An inventor, engineer and co-owner of a two-person company in Cleveland, he offered up a suite of patents for varying the valve timing in car engines at the Ocean Tomo Patent Auction here Thursday. The night before the auction, he said he has tried to commercialize the invention for several years. Ford Motor called him for a meeting in Detroit, but nothing happened. He also went to England to meet another manufacturer, but no licensing deal transpired.
"I am sort of ambivalent about selling," said Gary, who asked that he be identified only by his first name to preserve anonymity. "This has been six or seven years of my life."
Bidding climbed fast. "$1.1 million I am bid," said British auctioneer Charles Ross. "$1.3 million," he bellowed. "$1.4 million. Do I hear $1.5 million."
Then something occurred that seemed to happen quite a bit at the auction: No further bids came in. The last $1.4 million bid didn't meet the reserve, and the lot was withdrawn. No sale.
"We had the second highest bid out there," Gary said after the auction. He was upbeat and said he and his partner would continue to try to sell it.
Buyers and sellers had a tough time connecting at the highly publicized auction. Seventy-four lots of patents were offered up for auction, but only around 25 sold. Most of the time, the bids failed to meet the minimum reserve set by the seller, causing the item to be withdrawn.
A few auctions generated a fanfare of drama. A patent submitted by inventor Douglas J. Ballantyne for compressing movies for distribution on TVs went on the block at $300,000. "$450,000 I'm now bid. The bid is $500,000" said Ross. It climbed to $650,000 and stalled, but then ratcheted up rapidly to $900,000.
After crossing $1 million, only two bidders were left. It went to $1.1 million, then $1.2, followed by $1.3 million. The room of more than 300 attendees went silent. Ross stared at one of the bidders. Seconds passed. Ross didn't smile or change his expression, but he shifted his gaze to the other bidder.
"I will sell the lot for $1.4 million," he bellowed, notifying the room that the last bidder has just raised the sale price during that last exchange of stares. "Going once for $1.4 million. Going twice...Sold for $1.4 million."
A few rounds before that, a bidding duel between a woman and a man I couldn't pick out in the crowd drove the price of a set of patents for a flash memory module from 3Com from $350,000 to $950,000 in just a few minutes. The audience burst into applause.
Auction highs and lows
But those were the rare highlights. Most of the other patents sold for between $8,000 and $10,000, many to an anonymous bidder over the phone. An unidentified woman in the crowd also 'hoovered' in a few patents in this price range from a variety of fields. The running suspicion among people at the cocktail party that followed was that she came from a patent firm that earns revenue from licensing or suing others. (No one wore name tags to preserve anonymity.)
Some patents didn't even get bidders. Ross started the bidding on a patent for preventing air conditioners from overheating at $500,000. "Will someone bid me $500,000? $300,000...$200,000," he said. "I don't like going backward." When no bids emerged, the lot was withdrawn.
"When you're selling paintings or cars, you rarely go below $300,000," Ross, who also appears on Antiques Roadshow in England, said after the auction. "But patents are different. No one is going to come in and say, 'That is going for three-quarters of a million dollars. I think I will give it a punt.'"
The wide variety of the offerings did make it tough for sellers, many said after the auction. When the automotive patents were on the block, the bidders from semiconductor companies sat on their hands. Material science companies bid on things like the patent for Estrified propoxylated glycerols (a fat substitute invented by Arco Chemical) while the parties who showed up for the patent from inventor Andrea Rose for sizing clothes online sat on their hands.
Still, many bids came close to the reserve, said Jim Malackowski, CEO of Ocean Tomo, and eight sellers said they would stick around to hammer out deals with the potential buyers.
"The serious bidders did their homework," Malackowski said. "The result was kind of what we expected."
Future auctions will likely have to be better calibrated, said Stuart Soffer, an intellectual property consultant and technical expert witness from Menlo Park, Calif. Most sellers overvalued the value of their patents. Many, he added, will also likely have trouble getting more money through licensing their patents than they would have obtained by selling at the auction for a price that was below their reserve. The auctions should also more tightly follow a theme so the majority of the bidders who attend will be interested in most of the patents, he added.
The slow pace and low bids on some of the lots surprised him. "I wanted to get up and say, 'Ok. I bid $1,000," Soffer laughed.
But, like on eBay, the sellers who managed to offload something were glad they participated. Jeff Rosedale, an attorney at Woodcock and Washburn in Philadelphia, managed to sell a patent that grew out of his doctoral thesis. He got $10,000 for it. It will have to be split four ways, and he spent about $1,000 in attending the auction, he said.
"So I made a little money. Now, that's not counting the hours I put in (evaluating the value of the patent," he said. "But it was worth it."
Thursday's auction, he added, is likely only a first step in a process that will become more common.