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IP, Patent

UPDATE: Ocean Tomo/Round Rock Patent “Covenant Auction

I previously reported that Ocean Tomo is preparing to auction four covenants (not the Scandinavian pop variety) (See Patent Broker Ocean Tomo Auctioning Massive Collection Of Covenants).  This morning, additional information crosses the pond from Joff Wild at the IAM Blog that actually answers some of my earlier questions.

First of all, it appears that no company currently in litigation with Round Rock is eligible to bid on the covenants.  Second, one of the covenants will be limited to five years, while the rest will be perpetual. Presumably, this would include a representation that Round Rock would bind downstream owners of the patents with the same promises.

However, a covenant is an enforceable promise (a/k/a contract), not a license, so the devil is always in the details.  There’s also apparently going to be an approval process to bid on the covenants, as they come with various restrictions preventing handset makers and semiconductor companies from bidding on certain lots:

• COVENANT #1 – Any buyer who is: (i) NOT IN litigation with Round Rock; (ii) NOT a semiconductor company, AND (iii) NOT a handset / computer company, is eligible to buy a 5-YEAR covenant not to sue.

• COVENANT #2 – Any buyer who is: (i) NOT IN litigation with Round Rock; (ii) NOT a semiconductor company, AND (iii) NOT a handset / computer company, is eligible to buy a PERPETUAL covenant not to sue.

• COVENANT #3 – Any buyer who is: (i) NOT IN litigation with Round Rock, AND (ii) NOT a semiconductor company is eligible to buy a PERPETUAL covenant not to sue.

• COVENANT #4 – Any buyer who is: (i) NOT IN litigation with Round Rock, AND (ii) NOT a handset / computer company is eligible to buy a PERPETUAL covenant not to sue.

Via NPE invites bids for covenants not to sue over former Micron patents at ICAP OT auction

The five-year covenant strikes me as the strangest lot available. First of all, how much could 5 year’s worth of freedom from former Micron patents be worth for non-semiconductor/non handset companies ?  Second of all, aren’t you just setting yourself up as a sitting duck? Five years from now, Round Rock will have had time to go through at least two rounds of litigation.  If they survive, the patents will be approaching the “bullet proof” stage, not to mention the fact that you helped validate the patents along the way.

Losing out on a bid also presents a serious risk since bidders are required to register in advance, including the real-party-in-interest for any proxy bidders. Post auction, Round Rock could end up getting from ICAP a convenient list of additional licensing targets outside of its current enforcement vertical, which makes me curious about of what kind of arrangement Round Rock has ICAP.

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