Know where to go for know-how

Aug. 20, 2007
Live auctions can liven up the buying and selling of intellectual property, says Mike Spears, in this month's End Point column.

Even if you’re not actually taking part in the bidding, there’s always an air of excitement about an auction — a “live” auction, that is. Online auctions like eBay can certainly get you agitated if you’re buying, but usually only in the last few minutes or so when your offer (well, mine anyway) is trumped by the inevitable last minute bid. Any “buzz” there might be about such transactions is very much a personal one and one perhaps best not shared with other people.

The excitement that a real live auction room can generate, however, was highlighted last month when an obscure art auction in Market Harborough, U.K. made the front pages of some newspapers. A painting with an estimated selling price of $600 to $1,000 had caught the eye of two dealers in the auction room, who between them quickly bid the “18th century continental school, portrait of an aesthete” up to a final hammer price of $410,000. The vendor, who was reported as being “extremely happy with the result,” will be less happy to learn that experts in the London fine art trade now think the painting is probably a Titian, dating from around 1520 and worth upwards of $10 million.

Now it’s unlikely that an auction specializing in intellectual property (IP) could match that for excitement, but one held in June in London set a world record of nearly $5 million for a patent sold at a live IP auction. That auction was one of a series started last year by Chicago-based Ocean Tomo, a firm specializing in intellectual capital equity. Although online patent auctions have been around for a few years, through sites such as ipAuctions.com and FreePatentAuction.com (and even occasionally on eBay itself), Ocean Tomo claims to be the first company to offer live IP auctions.

IP traditionally changes hands after protracted negotiations behind closed doors with one or two companies and can take months if not years to complete, according to Ocean Tomo. An auction by contrast is open to all comers, with all potential buyers bidding in one place at the same time. The company sees this as offering distinct benefits to a potential seller of IP. It affords sellers “closure and the benefit of a true ’market sale’, while giving their intellectual property great exposure. The auction provides a platform by which a seller, whether a large or small company or individual inventor, may broadly market its IP, capitalizing on the publicity garnered by the auction itself, an established centralized marketplace and a competitive bidding environment.”

For the buyers of IP, however, Ocean Tomo says the auction delivers an entirely different set of advantages — the foremost of which is market transparency and pricing. “By making the forum for IP transactions public,” it says, “the auction provides the market with intelligence of what is available for acquisition as well as assuring that the buyer will pay a true market price for IP assets.” Given the commercially confidential nature of most traditional IP transactions, however, Ocean Tomo respects any requests for anonymity from bidders.

As with a fine art auction, experts in a field  can be called upon to pick out the valuable from the humdrum and the forgeries (some more expertly than others, though, as in the Titian example.) So, buyers should carry out due diligence to check for prior patents invalidating the IP on offer — although little, of course, can prevent future claims from cropping up against any patent.

Despite such caveats, Ocean Tomo’s IP auctions appear to be thriving, with the next one in Chicago scheduled on October 24 and 25. The range of technologies on offer can be quite widespread, with that record near-$5 million bid going for an Internet shopping patent. The London event though included one lot featuring a portfolio of patents relating to the hydrogenation of organic compounds. Applicable to many industries, the patents cover a number of developments including improved catalytic compositions and reactor systems, increased reaction rates, up to 50% savings in catalyst costs, minimized byproduct and improved yield.

Selling at only a little more than $16,000, that particular lot probably isn’t looked upon as a potential world-beater by its buyers. But then again, like the two dealers in Market Harborough, perhaps they know something no one else does. That’s the beauty and buzz of a live auction.

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