware and artificial intelligence software are currently incapable of performing the functions of the jury foreperson, this capability may not be as far off as many think.  According to Ray Kurzweil, the Engineering Director of Google, computer speed is not only increasing at an exponential rate, but the rate at which computer speed is increasing is also increasing exponentially.[13]  At this rate, supercomputer power will increase to around 500 times faster than the world’s fastest supercomputer, the Titan CrayXK47, by the year 2020.[14]

Kurzweil not only predicts exponential increases in computing power, but also exponential increases in computing price-performance.[15]  According to Kurzweil, this means that “later in this century . . . a thousand dollars of computation will be trillions of times more powerful than the human brain.”  This amount of computing power would be more than capable of performing the functions required of a jury foreperson, and affordable computers capable of performing this feat will most likely be available far before the type of system mentioned by Kurzweil.

IV. Conclusion

The constitution guarantees a criminal defendant the right to a trial by a jury of her peers.  This right places limitations on the role that an artificial intelligence can and should play in the jury room.  However, by relinquishing the leadership functions of the foreperson to an artificial intelligence, the jury can avoid any corruption associated with the foreperson’s selection and the power afforded her.

Eventually, artificial intelligence will be able to perform managerial and organizational tasks far better than any human foreperson.  An artificial intelligence could provide jurors with an accurate breakdown of how much each juror has contributed, a catalog of those contributions, and could ensure that jurors regard jury instructions when delivering a verdict.

In the near future, increases in technology will allow for an artificial intelligence to enter the jury room as a powerful tool.  In order to prepare for this reality, ethical concerns regarding the extent to which an artificial intelligence should participate in deliberations must be considered, and any implementation must carefully balance the defendant’s constitutional right to a trial by a jury of her peers and the interests of fairness and efficiency.

 


* J.D., University of Illinois College of Law. B.A., Political Science, University of Massachusetts at Amherst.

[1] The foreperson is usually elected at the beginning of deliberation and is charged with leading the jury’s discussion.  The foreperson will often call for straw-poll votes to check the jury’s progress toward a verdict.

[2] CRAY X-MP/48: 1986–1990, SCD Supercomputer Gallery, http://www.cisl.ucar.edu/computers/gallery/cray/xmp.jsp (last visited May 8, 2013).

[3] Adam Stevensen, High Performance Computing on Gamer PCs, Part 1: Hardware, Ars Technica (Mar. 30 2011, 11:30 PM), http://arstechnica.com/science/2011/03/high-performance-computing-on-gamer-pcs-part-1-hardware/2/.

[4] Noah Shactman, Air Force’s Top Brain Wants a ‘Social Radar’ to ‘See Into Hearts and Minds, Wired (Jan. 19, 2012, 6:30 AM), http://www.wired.com/dangerroom/2012/01/social-radar-sees-minds/.

[5] See Ashlee Vance, Google’s Self-Driving Robot Cars Are Ruining My Commute, Bloomberg Businessweek (Mar. 28, 2013), http://www.businessweek.com/articles/2013-03-28/googles-self-driving-robot-cars-are-ruining-my-commute (explaining the effects of Google’s self-driving cars on driving).

[6] Traci Feller, What the Literature Tells us About the Jury Foreperson, 22 Jury Expert 42, 42 (2010), available at http://www.thejuryexpert.com/wp-content/uploads/FellerNov2010Vol22Num6.pdf.

[7] Id. at 45.

[8] Thiel v. Southern Pacific Co., 328 U.S. 217, 220 (1946).

[9] See Learn Some Quick and Easy Tricks to Using Dragon NaturallySpeaking, Nuance, http://www.nuance.com/naturallyspeaking/customer-portal/tips-tricks.asp (last visited May 8, 2013) (explaining how to “train” Dragon to recognize your speech).

[10] Philip Elmer-DeWitt, Minneapolis Street Test: Google Gets a B+, Apple’s Siri Gets a D, CNNMoney (Jun. 29, 2012, 6:42 AM), http://tech.fortune.cnn.com/2012/06/29/minneapolis-street-test-google-gets-a-b-apples-siri-gets-a-d/.

