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IP, IP Asset, Patent

ICAP Continues To Struggle For Live Patent Auction Relevance

ICAP concluded its most recent live patent auction last week with underwhelming results.  The auction featured more than 190 total lots, but the vast majority were offered only through ‘sealed’ bids.  According to sources, the live auction concluded with just three completed sales out of 29 lots, with total sales volume well short of $2 M.  Joff Wild of IAM Magazine also confirmed this result.  In addition, the Gametime IP source indicated that 12 publicly offered lots failed to attract any bids at all. Assuming that ICAP chose the 29 lots it deemed most likely to sell in the live auction phase, the fact that the auction resulted in four times more ‘no-bid’ lots than sold lots, two reasonable conclusions are: 1) ICAP selected the wrong lots, or 2) ICAP lacked a significant number of relevant lots in the first place.

Prior to last year’s auction, Patent Calls conducted a study that identified an apparent lack of correlation between asking price and patent quality.  While a similar study was not conducted this year, ICAP appears to be following a similar trend.  For example, consider Lot No. 7, which featured a single US Patent (7,072,888) of questionable relevance, and failed to attract any bids at its reported opening price of $1 M.  Meanwhile, the substantially more valuable Lot No. 55, featuring a collection of four patents substantially more likely to be in use, attracted enough attention at its opening offer of $600,000 to obtain live bidding, making a post-auction sale likely.

In addition to the auction itself, ICAP hosted a pre-auction summit on patent monetization.  Advertised summit participants included representatives of Acacia, Sterling Partners (which recently acquired Canadian patent owner MOSAID), and RPX.  One auction observer told me “the events the day prior were not good and poorly attended.”  As for the auction itself, this observer characterized it as “an attempt to sell over 100 previous lots that did not sell and 30 ‘new’ lots.  It is hard to say how many sold as more than 100 were offered only via sealed bids.”  While this is true, assuming that ICAP tried to select its most interest lots for the public auction, substantial sales in the sealed-bid auction are unlikely.

While the pre-auction events failed to attract interest, auction day was another story.  In stark contrast, seats in the auction room filled up, leaving many participants standing.  The dramatic level of attendance makes the lack of bidding all the more telling.  As noted above, ICAP may have either misjudged which portfolios to select for the live auction, or may simply lack quality portfolios.  Either scenario is bad news for the live patent auction business model.

However, the larger problem may be the very real possibility that ICAP doesn’t know which problem it has.  Accurate patent pricing requires competent and reliable analysis.  While computerized analytical methods may provide indications and trends, patent claim language remains the final arbiter of real patent value.  As a result, only human analysts produce reliable pricing, and then only when the analysts can combine the skills of claim interpretation, subject-matter expertise and market knowledge.

So long as ICAP’s initial pricing efforts fail to resemble reality, the IP auction house will continue to offer–for patents–the same thing your local realtor offers for houses: stuff for sale.  In this context, the high interest and low bidding correlates.  Knowing the original pricing is unreliable, interested buyers can simply observe and use bidding data–or the lack thereof–as a data point to establish a more palatable price tag.  As one participant told me, “If there is no other bid at the auction, why bother bidding at all? Just swoop it up post auction at a discount.”  In fact, repeat patent sellers confirmed that previous lots sold in this manner, and this auction will likely be no exception.

If ICAP is content to broker private patent sales, then it should probably dispense with the live auction process altogether.  After all, weak sales volume threatens the credibility of the brokerage model entirely.  On the other hand, assuming ICAP continues to hold live auctions with the intent of making money, rather than as the world’s worst advertising strategy, the firm ought to invest in beefing up its valuation process.

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