A tale of two auctions

The past two weeks saw both the first and the second live intellectual property auctions held in Europe. Dave Keating reports on the very different outcomes of each.

The first auction of intellectual property in Europe got in just under the wire. IP Auctions, a newly formed German company, held its first auction in Munich May 15, just two weeks before Ocean Tomo held its fourth auction in London – its first in Europe. While the first auction yielded disappointing results, the second was an undeniable success, showing that although it may take some work, Europe is indeed ready for the live buying and selling of intellectual assets.

Ocean Tomo auction

Chicago-based merchant bank Ocean Tomo started holding  live auctions, in which the highest bidder receives the rights to the patent, copyright or trademark being sold, last year in San Francisco. Since then it has held successive auctions in New York, Chicago and London, with each one shattering the record of its predecessor. Last week’s London auction generated over £4 million ($8 million) in sales, setting a world record for the amount raised at an IP auction. About half of that amount was from just one lot, an internet shopping patent owned by Juliette Harrington of New Zealand, which went for £2.47 million.

Like its previous auctions most bids came from anonymous bidders over the telephone or the internet, and most lots didn’t receive any bids at all. Unlike a traditional auction, the IP auctions have tended to see much if not most of the buying and selling take place after the live auction itself. About 30 percent of the lots at last week’s auction were sold. The audience could only guess at which mystery bidders were behind the numbers assigned to the various phones in the phone bank, though like the past auctions they likely included some of the big players such as Intellectual Ventures and IPValue, which have both been collecting a diverse array of patents for future exploitation.

The success of the London auction contrasts sharply with the disappointment of the Munich auction two weeks earlier, which achieved sales of €423,000 ($572,000). This is well below the stated value of what was on sale which was estimated at $6.5 million. Although the proportion of lots sold was roughly the same as Ocean Tomo’s (28 percent), the bids were drastically lower. The lowest bid was a mere €5,000, and the average sale bid was €18,000. The low bids were probably a combination of two factors, the quality of the patents and the amount of due diligence the sellers were able to do on them. IP Auctions allowed sellers only six weeks to research the patents, and organiser Manfred Petry acknowledged immediately after the auction that this was not sufficient. Also, the quality of the patents was just not up to par with the Ocean Tomo lots. Many of the patents didn’t even have much time left until they expired, and for the most part they didn’t cover attractive geographic areas. Some patent holders were only auctioning their patents in individual countries like Italy or Spain, while keeping the more attractive patents for themselves.

Ocean Tomo’s experience two weeks later is probably a good example of how much of a learning curve is involved in this entire process. While their first auction was plagued by many of the same problems seen in Munich (low-quality patents and minimum bids that were too high, for example), the London operation was noticeably more smooth and efficient. This lesson seemed to not be lost on IP Auctions. Virtually the entire firm could be seen milling about at the Ocean Tomo auction, and even the Munich auctioneer was on hand to take notes.

Ocean Tomo is planning its next live auction for October in Chicago, and IP Auctions, probably heartened by the European success of their American counterpart, says it will hold another auction in Germany next Spring.