[11] David R. Martin & Jim Fitzgerald, IBM’s Watson Beats ‘Jeopardy!’ Champs Ken Jennings and Brad Rutter in First Public Test, Mass Live (Jan. 13, 2011, 10:04 PM), http://www.masslive.com/news/index.ssf/2011/01/ibm_watson_beats_jeopardy_champs_ken_jennings_brad_rutter.html.

[12] UNC Healthcare: How Big Data Was Leveraged to Reduce Medicaid Re-Admissions, IBM Software: jStart Portfolio, http://www-01.ibm.com/software/ebusiness/jstart/portfolio/uncMedicaid.html (last visited May 8, 2013).

[13] Ray Kurzweil, How My Predictions Are Faring 135–36 (2011), available at http://www.kurzweilai.net/images/How-My-Predictions-Are-Faring.pdf.

[14] See Introducing Titan, http://www.olcf.ornl.gov/titan (last visited May 8, 2013) (describing Titan’s theoretical peak performance as 20 petaflops, or 2×1016 flops, compared to Kurzweil’s projection of around 1×1019 flops in 2020).

[15] Ray Kurzweil, Kurzweil Responds: Don’t Underestimate the Singularity, MIT Tech. Rev. (Oct. 19, 2011), http://www.technologyreview.com/view/425818/kurzweil-responds-dont-underestimate-the-singularity/.

The Progression of Legal Acknowledgement of Families Created by Assisted Reproductive Technologies

By Prof. Dara E. Purvis*

Earlier this year in Florida, baby Emma was born to her delighted parents: Cher, Maria … and Massimiliano.  Two of them, Cher Filippazzo and Maria Italiano, are a same-sex couple who married in Connecticut and live in Miami.  The two women had tried to start a family using fertility clinics, but only successfully conceived after asking Maria’s hairdresser, an Italian immigrant named Massimiliano Gerina, to donate sperm to be used in a private artificial insemination.  At the time, the three verbally agreed that Gerina was acting only as a sperm donor and had no parental status or rights to any resulting child.

I. Parental Rights Issues Created by Multiparent Families

Sperm donors are generally not viewed as parents, but with one crucial detail: most sperm donations take place with the intervention of a doctor in a fertility clinic.  This provides several procedural safeguards, most importantly that fertility clinics require all donors and intended parents to sign legal documents specifying their roles (or, in the case of donors, relinquishment of any parental roles).  Filippazzo, Italiano, and Gerina had not memorialized their agreement in writing before their daughter, Emma, was conceived.

Seven months into Italiano’s pregnancy, the women attempted to remedy the problem and presented Gerina with a contract waiving any parental rights or claim of parental status.  Gerina refused to sign, retained a lawyer, and filed a paternity claim shortly after Emma’s birth in March 2011.  The case was scheduled to go to trial at the end of January, but the three were able to come to a private settlement immediately beforehand, which Miami-Dade Circuit Judge Antonio Marin approved.  According to the agreement, Emma’s primary parents are Italiano, the biological mother, and Filippazzo, who legally adopted Emma.  Gerina, however, is also listed on the birth certificate, and will have regular visitation with Emma.[1]

This resolution is a noteworthy and welcome step forward for nontraditional families.  Statutes and family courts have begun to grapple with multiparent families, but placing three names on a birth certificate formalizes what has otherwise been largely pragmatic and piecemeal.  The settlement also recognizes that individual parents may be privately creating families, through assisted reproductive technologies (ART) and adoption, in ways that the law should formally support.

When considering broad questions about how the law recognizes different family structures, birth certificates seem to be a minor footnote to the important work of regulation.  Birth certificates identify parents, but only create a presumption (albeit one that is rarely rebutted) of parentage.  Counterintuitively, however, birth certificates are usually the only formal identification of legal parents.  As such, they become immensely significant when the status of legal parent is contested or transferred.  Modifying a birth certificate, moreover, is often part of modifying legal parentage: in the traditional version of adoption, when a child is efficiently transferred from birth parents to adoptive parents with finality and anonymity, a crucial step is issuing an amended birth certificate erasing the names of the birth parents and naming the adoptive parents instead.[2]

