Auctioning IP – use as a licensing forum?
My good friend, Jeremy Philips of IPKat fame, who is (amongst many other things) editor of Oxford‘s Journal of IP Law and Practice (JIPLP), recently wrote a punchy and thoughtful piece in JIPLP on IP Auctions entitled ‘A bid for recognition‘.
Jeremy makes some interesting points, such as (using my words):
- the most appealing IP assets will not need an auction;
- IP auctions can not be compared to fine art auctions (fine art is unique, appreciates in value, does not expire); and
- the most valuable IP assets (trade marks associated with brands) are usually sold along with the business supporting them – and so would more likely be the subject of a take-over bid than an auction bid.
Jeremy suggests that one result of all of this may be that IP auctions end up as low-end commoditised affairs done online (again, my words). This has been tried and failed in the past (pl-x.com), though admittedly in the hands of different management.
Picking up the above points in turn:
- I think Jeremy is spot on about the types of assets that will end up at auction – in general.
However, I can envisage situations in which one might wish to force an auction between bidders for a particular IP right, which is indeed of high value. The key factors for this scenario would obviously have to be (a) a strong validity position, and (b) a guranteed minimum number of bidders. Why hold the auction in public, though? Again, as part of an overall IP strategy, this may be very valuable – for example in the context of future rights to be licensed, sold, enforced, or to generate a higher valuation for an entity, etc.
- Jeremy’s comparison with fine art is really interesting.
Jeremy says that in contrast to IP, fine art is unique. I mostly agree. Although a valid IP right is theoretically ‘unique’ it almost never covers the only way to acheive a particular result (whether it be a patent, trade mark, copyright, Design, or whatever) – technology will always find a way around an IP monopoly.
As Jeremy says, apart from trade marks, most IP rights do have a limited life. (Having said that, even fine art will deteriorate beyond recognition at some point..) Also, confidential information doesn’t really have a set expiry, though the idea of auctioning it brings about some interesting problems… However, I think many IP rights do appreciate in value. One of the most practical ways to value an IP right is by the sales of the product associated with it – which always go up over time. The patents covering Lipitor are worth a lot more to Pfizer right now ($20 Billion per annum?), than they did when they were first filed, and the same applies to the Coca Cola trade marks, etc.
- The most valuable IP assets are usually trade marks in association with a high-value, well managed brand (and all that supports it). I agree with Jeremy that it is hard to see high value brands going by way of auction.
A further thought would be to use an auction forum to grant a certain number of licenses, carved up according to field, geography, time, or whatever. Such a system could well favour higher value IP, as it gives the bidders the chance at a slice of something that is clearly valuable and which retains exclusivity.
What do you think?