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Patent Auctions: How Far Have We Come?

John C. Jarosz

Analysis Group, Inc., Managing Principal, Washington, D.C., USA

Robin Heider

Analysis Group, Inc., Manager, Washington, D.C., USA

Coleman Bazelon

The Brattle Group, Principal, Washington, D.C., USA

Christine Bieri

Analysis Group, Inc., Manager, Washington, D.C., USA

Peter Hess

Analysis Group, Inc., Vice President, San Francisco, CA, USA

In April 2006, Ocean Tomo, LLC held what it described as the “world’s first ever live patent auction.” Since then, it has held nine more, each of which has been widely publicized. As with all auctions, the purpose of the Ocean Tomo auctions has been to facilitate the expeditious and fair transfer of patent rights. The frequent and regular collection of interested buyers and sellers is expected to convey speed, and the sheer magnitude of parties bidding, with ultimate prices tending toward “true value,” is expected to result in fairness.

While patent rights have transferred hands in many ways for generations, auctions have been an infrequently used tool to facilitate such transfers. With its open-outcry auction format and well-publicized multi-day events, Ocean Tomo has succeeded in bringing a level of “buzz” to this particular method of matching buyers and sellers of patents.

In this paper, we describe the structure of the Ocean Tomo auctions, present the results of the auctions that have been held to date and evaluate the successes and shortcomings of those auctions. We find that that the use of auctions has been validated as a tool to transfer patent rights and that the structure chosen by Ocean Tomo does facilitate expeditious transactions. However, especially of late, the volume and magnitude of patent transfers has been limited. A lack of flexibility in Ocean Tomo’s auction structure, combined with the inherently complex nature of patents, render it unlikely that the current Ocean Tomo auction format will, to any great extent, replace conventional transfer mechanisms.

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