II. Judicial Interpretation of Parentage

A. Legal Rights for Two Parents Only

American courts have occasionally recognized more than two adults as having some legal relationship to a child.  Generally, however, a sharp distinction has been drawn between legal parents and the third person, who is labeled a de facto or psychological parent and does not possess all the legal rights and responsibilities of parenthood.[3]  The vast majority of the time, courts faced with a group of potential parents have consciously chosen a maximum of two from the crowd.  As the California Supreme Court put it in 1993, faced with a married couple and their gestational surrogate all claiming status as parent, recognizing one father and two mothers would “diminish” the role of the natural and legal mother, even as the court acknowledged that “advances in reproductive technology render[ed] a different outcome biologically possible.”[4]

One year later, a New York court was faced with a dilemma similar to that created by Italiano, Filippazzo, and Gerina.  The sperm donor in that case, named Thomas, was the biological father of a twelve-year-old girl named Ry, and after her birth sought an order of filiation.[5]  At the time of the lawsuit, Ry lived with her biological mother Robin and Robin’s same-sex partner Sandra, along with Sandra’s biological son.  Sandra, however, had not legally adopted Ry, so the question was whether to recognize a potential second parent, not a potential third parent.  Furthermore, the court noted that “the question of the respective rights of a gay life partner vis-a-vis a biological parent presents a timely issue for consideration by the legislative and judicial branches of government,” clearly indicating that if Sandra had sought to legally adopt Ry, only one of the two potential parents—Sandra or Thomas—could succeed in being recognized.[6]

Since the 1990s, as the use of ART has increased, some courts and legislatures have edged away from a two-parent rule.  Departures from the norm, however, have served specific policy goals such as providing financial support or protecting extant emotional relationships with the child.  Louisiana, like most states, presumes that the husband of a woman who gives birth is the baby’s legal father.  Despite the existence of such a presumption, state law allows a second man to be identified as father—“dual paternity”—for the purposes of imposing a support obligation.[7]  One California court came to a more attenuated resolution along the same lines by finding that a biological grandson born out of wedlock could inherit from a family trust notwithstanding the fact that under California’s marital presumption, the grandson’s legal father was not a member of the inheriting family.[8]

B. Legal Acknowledgement of Three Parents

Some courts have crafted compromises by which more than two adults are recognized as parental figures, but have been less explicit about identifying more than two adults as actual parents.  In 2007, for example, a Pennsylvania court was faced with two women who had been in a long-term co-parenting relationship, but who had since ended their romantic relationship, as well as the biological father of two of their children, who had been involved in the lives of the children (with both mothers’ consent) since their birth.  The court awarded partial physical custody and support obligations to both the non-biological mother and the biological father, but left the children’s birth certificates undisturbed.  Furthermore, the court paid significant attention to the biological father’s existing relationship with the children—he was present at the birth of one of the children, provided regular financial support, and was eager to continue regular visitation.[9]  The court found that this gave him the same role as the non-biological mother: someone who stood in loco parentis.  Persons standing in loco parentis share, under Pennsylvania law, the same “rights and liabilities” as do legal parent and child, but the court noted that the status “does not elevate a third party to parity with a natural parent” for the purposes of determining custody.[10]

C. Legal Acknowledgement of Three Parents on a Birth Certificate

With these precedents in mind, the recent Florida case might not seem particularly novel.  One reading of the co-parenting scheme including Filippazzo, Italiano, and Gerina is that it is not a significant departure from the norm.  As Gerina acknowledged to media, “[t]he mothers are in charge.  I’m just going to spend time with [Emma].  They are the parents.”[11]  The birth certificate did not, in other words, create three legal parents with equal rights.

The birth certificate, however, has important conceptual consequences.  First, recognizing both biological and functional parents on a birth certificate diminishes the primacy of genetic relationships.  This is especially important as same-sex marriage complicates parentage rules: biological relationships indicate one male and one female parent, but the marital presumption would indicate two female parents.  Most states that legally recognize same-sex relationships, either through marriage or civil unions, apply marital presumption rules regardless of gender and would place a same-sex spouse’s name on the birth certificate.  But Iowa does not, and Iowa’s Department of Public Health has resisted arguments for doing so all the way to the state supreme court.[12]  As campaigns for marriage equality progress across the country, questions of presumptions of parentage will arise again and again—but adding lines on the birth certificate provide an easy answer.

