Ocean Tomo Auctions, LLC
The Ocean Tomo Live Intellectual Property Auction has become referred to by many leading industry professionals as a “forum of commerce.” The event brings together some of the world’s IP leaders, ranging from the heads of IP of some of the largest companies to former national patent commissioners. Ocean Tomo and the auction have also received considerable national and international media attention, including features and appearances on CNBC, Bloomberg TV, The Wall Street Journal, Barron’s, Forbes, Red Herring, BusinessWeek, CNET, Reuters, Associated Press, Chicago Tribune, Variety, and Billboard, among many others. Moving forward, Ocean Tomo plans to hold multiple auctions every year in venues around the world including Europe, Asia, and the United States.
The Origin
The concept of a multi-lot, live auction for intellectual property was born with the intent to introduce to the marketplace a forum for facilitating the exchange of intellectual property. The goals of the auction are to bring a sense of urgency and closure to IP transactions, create a center for IP liquidity, and effectuate transparency for a market in which none has historically existed.
The auction brings with it various benefits from the perspective of both a Seller and a buyer. From a Seller perspective, the auction is the first forum for transacting intellectual property in which the burden of purchasing is shifted to the buyer. The auction structure and format enables a Seller to offer a group of pre-set terms and conditions, including a minimum price, “the reserve”. Many auction participants and followers in the marketplace have begun to see and realize the value of the auction.
| “Patent holders are eager for alternative means for monetizing their patent assets. This is especially true for patent holders that view aggressive licensing strategies as neither feasible nor desired. The emergence of a consistent and robust marketplace for patent assets…should provide liquidity to the patent market and allow intellectual property holders to realize value from their unused patent portfolios through avenues other than licensing and litigation.” –“Patent auctions: emerging trend?” by Perry J. Viscounty, Michael Woodrow De Vries and Eric M. Kennedy (The National Law Journal, May 8, 2006). |
Indeed, the concept of a live auction was one that Ocean Tomo perceived as offering many benefits to a potential Seller. Notably, the live auction offers sellers closure and the benefit of a true “market sale”, while also affording their intellectual property great exposure. Historically, the intellectual property market has been rather insulated as transactions have been conducted privately, with no public discussion with respect to buyers and sellers or price. The auction provides a platform by which a Seller, whether a large or small company or individual inventor, may broadly market their intellectual property, capitalizing upon the press garnered by the auction itself, an established centralized marketplace, and a competitive bidding environment.
For buyers of intellectual property, the auction provides an entirely different set of advantages. The foremost benefit is market transparency and pricing. Currently, buyers have extreme difficulty in valuing IP as a very limited public data set for comparable transactions is available.
| “A robust public market for patents will no doubt increase the overall number of patents available for sale and the visibility of available patents, thereby facilitating…strategic patent purchases and ensuring that all potential purchasers have an opportunity to bid on patents in which they are interested.” –Viscounty, et al. |
With the typical market transaction shrouded in secrecy, potential buyers often are unaware of the intellectual property acquisition opportunities in the marketplace, and consequently are unable to act to pursue them. This often results in their learning about IP which was for sale only after receipt of a licensing or notice letter. This has rendered, and will continue to render, companies susceptible to unforeseeable actions. Conversely, the public nature of the auction enables companies with a licensing interest, or interest in pursuing the development of new technologies and/or portfolio diversification, equal opportunity to know of and pursue opportunities. By making the forum for IP transactions public, 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.
While the auction brings transparency to the IP marketplace, buyers can conduct diligence and bid for auction lots anonymously. Indeed, Ocean Tomo is very conscientious of Bidder anonymity, and will not disclose the identity of any Bidder or bidding entity. Significantly, all bidders and sellers, by agreement with Ocean Tomo, represent and warrant that no involvement in the auction by other sellers or buyers will be used as evidence in any future litigation, thereby affording bidders an increased level of security regarding their auction participation. In addition, this enables all bidders and sellers the ability to participate in the auction without fear of any negative legal ramifications, regardless of their results within the auction.
Past Auctions
The first Ocean Tomo Live Intellectual Property Auction was held in San Francisco, California in April 2006. It featured 78 lots of patents and resulted in transactions both on and off the auction floor. The follow-on event, held in New York City in October 2006, offered to the intellectual property market 96 lots diversified between IP assets, including patents, trademarks, copyrights and music related properties, and domain names. The New York auction resulted in an increased level of bidding activity and welcomed new sellers to the event. Sellers of intellectual property offered in either auction included IBM, Motorola, Honeywell, 3Com Corporation, Siemens AG, AT&T, Dow, Boeing, Kimberly Clark, BellSouth, Agere, Eastman Chemical, CREE and Freescale Semiconductor and many others.
Ocean Tomo has demonstrated through the success of the transactions completed in the first two auctions – both on and off the floor – that a live auction is a becoming the premier forum for transacting intellectual property:
| “The proliferation of intellectual property auctions – both in-house and online – will promote the exchange of patent properties. Auctions will give increased financial incentives to successful inventors and provide a robust market for investors.” –“Under the gavel: a defense of patent auctions” by Barry Evans and Jean-Paul Ciardullo (The Daily Deal, Monday, October 23, 2006, p.3) |
The Future
Ocean Tomo is committed to hosting regular auctions at locations around the world.
The keys to success from the firm’s point of view are the following: (1) transparency (a public auction); (2) comparability of assets (using Ocean Tomo’s proprietary PatentRatings® system); and (3) a strong process (including adequate publicity and the structured diligence and confidential protections discussed above.)