Patent Auctions Research Articles

Predicting the value of Chinese patents using patent characteristics: evidence based on a Chinese patent auction

Abstract This study revisits the question of predicting patent value with observed patent statistics, exploiting a rare public auction of patents in China in which the starting prices are used as approximates of patent private value. Family size and the number of assignees come out as the most consistent indicators, while notably, forward citations turn out to be not important. This discrepancy with past studies is investigated. We propose some of the institutional features in the Chinese patent system could lead to the forward citations not as informative as their counterpart in other jurisdictions. The findings bear important implications as Chinese patent data are increasingly being used in innovation studies.

Patent auctions and bidding coalitions: structuring the sale of club goods

AbstractAuctioneers of patents are observed to allow joint bidding by coalitions of buyers. These auctions are distinguished by the good for sale being nonrivalrous, but still excludable, in consumption—that is, they auctions of club goods. This affects how coalitional bidding impacts auction performance. We study the implications of coalitions of bidders on second‐price (or equivalently, ascending‐price) auctions. Although the formation of coalitions can benefit the seller, we show that stable coalition profiles tend to consist of excessively large coalitions, to the detriment of both auction revenue and social welfare. Limiting the permitted coalition size increases efficiency and confers benefits on the seller. Lastly, we compare the revenues generated by patent auctions and multilicense auctions, and we find that the latter are superior in a large class of environments.

Patent Auctions and Bidding Coalitions: Structuring the Sale of Club Goods

Auctioneers of patents are observed to allow joint bidding by coalitions of buyers. These auctions are distinguished by the good for sale being non-rivalrous, but still excludable, in consumption{that is, they auctions of club goods. This affects how coalitional bidding impacts auction performance. We study the implications of coalitions of bidders on second-price (or equivalently, ascending-price) auctions. Although the formation of coalitions can benefit the seller, we show that stable coalition profiles tend to consist of excessively large coalitions, to the detriment of both auction revenue and social welfare. Limiting the permitted coalition size increases efficiency and confers benefits on the seller. Lastly, we compare the revenues generated by patent auctions and multi-license auctions, and we find that the latter are superior in a large class of environments. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Patent Auctions and Bidding Coalitions: Structuring the Sale of Club Goods

Auctioneers of patents are observed to allow joint bidding by coalitions of buyers. These auctions are distinguished from standard ones by the patents being non-rivalrous, but still excludable, in consumption--that is, they are club goods. This affects the way coalitional bidding impacts auction performance. We study the implications of coalitions of bidders on second-price (or equivalently, ascending-price) auctions. Although the formation of coalitions per se can benefit the seller, we show that stable coalition profiles tend to consist of excessively large coalitions, to the detriment of both auction revenue and social welfare. We show that limiting the permitted coalition size increases efficiency and confers benefits on the seller. Lastly, we compare the revenues generated by patent auctions and multi-license auctions, and we find that the latter are superior in a large class of environments.

How does patent transfer affect innovation of firms?

The growth of the market for patents has drawn the attention of innovation management scholars and policymakers, especially regarding the impact this market may have on innovation. One of their prominent questions is whether firms exploit the market for patents to obtain strategic benefits over their market rivals rather than compete through the acquisition of technologies, which may aggravate ex-post patent holdup and increase the cost of innovation.This study examines how a firm's acquisition of external patents affects its rival firms’ innovation activity when a patent can be strategically utilized by the patent purchasing firm. Through our review of patent holdup literature and firms’ strategic utilization of patents, we derive a hypothesis stating that a firm's patent purchase deters its rival firm's development of relevant technologies to that patent if the patent covers crucial technological input for its rival's market operation.Our analysis uses Nortel's patent auction in 2011 and finds supportive evidence for the stated hypothesis. This paper discusses the differences between the nature of the market for patents from the market for technology and how we must incorporate such differences to formulate better innovation policies.

