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Patent Auctions Continue, Despite Setbacks

The New York Times ran a piece yesterday on patent auctions, focusing on the story of Daniel Schlager, a doctor who invented a "personal alarm" device using GPS technology in the early 1990s. As a small inventor, Schlager and a partner hired a patent licensing consultant to help them present the technology to cellphone companies like Qualcomm and Motorola. They weren't able to interest them in taking a license, so they sued. According to the article, Schlager's company, Zoltar Satellite Alarm Systems, has spent millions in legal fees and collected millions in settlements. Now Zoltar is looking to sell its alarm patents next month in an auction put on by San Francisco-based patent broker Pluritas.

The article doesn't specify how the "auction" will take place, nor does this press release, but it does hint at the Zoltar patent portfolio's value.

Today, the fast-growing makers of smartphones like Research in Motion, Apple, HTC and Nokia have no agreements with Zoltar. Dr. Schlager said he did not plan to sue them. Instead Zoltar will sell its patents in an auction, hoping for a faster, simpler and less risky payoff.

Given the 20-year shelf life of a patent, Zoltar's patents presumably have at least six years of life left in them. That's plenty of time for a new buyer to start suing the rest of these smartphone-makers. So why is Zoltar trying to cash out now? Without a look at the confidential settlements the company has reached in previous litigation, it's tough to say for sure.

But the more general trend discussed in the article -- the proliferation of patent auctions -- has hit a few bumps in the road of late. This June, Chicago-based Ocean Tomo sold its live-auction unit to British broker ICAP for a measly $10 million. Ocean Tomo's March auction in San Francisco was particularly disappointing, failing to stir much frothy bidding after several years of splashy live-auction events. Patents will surely continue to prove an attractive asset for investors, as the article suggests -- Intellectual Ventures, the largest single investor in patents, has started selling off some of its portfolio to buyers who aren't opposed to litigation as a way to monetize their investments. But based on the Ocean Tomo experiment, it's clear that the world isn't quite ready for patents -- even those like Zoltar's -- to be sold like cattle.

Posted by Laurel Newby on September 21, 2009 at 07:38 PM | Permalink | Comments (1)

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