I received a note about a new patent auction site, FreePatentAuction. There’s something very democratic and marketplace efficient in such systems but patent auctions are the kind of thing that fuel a lot of angst in the patent community. Critics worry that this will only appeal to potential plaintiffs (read: patent trolls) or to companies that want to take technologies off of the market. Even supporters doubt that they can easily bring the rights buyers and sellers together since each patent or portfolio is, by definition, quite unique. These are also hampered by the fact that it is extremely difficult to value such assets given their lack of liquidity.

FreePatentAuction caught my eye because, as it states on its site, “It’s Free: we do not charge you or anybody else for the service. FreePatentAuction is not a commercial venture.” Well, I like free but I wonder how they are going to stay in business. This reminds me a little of the First Citiwide Change Bank, which specializes in making change:

Bank Representative: All the time, our customers ask us, “How do you make money doing this?” The answer is simple: Volume. That’s what we do.

In looking around the FreePatentAuction site, you see that the technologies are quite diverse. Some seem reasonable like the utility patent on snap-together socks offered at $29,000 (see U.S. Pat. No. 6,185,751). I think this would be good for my kids in putting their socks together but I wonder if the novelty would wear off quickly.

But other patents are not so grounded in reality, like one offer for a design patent (note, not only is this not a utility patent, it is only patent pending). This design is for a picture frame described as “pictures are arranged consecutively; in a loop” and the “unit displays up to 11 pictures that rotate via a series of internal rollers; pictures moves to each position along rail slots or pulleys.” And the best part is that this can all be yours for a mere $10,000,000. OK.

On the upside, FreePatentAuction.com is easy to use, nonexclusive and free to both sellers and buyers. In fact, the site doesn’t even have a mechanism for knowing is a sale has transpired. So, I guess there is little harm in using the service. At the very least, the site may provide your invention with some extra exposure needed to attract investors. I have to believe, though, that the value will only come with some better ability to separate the wheat from the chaff.

Other patent auction sites have shown some success. The Ocean Tomo patent consulting firm plans to hold auctions twice a year. At the last auction, 26 of the 78 patent portfolios put up for sale were sold off to buyers. The total amount was a little more than $3 million, and many of the patent portfolios sold for around $11,000. Bidding on 52 of the lots offered failed to meet the seller’s minimum and were withdrawn. However, five additional lots of patents sold after the auction for $5.4 million. They charge a set fee ranging from $1,000 per single patent listing without reserve to $6,000 per patent pool listing with reserve.

Note: If you’ve used these or any other patent auction service, please email us and let us know your opinions so we can report back on your stories. email the Baristas

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