More importantly, the judge’s approval of Emma’s birth certificate endorsed an unconventional but more realistic assessment of her day-to-day life.  Filippazzo explained, “[w]e’re trying to do the right thing for Emma[.]  We want Emma to have it all, and we believe by doing it this way, including him in a birthday or Thanksgiving, it’ll be a nice addition for her.”[13]  In spite of the disagreement and litigation, Gerina reports that he and Emma’s mothers put their acrimony in the past and are once again good friends working collaboratively for Emma’s benefit.[14]

A pragmatic endorsement of unorthodox family structures may be increasingly necessary in the future.  Recent figures indicate that four percent of births were conceived using ART, and that proportion will likely go up.[15]  Some scientists predict that children who have three biological parents are only a few years away.[16]  Strains on the law’s limit of two legal parents will only increase, and listing three names on a birth certificate is one more step towards conforming legality to reality.

 


* Visiting Assistant Professor, University of Illinois College of Law. Yale Law School, J.D. 2008; University of Cambridge, M.Phil. 2005; University of Southern California, B.A. 2003.   Thanks to Angelica Nizio and the rest of the editors of the the Journal of Law, Technology & Policy.

[1] Steve Rothaus, Miami-Dade Circuit Judge OK’s Plan for Gay Man, Lesbian Couple to Be on Daughter’s Birth Certificate, Miami Herald: Gay S. Fla., http://miamiherald.typepad.com/gaysouthflorida/2013/02/miami-dade-circuit-judge-oks-plan-for-gay-man-lesbian-couple-to-be-legal-parents-of-young-daughter.html (last visited Apr. 9, 2013).

[2] Carol Sanger, Separating From Children, 96 Colum. L. Rev. 375, 444–45 (1996).

[3] Canada, however, identified three legal parents in 2007, when an Ontario court approved of a joint petition by a child’s two mothers (the biological mother and her partner) and the biological father to recognize all three as legal parents.  A.A. v. B.B. (2007), 83 O.R. 3d 561, para. 37 (Can. Ont. C.A.).

[4] Johnson v. Calvert, 851 P.2d 776, 781, 781 n.8 (Cal. 1993).

[5] In re Thomas S. v. Robin Y., 618 N.Y.S.2d 356, 357 (App. Div. 1994).

[6] Id. at 361.

[7] La. Rev. Stat. Ann. § 46:236.1.2.D (2012); Melanie B. Jacobs, More Parents, More Money: Reflections on the Financial Implications of Multiple Parentage, 16 Cardozo J.L. & Gender 217, 218 (2010).

[8] Citizens Bus. Bank v. Carrano, 117 Cal. Rptr. 3d 119, 124–25 (Ct. App. 2010).

[9] Jacob v. Shultz-Jacob, 923 A.2d 473, 481 (Pa. Super. Ct. 2007).

[10] Id. at 477.

[11] Rothaus, supra note 1.

[12] Nova Safo, Gay Parents Battle “the Iowa Anomaly, CNN Radio (Mar. 4, 2013, 7:00 AM), http://cnnradio.cnn.com/2013/03/04/gay-parents-battle-the-iowa-anomaly/.

[13] Kevin Gray, Florida Judge Approves Birth Certificate Listing Three Parents, Yahoo! Can. News (Feb. 7, 2013), http://ca.news.yahoo.com/florida-judge-approves-birth-certificate-listing-three-parents-233555185.html.

[14] Rachel Katz, Miami Judge Allows 3 Names on Birth Certificate, ABC News (Feb. 8, 2013, 2:03 PM), http://abcnews.go.com/blogs/headlines/2013/02/miami-judge-allows-3-names-on-birth-certificate/.

[15] Dara E. Purvis, Intended Parents and the Problem of Perspective, 24 Yale J.L. & Feminism 210, 231 (2012).

[16] Nick Collins, Babies With Three Parents Possible Within Three Years, Telegraph (Jan. 19, 2012, 6:40 PM), http://www.telegraph.co.uk/science/science-news/9025121/Babies-with-three-parents-possible-within-three-years.html.

IPXI: Creating an Efficient Patent License Marketplace

By Chase Means[*]

Intellectual property is considered by some to be the largest asset class in the world.  Intellectual property assets in the United States were recently estimated at $5.5 trillion.[1]  Despite this huge estimate of intellectual property assets, not all of these assets are being effectively utilized.  In fact, in the United States alone, it is estimated that “a staggering $1 trillion” is wasted in underutilized patent assets.[2]  In order to help exploit some of these unused resources, a new exchange called the Intellectual Property Exchange International, Inc. (IPXI) has been created.[3]  The basis of IPXI is to allow IP owners to list their IP on an open market where licenses can be bought and sold freely.

