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Archived updates for Friday, April 07, 2006

Patent Auction Reveals High Expectations in a Fragmented Market

The Patent Prospector Blog is reporting that Ocean Tomo's first patent auction on April 6, 2006 didn't create the bidding tsunami that many sellers hoped for.

More than 400 patents went on the block in 74 lots. Around 25 lots sold.
Many languished under the seller's reserve minimum, clearly an indication of
owner optimism trumping market reality. Most patents that did sell went for
$10,000 or less, many to phone bidders. In several cases where the bidding got close, but failed to reach reserve price, sellers got real and headed off to private negotiations with the highest bidder.

Still, some lots generated drama. A movie compression patent by Douglas
Ballantyne shot to $650,000, stalled, rose to $1 million with two bidders left, before nudging and closing at the highest lot price of $1.4 million. The catalog-listed value for the patent was $2 to $5 million.

The audience burst into applause after a rapid round of bidding for a lot of flash
memory patents from 3Com drove from $350,000 to $950,000 in mere minutes.

While auction statistics collected by Technology Patents & Licensing indicate that the average price per patent sold was $30,344, , that figure drops to $4,330 when the top two lots are removed. Nonetheless, fourteen of the fourty three lots that failed to reach their minimum price drew high bids of $500,000 or more. "There was a disconnect between the sellers' expectations and the buyers,'' Q. Todd Dickinson, chief patent executive for General Electric, reportedly told Mercury News. "In hindsight, we weren't aggressive enough'' in pushing sellers to set lower minimums," James E. Malackowski, chief executive of Ocean Tomo, also reportedly said. Only eleven of the lots did not receive any bids.

While minimum pricing requirements can be fairly easily adjusted to reflect market realities before Ocean Tomo's next auction in New York City this October, the problem of market fragmentation may be a bit more difficult to address. As noted by the Prospector, "the variety of technologies on offer meant that bidding on any particular lot was limited to a very few bidders from the get-go."

Patent sales on eBay, perhaps the world's most-fragmented auction market, may reflect many of the same inefficiencies. As pointed out by Steve Nipper at the Invent Blog, the asking price on this expired patent is still $20,000,000, without a single bid.
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