Comment to the SEC in Support of the Enhanced Disclosure of Patent and Technology License Information

Intangible assets like IP constitute a large share of the value of firms, and the US economy generally. Accurate information on the intellectual property (IP) holdings and transactions of publicly-traded firms facilitates price discovery in the market and reduces transaction costs. While public understanding of the innovation economy has been expanded by a large stream of empirical research using patent data, and more recently trademark information this research is only as good as the accuracy and completeness of the data it builds upon. In contrast with information about patents and trademarks, good information about IP licensing is much less publicly available. Although IP royalties provide large in-bound trade flows to the United States, remarkably little is known about the economic realities of IP transactions. But not only are licensing royalties economically impactful, but building a better understanding of how markets for technology operate in a modern, innovation economy is important for the transparency of markets, and to the public and policy-makers. Open data on innovation is currently siloed, fragmented, and unfederated across a number of repositories (some electronic and others physical) including the Administrative Office of the Courts, Secretary of State Offices, Copyright Office, IRS, USPTO, SEC, FDA, NSF, SBA and others, raising search and discovery costs and undermining the goals of open data. Data on “comparables” tend to be thin in the industry, a situation that may offer a sub-optimal market environment for startup firms: these young entities often rely on selling intangibles, but have low bargaining power, and limited resources to invest in search and price discovery. Disclosures of material licenses and intellectual property information to the SEC addresses a number of existing gaps, with the potential to play an expanded role. In fact, IP license information is not widely available to the public through any other federal agency, even in cases where the IP was federally funded. Thus the IP license information available through the SEC is an invaluable resource to the public. One major limitation with the existing SEC licensing information, however, is that it is often difficult to find and manipulate. An impediment arises since the data are not tagged or designed to be easily combined with other information sources. One of us, for example, has sought to determine which firms have SEC-registered patent licenses over a period of time for the purpose of establishing a public database of licenses obtained through FOIA requests. However, there is no straightforward way for the public to search for this information, in the SEC record or otherwise. The overall thrust of our comments is to commend the SEC on the valuable disclosures its requirements encourage and to recommend preserving and augmenting, rather than diminishing them, in order to 1) produce more useful data and 2) reduce the costs of discovering and using existing data disclosed to the SEC. In many cases, an SEC requirement will not require reporting entities to create new information (e.g., when disclosing patents or licenses) but it will greatly reduce the costs to third parties of searching for this information.