Internet, consumer patents rule at auction
Auctioneer Charlie Ross fielding a bid. Note the totals on the board behind him. The bids can run high.
(Credit: Ocean Tomo)SAN FRANCISCO--Jonathan Bari didn't seem too nervous until the $725,000 glitch.
A woman, taking commands from someone at the other end of her cell phone, had bid $750,000 on the patent portfolio he was selling at the Ocean Tomo IP Auction last week in San Francisco. The patents covered an online authentication system for consumers devised by his old company Catavault.
The panic came because auctioneer Charles Ross registered the bid at $725,000.
"She said $750,000," he said to me. (We were sitting next to each other.) He became absolutely still. His anxiety then began to climb--not because he was going to be shorted $25,000, but because the bidding accelerated.
A remote buyer placing bids through a representative of the auction house (the buyer was speaking to the rep on a phone) raised it to $800,000. The cell phone woman laughed, talked to her client on the phone, and after a pause bumped it to $810,000. The remote bidder bumped it to $815,000.
VIDEO: Click image to see scenes from the auction.
(Credit: CNET TV)It continued on. When the bidding crossed $1 million, the 200 or so people in the room simultaneously went "Oooooohhh."
Not Bari. He started breathing audibly. "Go higher, higher," he whispered, to outer space.
The remote bidder kicked it to $1.1 million. The room paused. Cell phone lady quit. Bari shook my hand and left, happy that the winner bid far more than the $500,000 minimum he had set.
The devil's lair?
While Bari got one of the highest prices of the day, his experience reflected the overall tenor of the patent auction, in which intellectual property owners sell their goods to anonymous bidders. Internet patents--particularly the kind that could apply to vast numbers of transactions on the Net--drew a lot of attention.
Discovision Associates got $6 million for a large patent portfolio for improving bit streaming, a record for an intellectual patent portfolio at auction. Yoogli, which has a semantic search patent, received a $1.1 million bid, but withdrew the patents because it was below Yoogli's reserve.
For critics of software patents, this kind of event is the ultimate nightmare. They claim that Internet patents are dangerously broad and that auctions ultimately fuel lawsuits. It's like the Amazon one-click patent and an attack by wolves all rolled into one.
So far, Ocean Tomo says that only a few lawsuits have emerged around patents bought at its auctions. Still, some attendees represented "patent enforcement firms," which buy patents and then extract royalties from other companies. Intellectual Ventures, the large patent firm founded by former Microsoft chief scientist Nathan Myhrvold, was allegedly bidding by phone through one of the auction house reps, according to some attendees.
Or heaven's gate?
The patent holders, though, see it differently. Many are independent inventors who tried to license their products to large companies but got rebuffed. Without patents, large companies would steamroll over the little guy, many assert.
Realtor Martin Eldridge, for instance, got $1 million for a location-based application that combines GPS-like data with information services. If you walk by a painting rapidly in a museum, for example, you might just get the name of the painter sent to your cell phone. If you pause, it might forward you the date it was painted and other details.
He came up with the idea while driving down Highway 1 in California.
Taking bids by phone. Many bidders call in their bids by phone to maintain secrecy. Phone buyers, however, will also have observers in the room.
(Credit: Ocean Tomo)"I wanted to know what I was driving by," he said, elated and sipping champagne. He wrote Google, Garmin, Microsoft (all of whom have extensive patent portfolios that the rigorously defend) and several other companies about licensing. None responded. The auction gave him a way to make some money off of it.
Michael Voticky sold a voice-mail management program he came up with while on a flight from Europe, for $500,000. It was his minimum. "No complaints," he told me.
The list goes on: Videa got $700,000 for a patent for displaying video files as thumbnails. Another company got $975,000 and hearty applause from the audience for an application that ranked media files according to a user's personal profile. QSIndustries got $400,000 for a digital sound-effects app. A newsfeed aggregator patent went for $400,000.
Below that, a slew of patents that related to consumers sold in the $100,000 to $250,000 range. Under the unstated rule of auctions, the crowed applauded and ooohed only if the bidding went past the $900K mark.
