IP, Going Once ... Twice
Posted Aug 1, 2007 6:50 AM CDT
By Jenny B. Davis
It was standing room only for business-suit types at Ocean Tomo’s Spring 2007 Live Intellectual Property Auction.
Investors, venture capital lawyers, entrepreneurs and, yes, even a patent troll or two had come together in the grand ballroom of Chicago’s Union League Club to witness the sale of millions of dollars’ worth of patents, trademarks, copyrights and domain names.
Auctions are nothing new in the world of IP, but usually they’re small, private affairs, says Andrew T. Ramer, who oversees the auctions for the Chicago-based merchant bank. In other words, nothing like what Ocean Tomo started doing in 2006, with its multi-lot, open-bar extravaganzas packaged with two days of specialized business seminars, a gala dinner and networking ops galore. “We wanted to make the event itself a centralized forum for who’s who in IP,” says Ramer. “When you bring that many decision-makers into the room, there are plenty of deals happening that we aren’t even involved in.”
And plenty that they are. That April afternoon, British auctioneer extraordinaire (and Antiques Roadshow regular) Charles Ross brought down his gavel on 67 lots, including a method to remotely test modem performance, an interference-cancellation system for electromagnetic receivers and the Q Grill, which was featured in Wired magazine.
The 34 lots that sold commanded an average price just higher than $408,000; one portfolio of video-on-demand patents garnered a record-making $3 million and change—and an enthusiastic round of applause.
Who bought what? It was impossible to tell because most bidders bypassed the very public floor in favor of the phone bank. The ability to bid anonymously—and to remain private, post-sale—is integral to the success of the auction, Ramer says. “If you’re a Motorola and you want to acquire IP, you don’t want people to know your strategic plans, and you don’t want people to know how much you’re willing to pay.”
Seller identities, however, are usually disclosed, and they range from venture-backed companies to universities to inventors. Ramer says he once sold a patent for $1.54 million that two Canadian men had kept in a drawer.
Ocean Tomo charges sellers a listing fee that’s typically between $1,000 and $6,000 plus a 15 percent seller’s premium on the final bid price. Lots are created logically, grouped by seller and purpose, and catalogs are issued about three months before the auction.
Interested buyers, once qualified and charged a $1,500 fee, can access due diligence and transfer documents via a password-protected online data room. They can also contact sellers in writing or through conference calls and in-person meetings. All sale prices include a 10 percent buyer’s premium, and sales are generally finalized within 20 business days.
Like sellers, buyers come from everywhere, and Ramer admits that the company scouts for sellers and does a “tremendous amount” of legwork to let potential buyers know what’s coming up for sale.
Yet surprises do happen. “There have been lots purchased at auction from buyers who did not do their due diligence,” Ramer says. “Their bid was fueled by the bidding activity on the floor.”