Wednesday, April 25, 2007

The New Era in the IP Assets Market

James E. Malackowski,

President & CEO, Ocean Tomo, LLC

This year may turn out to be a watershed moment for intellectual property in the U.S. Relative to recent years, there are better prospects for patent reform legislation and a noted appetite at the Supreme Court for patent cases. At the same time, the market is witnessing the prospect of increased IP regulation in the form of new accounting rules and expanded review of patent-related business transactions. In addition, there is widespread and growing appreciation that enhanced competitiveness is inextricably linked to IP. Against this backdrop, the time is ripe for the development and widespread use of private sector mechanisms to cure inefficiencies in the IP marketplace.

The Supreme Court’s current interest in patent cases coinciding with momentum building for a patent bill indicates an activist Court seeking to influence the scope of patent legislation. The Court’s timing is impeccable. The private sector now has an opportunity to widen the application of patent pools and IP securitizations, participate in the development and use of secondary markets for IP transactions, and explore new avenues for IP asset monetization and commercialization. With Congress and the Supreme Court taking up IP issues, a level of urgency surrounds private sector activity.

The IP debate has revolved around promoting innovation and American competitiveness in the global markets. While the public dialogue extends to new technologies, new legislation, and new business models leveraging IP assets, there has been less attention devoted to the marketplace mechanisms and infrastructure necessary to make IP assets liquid and transferable at low cost. Yet the maturation of the IP marketplace is critical and necessary. First, corporate IP management stands to benefit from marketplace innovations. Second, efficient market mechanisms create benchmarks for the courts to recognize in IP infringement damage awards. Third, private sector innovations can cure market inefficiencies, thereby influencing the shape and scope of legislative remedies. Examples of recent marketplace innovations include public auctions of IP and emerging patent valuation standards.
It is a momentous time for the IP markets as 80% or more of a public company’s market value resides in its intangible assets, and this dependence continues to increase. Business models are emerging to more efficiently acquire, enforce, and monetize IP assets. Small and large corporations with IP portfolios will benefit from widespread adoption of the newly available IP marketplace mechanisms. A new era is dawning with efficiencies ready to be exploited by IP-rich companies. For example, the ability to buy and sell patents and patent portfolios in a liquid market changes the IP management options at a company’s disposal. Greater transparency in IP-based transactions and the development of a secondary market for IP assets are welcomed by investors and policymakers. Use of the new IP marketplace mechanisms supplies IP assets to a market with pent-up demand. The time is ripe for the private sector.

Last week on April 19th, Ocean Tomo held its Spring Live IP Auction, where total floor sales reached $11,429,000, including sales of $3,025,000 and $2,860,000 setting the world’s record for highest selling prices for patents at a multi-lot live IP auction. The auction had a 51% transaction success rate; 55% of the sellers who participated in the auction successfully transacted their patents; and the average selling price per lot was $336,148.

About Ocean Tomo: The next Ocean Tomo Live IP Auction is set for June 1, 2007 at The Dorchester in London, England. The Catalogue, now accessible online at, provides information regarding the 600+ IP assets to be offered. Sellers include top multinational companies such as PCTEL, Inc., Air Products and Chemicals, ABB Research Ltd., MeadWestvaco Corporation as well as small to mid-sized companies, professional inventors and investors.

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