Compare that with what happened with the patents for industrial users. Sun Microsystems offered a number of patent portfolios. The first three were withdrawn because bidders didn't hit the minimum or bid at all. Sun finally sold one for $325,000.
Other companies didn't see bids, or high enough bids to get past their minimums, on patents for improving cell phone antennas, engine management systems, conductive coatings for planes that make them easier to de-ice, or an application for tracking trucks in delivery fleets. Edward Hyman got $130,000 for a chip that can help control satellites, a little above his minimum expectation.
In all, Ocean Tomo CEO Jim Malackowski deemed the day a success. The patents sold generated $19.6 million in revenue. That's a record for an intellectual-property auction.
Four lots sold for more than $1 million and around 62 percent of the lots were sold overall. Ocean Tomo keeps 25 percent as a commission--10 percent from buyers and 15 percent from sellers.
Not bad for a day's work.
In this kind of situation we will have an inflation of the patent values, or enforced patents that the general public will consider absurd.
Why doesn't C-NET comment on the this? Does those patents really bring any value to the market?
There is nothing strange that the ideas just "popped" up in the patent holders head. The reason is that similar ideas pops up in most heads once in a while. Without research, just by a common life. Nothing extraordinary in any way.
mentioned are obvious? SO WHAT! did any of you lose a bid on
any of these patents? do you know what the claims in the
patents actually say? do you know who bought them?
This is a free market. If I get a patent on toe nail clippers and
someone buys that patent from me, how do any of you have
anything to do with that transaction?
Are you seriously suggesting that a patent holder has to keep
their patent and is not allowed to sell it or license it, for that
matter?
Grow-up. This has nothing to do with validity (novelty or non-
obviousness) and everything to do with a way for inventors to
sell, not litigate even though it is their right to exclude others
from practicing the *claims* (not the specification, the actual
language of the *claims*).
Any of the commentators own property? Should you be
restricted in selling your property? How eBay? Is it fair what
people get for *used* items?
You may rail against patents and you may rail against movies;
but, your rants are no more relevant than railing against people
who trade stocks.
Wow, what misinformation lead you to think that somehow
educated buyers, many of whom are behind the call for patent
reform (!), actually do buy patents and actually do refuse to
license the same patents when offered to do so.
[[digitalshaman]]
After the patent is granted, the idea is not free any more.
By allowing trivial ideas to be patented you create strange effects on the market. The money does not end up by the company doing the work. The money end up on random places, decided by the patent office.
It also include risks to companies that include trivial and obvious ideas to their business. Risk costs money. And this is an obstacle on the free market.
have gone through some form of analysis during the
examination process. Something that is not insignificant if
you've ever been through one. (yes, I have granted patents)
however, the examination process is less than perfect and
patents do end up being granted that probably should not be.
[as an aside, to all of you who believe in things like government
run health care, take a look at your complaints on the patent
examination process and see the future]
Second, if and when the patent owner of some of these dubious
patents tries to enforce them, the likelyhood of success goes
down since the people who are being threatened have the
opportunity to oppose the patent on prior art, obviousness and
potentially other grounds. So, if you are showing up at an
auction buying patents that have not been tested through their
first real test, it's a crap shoot at best.
Third, if the patent survives this far, why should not the owner
of the patent have the rights to reap the benefits? If something
was so obvious, then why didn't someone else think of it first?
I've seen some pretty creative stuff in my life, much of it which
was patented and deserving of protection. Regardless if you
think it was obvious (Gee, why didn't I think of that?) soemone
invested time and talent into the idea and got the rightsto
exploit it. And this is wrong?
Is the US Patent system perfect? Far from it, but show me
another system that protects the investment of inventors?
- Patents and small business
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by igl00lgi
April 7, 2008 12:10 PM PDT
- Patents kill small business and innovation as much if not more than they help them. As a manager of a business that utilizes technology, to innovate on our existing services and products, the risks are always in the back of our minds. Overly broad patents along with attornys and groups that utilize them to squeeze small businesses are doing more harm to this country than good.
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