Technology Auction Could Breed Patent Trolls

Sellers in the auction include Siemens (NYSE: SI) , BellSouth (NYSE: BLS) , AT&T (NYSE: T) , Kimberly Clark (NYSE: KMB) and 3Com (Nasdaq: COMS) , as well as mid-sized companies and notable individual inventors. The patents are estimated in value from US$100,000 to more than $5 million.

Some Hesitant

Some are calling it an evolution in intellectual property valuation. Others are concerned about patent trolls. Patent trolls are individuals or companies with a patent portfolio containing important software patents that they never intended to commercialize.

Ocean Tomo, an independent merchant bank focused on intellectual property assets, is holding the auction that features 400-plus technology patents to be sold in lots.

"The effect of the auction as a marketplace is already being felt," said James Malackowski, president and CEO of Ocean Tomo. "We sought permission from a few sellers to publish their participation in the auction early in the process."

Getting Inside Motorola's Brain

The auction will place before the buying public more than 65 individual lots of patents. Bidders will be able to place bids in person, by telephone, proxy or absentee instruction.

Patents listed for auction are grouped into categories like Wireless, Cellular, Optical and other Telecom, Semiconductor, Power Technologies, Medical/Bio-Chip/Biotech, Bar Code/RFID Technologies, Display/Multimedia Technologies, Advanced Materials & Chemicals, and Automotive/Industrial Machinery.

Among the lots listed for sale include former Motorola (NYSE: MOT) Barcode and Biochip portfolio, four wheel steering system originally developed by Ford Motor Company (NYSE: F) , bleach activator originally developed by The Clorox Company (NYSE: CLX) and an image distribution system, similar to what search engine companies Google (Nasdaq: GOOG) and Yahoo (Nasdaq: YHOO) are using in their interactive Earth image navigation systems, that can be adapted to numerous technology platforms.

Trolling Predicted

The concept of a patent auction breeds questions of patent trolling. When a patent troll is unable to obtain a licensing agreement with another company, it threatens or enters patent infringement litigation.

There is clear evidence that intellectual property litigation is on the rise. The number of these cases, which includes copyrights, trademarks and patents, has increased 7.3 percent from 2000 to 2004 nationally, according to the Administrative Offices of the U.S. Courts. Specifically, there were 8,738 IP-related lawsuits in 2000 compared to 9,590 in 2004.

Eight out of the 10 IP cases defended by Steve Bauer, head of the Boston office of Proskauer Rose LLP, are initiated by patent trolls. "These trolls don't want to protect their patent, they want you to pay to use it," Bauer said. "Patent trolls typically settle if you offer them a licensing agreement of 1 or 2 percent."

Second Hand Patents

However, David B. Ritchie, an intellectual property attorney and partner in the San Jose Office of Thelen Reid & Priest, isn't too concerned about patent trolling at Thursday's auction.

"The auction is an interesting way for companies to realize some value from patents they are no longer interested in," Ritchie told TechNewsWorld. "Some of the patents have potential for abuse, but the vast majority of them will probably go to companies that need some legitimate patent coverage."