I. How IP Owners Have Exploited Their Assets in the Past

Prior to the creation of IPXI, there were several ways one could take advantage of IP assets through licensing.  The most traditional methods were bilateral licenses and compelling a license through court proceedings.  These options have certain challenges or weaknesses that IPXI attempts to remedy.[4]

A. Bilateral Negotiations for a License

Negotiating a license with a potential licensor is one of the most common ways IP licenses come about.  Generally this requires a company to identify a particular potential licensor and negotiate a license with it.  This can be difficult or troublesome for several reasons.  First, corporations often discover potential licensors by identifying potential infringers of their IP.  It is often not easy to negotiate a license with an entity that feels accused of appropriating IP.  Second, there are numerous steps involved for an entity that seeks to enter into a bilateral license.  When seeking a license, negotiating with every potential infringer takes significant time and effort.[5]  This increases transaction costs from a hypothetical market-based scenario where anyone could take licenses at a market-determined rate.[6]

B. Compelling Licenses Through Litigation

The next traditional way IP licenses occur is compelling a license through litigation.  There are several issues with this method.  Similar to the first method, the litigation route requires one to sue a single infringer at a time, greatly increasing the amount of effort to get an entire market to respect an IP asset.  Next, litigation has significant risk.  By suing a potential infringer, there is risk of not procuring a license.  Worse still, one may have to take a compulsory license based on any counterclaims from the other party.  Additionally, a court may find that a particular IP asset is invalid and the value of the asset may be lost completely.

Finally, the top reason to avoid seeking a license through litigation is the huge cost of litigation itself.  In 1992 U.S. dollars, the mean cost including trial for a patent suit with $1 to $25 million at stake is $2.10 million.[7]  In addition to the cost of litigation expenses, the opportunity and business costs of participating in litigation can cost parties even more.

II. How IPXI Aims to Help IP Owners Better Monetize Their IP

IPXI’s top goal is to create an open marketplace where buyers and sellers of patent licenses can easily come together to reduce transaction costs and other difficulties present in the current IP licensing market.  It hopes to create an exchange where licenses can be bought and sold in an open market that will remove barriers to trade.

A. ULR Contracts

In order to facilitate a marketplace for patent licenses, IPXI has created a unit license right contract, or ULR contract.[8]  A ULR contract generally consists of a non-exclusive license for a single patent, or several grouped or pooled patents.[9]  In this manner, IPXI intends to list on its exchange patents or groups of patents that most easily facilitate the use of an entire technology or invention, not just of a single patent.

The ULR contract is also different from typical licensing and royalty arrangements.  Traditionally, most royalty arrangements negotiated between two parties agree on a particular royalty rate that should be paid each time the technology is used.  In this arrangement, the licensee pays the licensor the predetermined rate every time the technology is used.  ULR contracts are designed differently.  A ULR contract gives the purchaser the right to use the patent for a future one-time use of the technology.[10]

For example, a telecommunications company may list on the exchange a patent for a particular cell phone technology.  If another company would like to utilize the technology in a cell phone, it must purchase ULR contracts through the exchange.  If the second company wants to make 200,000 cell phones using the technology, it must purchase 200,000 ULR contracts through the exchange.  Each time the company builds one of the cell phones with the patented technology, one of its 200,000 ULR contracts is exhausted.  In this arrangement, each ULR contract is preserved until actually used.  As a result, if the company fails to exhaust all 200,000 ULR contracts it had purchased, it can in turn sell unused ULR contracts on the exchange.  When you have multiple parties buying and selling ULR contracts, something resembling a marketplace for patent licenses can be conceived.  IPXI’s hope is that this will create a robust resale market for ULR contracts.

B. How a ULR Contract Makes It to Market

The first step IPXI has contemplated before listing IP in its exchange is a vetting and valuation process.  IPXI will first internally assess the quality and validity of the IP that is to be listed.[11]  This is an important step because IPXI is likely not interested in listing IP that will not have buyers or IP that could be easily invalidated.  This process will include some evaluation of the potential market for the IP.  It will also include a validity evaluation which can include prior art searches, review of the file history of a patent, and review of the patentability requirements in light of the particular patents at issue.

