Friday, March 03, 2006

Patent auctions by Ocean Tomo

Chicago-based Ocean Tomo, a patent consulting firm that includes Ross Perot as an investor, will put on the auction block approximately 400 patents applicable to semiconductors, RFID (radio frequency identification), wireless communications, automotive technology, food, energy and the Internet. The patents will be grouped in 68 blocks ranging in estimated value from $100,000 to more than $5 million.

Like other patent consultants, the company conducts intellectual property inventories and consults on transactions. But the company also claims it has devised a more comprehensive way to put a dollar figure on a patent. AT&T has hired the company to help it sell the intellectual property behind Internet pioneer Prodigy. (In 2004, Ocean Tomo auctioned off 39 patents from CommerceOne for $15.5 million.)

The firm has come up with more than 50 metrics--including the number of citations in other patents [IPBiz note: in other words, gibberish], the area of technology and the number of claims--to attempt to give intellectual property owners and potential licensees a more accurate value on the patent.

Ocean Tomo CEO Jim Malackowsky likens Ocean Tomo's work to the work conducted by the early merchant banks such as Morgan Grenfell. These banks started out as merchants and morphed into financiers, issuing credit and guaranteeing payments for fellow traders.

"Everything that they are doing today is what they did for their own assets 150 years ago," he said.

The analogy might be somewhat stretched. Unlike commodities, such as wheat or iron, the quality and value of patents differ drastically. Nonetheless, a more efficient marketplace for intellectual property could dovetail with the strategies of companies like IBM, Microsoft, Hewlett-Packard and other giants. These companies are mining their portfolios for royalties. IBM gains about $1 billion a year in IP licensing while HP has seen royalty revenue nearly quadruple in the past few years.

Ocean Tomo, Malackowsky added, doesn't shop in the bargain bin. The firm examined more than 1,200 patents and selected what it believed were the most marketable for the auction. The firm also invests in start-ups with intellectual property it finds interesting. The investments are in the form of loans: If the firm goes under, Ocean Tomo reclaims the patents under a mortgage.

**Of the patent quality issue***

"Everyone is always in angst about patent trolls, but (try to) name 10 of them," he said. "There are some junk patents and lawsuits, but by the time a patent gets through the patent office, gets through the pretrial phase, gets through the Markman hearing (to determine the scope of a patent), the trial and the appeal process, it is a pretty good patent."

[IPBiz post 1298]


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