A Patent Auction is an effective managed-risk monetization strategy.
Commercialization of a patented invention is inherently risky, especially for an individual or small business entity. For example, in-house utilization incurs up-front costs in engineering, production, marketing and product sales, with no guaranteed return of investment. Licensing of a patent or patent portfolio requires comprehensive industry knowledge and the ability to police and enforce an agreement. Successful negotiation of a direct sale likewise requires industry knowledge as well as contacts with industry decision-makers. Valuation can be difficult.
In direct one-on-one licensing or sales negotiations, a prospective buyer tries his best to drive prices downwards. In contrast, the natural dynamic of an auction is that prospective buyers who are business competitors bid the selling price upwards. Arguably, one of the best measures of a patent’s value to a potential buyer is simply the price he would pay to prevent a competitor from getting it. Thus, a gathering of competitors at an auction can provide an accurate valuation of a patent.
General Procedure for Auction Listing and Sale
- Patent Seller (Owner) signs consignment agreement with auction house, agreeing to listing of patent/portfolio for auction and to payment of sales commission and listing fee to auction house in case of sale.
- Patent Seller sets Reserve Price (i.e., minimum auction price).
- Patent Seller pre-signs patent Assignment and Indemnity agreements before auction.
- In case of sale at or above Reserve Price: (a) Patent Seller pays listing fee; and (b) 15% of sale price is deducted for commission payment to auction house, while the balance is paid to Patent Seller. [The auction house also collects a so-called Buyer's Premium of 10% from the buyer. Accordingly, the total effective auction fee is about 25% of a buyer's overall budget.]
Thus, the Seller pays fees only if there is a successful sale by the auction house.
The listing fee is $3000 if the Reserve Price does not exceed $200,000; $6000 if the Reserve Price is greater than $200,000.
Generally, only IP including at least one United States patent or U.S. patent application will be accepted.
Variation: At Seller’s discretion, Seller may list the patent/portfolio at a “buy-now” price for pre-auction sale. The buy-now price is higher than the Reserve Price.
Auction Broker at No Additional Cost
Patent Transfer Inc. is an independent broker that specializes in identifying high-value patented technology and other intellectual property suitable for private placement or for listing at auction.
Patent Transfer Inc. is paid directly by the auction house from its normal, standard sales commission. Thus, payment of an auction brokerage fee to Patent Transfer Inc. does not affect in any way the final amount of sales proceeds received by the patent Seller.
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