The next step, pending the IP makes it through the first round of evaluation, is approval by a selection committee.  The idea of the selection committee is to have market or industry leaders sit on this committee and independently assess the viability of the offering.[12]  If the selection committee thinks the IP is worthwhile, the vetting moves on to the next step in the process.

This next phase utilizes external parties to check the IP for validity and value.  This will include valuations and validity determinations.[13]  Also during this phase, the potential listing will be described and publicized for any members of the exchange to comment on.[14]  After a certain period of time to collect comments and perform the further validity and valuation checks, the selection committee will review all the assembled information for a final assessment.[15]

Once the IP is approved for an offering, the IP owner must pay IPXI a fee to fund marketing for the IP and for other activities to make the IP ready for an offering as ULR contracts.[16]  Through this process, IPXI will come up with an “Offering Memorandum” that details what IP will be offered, how many ULR contracts will be offered in the initial offering, and at what price the ULR contracts will be listed.

IPXI has developed a unique approach for auctioning off approved IP, which it hopes will best induce an accurate market price for ULR contracts.  By utilizing an initial offering and subsequent offerings, it hopes to stimulate demand for the ULR contracts and get a more accurate market price for the IP.  Although an asking price for the initial offering will be determined during the approval process, IPXI will conduct the initial offering as an auction.  In this auction there will essentially be a minimum number of ULR contracts that must be sold at a certain price (essentially a reserve price).  “By setting an asking price for ULR contracts and lowering that price until bidders are willing to accept a minimum number of offered ULR contracts, the Dutch auction method determines an initial offering price based on market input.”[17]

Whatever rate the first offering of ULR contracts is sold at, IPXI plans to list the next offerings of ULR contracts at a relatively higher rate.[18]  This is to help stimulate demand during the first offering.  Ideally, this higher price of subsequent offerings of ULR contracts will entice buyers to use the secondary market for procuring ULR contracts.  Additionally, IPXI hopes this will stimulate organizations other than technology producers to buy ULR contracts.  “IPXI contemplates that ULR contract futures and derivative products also will be developed.”[19]  IPXI hopes that this system brings about several advantages over the old methods for licensing.

C. Potential Advantages of IPXI

The transparency and efficiency with which IPXI operates will offer corporate management the opportunity to make better business decisions regarding their IP.  IPXI will offer license rights with standard terms at market-based prices.  As a result, licenses are available to parties that normally wouldn’t have the ability to negotiate a license.[20]  This increases demand for the technology, benefitting the licensor while keeping prices low for the licensee.[21]

IPXI also has the potential to greatly reduce transaction costs associated with previous methods of licensing, such as bilateral licenses.  It also reduces prejudices that may exist within a market between two market players that would impact license terms.  IPXI aims to offer identical terms to any potential licensee in a transparent way, which allows the market of licensees to be larger than it could be otherwise.

Another potential benefit for the licensee is that only a small number of ULR contracts need to be purchased, which may be helpful in covering the needs for “research and development, limited product releases, and the like.”[22]

Finally, IPXI could help remedy some of the larger issues plaguing the United States patent system.  These include patent trolls, the “patent thicket,” and rising costs of patent litigation.

D. Challenges Facing IPXI

The biggest challenge IPXI will face is finding buyers for the IP offerings.  Patents are inherently unstable assets that can be invalidated in court.  Further, parties often disagree about whether infringement actually exists or not.  This could make implementing an exchange for patent licenses very difficult.

The next challenge for IPXI will be finding high quality IP that will sustain a marketplace.  Patents expire and technology moves quickly, so taking advantage of IP rights often needs to be done quickly and efficiently.  It is unlikely that companies will be willing to list IP on the exchange that is part of their core business.  As a result, IPXI will be dealing with “leftover” IP to a certain extent.  IPXI must be able to sift out the worthless IP and exploit the valuable IP they come across.

A final difficulty IPXI will face is how to structure its procedure for dealing with infringers of the patents listed on its exchange.  One of IPXI’s goals is to reduce litigation and increase licensing.  But if litigation must be used as a last resort, IPXI must determine how the litigation should proceed and how it will be funded.  If parties are pooling patents these arrangements can get very complex, and IPXI would do well to develop a procedure for dealing with infringers.

