Thursday, September 24, 2009

Patent Auctions Go Mainstream

Today's New York Times's article "Patent Auctions Offer Protections to Inventors" offers proof that patent auctions and the pejoratively named Patent Trolls are a force to be reckoned with. It is time to move to using the term Non-Practicing Entity (NPE) and accept the fact that these organizations will help shape the face of intellectual property monetization going forward. (They are going to need some better logos if we can't use the cute trolls any more.)

Zoltar Satellite Alarm Systems is about to auction off its hard won and battle hardened patents for personal alarm systems with GPS receivers. Aside from the usual rant that none of the articles on the subject included the patent numbers,(5,650,770 and 5,963,130, the Self-Locating Remote Monitoring System patents plus 3 more use patents and 15 interational patents), these patents may be the seminal technology for helping rescue people find you when you dial 911. The inventors convinced the Federal Communications Commission (FCC) that they had already invented 911 locator services for cellphones when the FCC and others thought it couldn't be done.

The privately held Zoltar, its two inventors, and their investors are seeking a more cost effective way to monetize their intellectual property asset without having to do battle with every cellphone maker on the globe. The auction provides a way for them to get a reasonable return on their investment while turning the heavy lifting of patent enforcement over to firms with deeper pockets and the ability to get the companies that infringe the patents of small or individual inventor's to return their calls.

While there is still lots of discussion on where NPEs and transaction companies fit into the marketplace it's clear they are here to stay. Holders of intellectual property can no longer afford to ignore small inventors and small companies because they now have a new avenue to get the marketplace to pay attention to their investments and pay them for their work. The technology is out there to do deep dive searching into the content of patents so that everyone in the IP market space can find what's out there. You can no longer get away with just paying attention to the big patent holders. Some of the good stuff has been created by individual investors and small companies for whom patent auctions are a good thing.

There are many schools of thought on the emerging patent marketplace these days. One is the IP marketplace model like the stock market treating patents like stocks that can be traded freely in the marketplace. The downside here is that its not an asset that is easily traded or moved between owners. The other is the art gallery model where patents are treated like works of art - which is probably a more accurate reflection of the asset but a more benign view of the reality of how the transaction has to work to maximize value. The art gallery model has its flaws since its unlikely someone would pay the big bucks for patent and a just hang it in the hall for their personal enjoyment. Its value is in its monetization. (Unless of course your goal is to take it out of the market all together...we'll save that discussion for another day.)

At Coronado we like the transparency and transaction velocity model. In this model the more information you have about the patents, their use, the inventors, and how you can use the technology in new and serendipitous ways never contemplated by the inventors, the more you understand its value. If you know its value you understand why you need to pay for it. This creates transparency.

This knowledge is coupled with the ability to quickly determine who owns the patents so you can go out and get yourself a license. (Calling NPEs who hide their ownership of patent assets, and sit back in the tall grass waiting - hey, USPTO solved the problem of the submarine patent by publishing the applications. You guys have just recreated it in another form. And weren't you some of the biggest complainers when the submarine patents surfaced in the old days? We know how to find you...) This creates transaction velocity and a vibrant intellectual property marketplace.

At Coronado Group we focus on the transparency part with our Cognition IP work. We are committed to making patent information more accessible and more transparent to help advance the ball on the transaction velocity part.

The auction
is being lead by Pluritas, LLC, a patent transaction company. It will be held on October 14th. The titans of the cellular and smartphone universe are expected to show up for the party. It will be interesting to see if Pluritas or the purchaser release a price so that we will all understand the value that Zoltar's work has in the marketplace. That's part of getting to that vibrant intellectual property marketplace sooner rather than later.

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