Auction of Intangibles Attracts NASA, Private Investors
Published on: 14th Sep 2008
Note -- this news article is more than a year old.
CHICAGO (Dow Jones) Bidders will gather in Chicago next month for a high end live auction at the historic Chicago Cultural Center, but they won't be vying for Roy Lichtenstein lithographs or a seventeenth century writing desk.
Rather, Ocean Tomo LLC, a specialist in turning intellectual property into real money, will broker the sale of patents, trademarks, copyrights and domain names to sophisticated technology buyers. Sellers range from individual inventors to multinational corporations and investors.
Three lots at auction are of special interest: For the first time, on Oct. 30, a government agency, Goddard Space Flight Center, part of the National Aeronautics and Space Administration, will auction off exclusive licensing rights to more than 40 patents or patent applications from its private store of technology development.
Goddard's goal is to bring technology into the light for use on more than just space exploration. Ocean Tomo wants potential buyers to see that, with ever more corporate value coming from intangible property, it's a good place for beaten-down investors to push their cash.
Nona Cheeks, a spokeswoman for Goddard, said auctioning patent licenses "gives us another tool in our toolbox for reaching out to industry." Although NASA has struggled to get federal funding, making money isn't the main goal of auctioning patent licenses, she said. "We want the technology that we've tested to be used to develop products that can benefit the public. We have a duty to be a good steward over taxpayer resources." She added that, "if money comes back to us, we can invest it in other projects."
Until now, Goddard has used its discretion to license patented technology for commercial development. Unlike defense contracts, there is no competitive bidding process, although Cheeks said there is a government mandate to give preference to smaller companies where possible.
In the upcoming auction, the NASA unit can vet potential bidders, but won't know who wins until the auction is finished.
Cheeks said other NASA entities and government agencies are likely to follow suit with auctions. "We've had a lot of interest in what we're doing."
Goddard currently holds a portfolio of 72 active patents. The patents and patent applications that were picked for the Ocean Tomo auction already have piqued interest from technology developers, Cheeks said.
The three lots of patents chosen for the auction include computer systems technology, GPS-based systems and applications, and capaciflector sensor technology and applications. (The latter helps robots detect the presence of nearby objects.)
Keith Bergelt is chief executive of Open Invention Network, a company that manages patents - often defending legal patent rights in court - for a group of corporations that develop the Linux operating system for computer networks. He believes the NASA property can fetch better prices at auction than if there were no competitive bidding. More important, Bergelt said, the auction format can eliminate the perception that government agencies work too closely with politically-connected defense contractors, in some circles referred to as "the Beltway Bandits."
"In a blind auction, NASA won't know who the buyer is, so there can't be any talk of political favoritism," Bergelt said.
The 'Christie's' Of Intangibles
In just a few years, Ocean Tomo has become a credible leader in the intellectual-property business. Seven previous auctions were held in cities from Amsterdam to Hong Kong, drawing hundreds of bidders, including representatives of Fortune 500 companies, and generating millions of dollars in sales.
Andrew Ramer, president of Ocean Tomo's auction business, uses the services of auctioneer Charles Ross, who has brought the gavel down on high-profile events such as Sir Elton John's charity auction for AIDS in Monaco and the sale of Los Angeles Times heir Otis Chandler's private automobile collection, which fetched $36 million. Ramer likens the atmosphere at intellectual-property auctions - where an audience of several hundred people raises small paddles to compete with phone-in bidders from far-off locations - to an event at auction houses Christie Group or Sotheby's.
Computer-network company 3Com, in Boston, has sold patents at Ocean Tomo auctions, said Richard Baker, the company's director of intellectual property licensing. "It worked very well for us. In fact, we are selling lot #2 at the October auction," he said. That includes technology for use on a personal communication device, which has an estimated value of $400,000.
"We've seen patents go for $3 million or $4 million at these auctions, in bidding that takes less than 60 seconds," he said. "You can imagine that telephone bidders are all huddled around somewhere. They've done their homework and they know exactly how much they are authorized to spend."
Investors Taking Notice
Keith Bergelt thinks intellectual property might be the next big thing for investors, now that hedge funds and wealth managers are hard-pressed to find places to put cash. He formerly ran a hedge fund that raised capital on patent investments; it financed businesses ranging from from potato chip-maker Wise Foods to fashion designer Betsey Johnson, he said.
So far, there are no equity analysts tracking patent investing, but Ocean Tomo expects that to happen in the next few years.
Already, Ocean Tomo is pretty much the Coldwell Banker of intangible property; the company put together stock indexes that trade on the American Stock Exchange, most notably, the Ocean Tomo 300 Patent Index (OTPAT), comprised of 300 companies that own the most valuable patents relative to their book value. Ocean Tomo asserts that, overall, nearly 80% of corporate value now is in intangible assets.
The patent index also is the basis of two exchange-traded funds open to individual investors, the Claymore/Ocean Tomo Patent ETF and the Claymore Ocean Tomo Growth Index ETF.
Monetizing patents may be a new frontier for investors, but Ocean Tomo products aren't a pure play in the unknown: Top holdings in the Patent ETF are General Electric, Microsoft and Proctor & Gamble.
-By Ann Keeton, Dow Jones Newswires; 312-750-4120; email@example.com
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