III. Conclusion

IPXI is an exciting new entity that has the potential to significantly change the face of the IP marketplace.  Despite significant hurdles, IPXI is poised to help create a better true market for patents and increase transparency and predictability in such a volatile sector of the law.


[*] J.D. Candidate, University of Illinois College of Law, 2013.  B.S., Electrical Engineering, Olivet Nazarene University, 2008.  I am incredibly grateful to Jeff Charbeneau and Dr. Robert Sanders for their invaluable assistance in helping me develop this topic.  I would also like to thank the editing staff of the Journal of Law, Technology & Policy for all of their contributions to this article.

[1] David Silverman, Intellectual Property: The World’s Great Unknown Asset Class, Swiss Derivatives Rev., Autumn 2009, at 46, 46, available at http://www.sfoa.org/sfoa2010/include/Publications/doc/publi-pdf/SDR_41_Final.pdf.

[2] Kevin G. Rivette & David Kline, Discovering New Value in Intellectual Property, Harvard Bus. Rev., Jan.–Feb. 2000, at 7, available at http://www.pctcapital.com/pdfs/Harvard.pdf.

[3] The Exchange, Intellectual Prop. Exc. Int’l, http://www.ipxi.com/inside-ipxi/the-exchange.html (last visited Mar. 6, 2013).

[4] See Cameron Gray, A New Era in IP Licensing: The Unit License Right Program, Licensing J., Nov./Dec. 2008, at 1, available at http://www.oceantomo.com/system/files/New_Era_in_IP_Licensing_NovDec08_CGray_0.pdf (describing a new paradigm in IP licensing: the Unit License Right program, which is being developed by IPXI).

[5] Ian D. McClure & James E. Malackowski, The Next Big Thing in Monetizing IP: A Natural Progression to Exchange-Traded Units, Landslide, May/June 2011, at 3, available at http://www.ipprospective.com/wp-content/uploads/2011/05/mcclure-landslide_may_june20111.pdf.

[6] See Gray, supra note 4, at 5 (discussing how the ULR program can reduce transaction costs).

[7] James Bessen & Michael J. Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk 132 (2008).  The cost for a similar suit through discovery is $1.20 million.  The mean cost including trial for a patent suit with more than $25 million at stake is $4.14 million.  The cost for a similar suit through discovery is $2.59 million.  Using a different metric, the mean legal costs for a patent owner in an infringement suit that goes to trial is $1.20 million, and $1.10 million if summary judgment is granted.  Comparatively, the mean legal cost for an alleged infringer in an infringement suit that goes to trial is $2.85 million, and $0.66 million if summary judgment is granted.  All numbers presented here are in 1992 U.S. dollars, so the current costs are likely much higher.  Id.

[8] McClure & Malackowski, supra note 5, at 3.

[9] Id.

[10] Sarah J. Duda & Benjamin Urban, The Patent Exchange: A New Approach to Licensing Intellectual Property, Snippets Volume 10, Issue 3, Page 11, available at http://www.mbhb.com/files/Publication/65686f54-b019-44ee-95ee-823981e6570f/Presentation/PublicationAttachment/145c9b5a-7903-4d5f-8244-89e9379e7b6c/Snippets%20Vol%2010%20Issue%203_081612-FINAL.pdf.

[11] Id.

[12] Id.

[13] Ian D. McClure, The Value of Efficiency and Transparency in IP Licensing: Let the Market Decide, Intell. Prop. Mag., Feb. 2011, at 53, 54, available at http://www.ipo.gov.uk/ipreview-c4e-sub-mcclure.pdf.

[14] Id.

[15] Duda & Urban, supra note 10.

[16] Id.

[17] McClure, supra note 13, at 54.

[18] See Intellectual Prop. Exch. Int’l, http://www.ipxi.com/inside-ipxi/faq.html  (last visited Mar. 10, 2013) (discussing how “[t]ranche pricing creates early adoption incentives for ULR purchasers”).

[19] McClure & Malackowski, supra note 5, at 4.

[20] Id.

[21] McClure, supra note 13, at 54.

[22] Duda & Urban, supra note 10, at 12.