Buyers in the patent auction market: Opening the black box of patent acquisitions by non-practicing entities

In this paper we conduct an exploratory study on the activity of NPEs as buyers of patents in the auction marketplace. The analyses are based on a comprehensive dataset covering all patent auctions held by Ocean Tomo until the end of 2008, matched with information drawn from patent databases and the USPTO reassignment register. The results indicate that the probability that a traded patent is acquired by a NPE rather than a practicing entity increases in the presence of triadic family members and backward citations, while it decreases in the number of inventors and when the invention represents an extensive technological advance (proxied by the originality index). If we disaggregate the category of NPEs, we find that, with respect to manufacturing buyers, defensive aggregators purchase patents which have, on average, a narrower technological scope, a higher technical merit, a lower number of inventors and a longer residual life. Instead, the super-aggregator Intellectual Ventures (I.V.) assigns a higher value, with respect to practicing firms, to patents that are triadic, have a longer time to expiration, have a lower number of inventors and have a higher number of assignees. Patents purchased by both defensive aggregators and I.V. also report higher values of forward citations and residual life than patents acquired by other NPEs.

The Dynamics Between Forward Citations and Price of Singleton Patents

In recent years, business practitioners are seen valuing patents on the basis of the market price that the patent can attract. Researchers have also looked into various patent latent variables and firm variables that influence the price of a patent. Forward citations of a patent are shown to play a role in determining price. Using patent auction price data (of Ocean Tomo now ICAP patent brokerage), we delve deeper into the role of forward citations. The successfully sold 167 singleton patents form the sample of our study. We found that, it is mainly the right tail of the citation distribution that explains the high prices of the patents falling on the right tail of the price distribution. There is consistency in the literature on the positive correlation between patent prices and forward citations. In this paper, we go deeper to understand this linear relationship through case studies. Case studies of patents with high and low citations are described in this paper to understand why some patents attracted high prices. We look into the role of additional patent latent variables like age, technology discipline, class and breadth of the patent in influencing citations that a patent receives.

Selling patents at auction: an empirical analysis of patent value

This article analyzes the impact of patent bibliographic indicators and patent characteristics on the economic value of patents put on sale in an auction, considering different typologies of sellers and buyers. A unique data set covering all patent auctions held until the end of 2008 by Ocean Tomo is used. We employ two measures of patent value drawn from the auction process: the offer price (ex ante value set by the seller) and the closing price (the market value determined by the buyers) of patent lots. We find a positive correlation between forward citations and the economic value of patents (in terms of both the lot offer price and the lot closing price), while backward citations have a positive and significant impact only on the lot offer price. The number of claims is positively related to the lot closing price and the effect is significant only for the fraction of buyers who are nonpracticing entities. The degree of technological congruence of the patents included in a lot turns out to be positively associated with the probability that the lot is sold and has a positive effect on both the lot offer price and the lot closing price. We also find a significant impact of the extent of the residual life of patents on the lot closing price. The effect is driven by the subsample of nonpracticing entities as buyers. Finally, the extension of patent protection to other jurisdictions, as captured by the size of the patent family, is positively associated with both the lot offer price and the lot closing price.

Testing patent value indicators on directly observed patent value—An empirical analysis of Ocean Tomo patent auctions

The valuation of patents is an important, albeit challenging task. Extant research to identify patent value indicators has so far relied on expert estimates of patent value, exploited patent renewal data, or depended on more indirect measures of patent value. Recently, specialized market places for patent transactions have emerged that allow us for the first time to directly observe patent's private value. One of the most prominent market places for patents is Ocean Tomo, a platform that offers periodical patent auctions. We make use of this auction data to empirically test predictions on patent value identifiers on real-world auction prices. We find empirical support for forward citations and the patent's family size; however, both indicators explain only a small variance in patent value. In contrast, our full model explains a large share of variance, making us optimistic that with increased directly observed patent value, such models can be useful tools in patent valuation.

Selling Patents at Auction: An Empirical Analysis of Patent Value

This paper analyzes the impact of patent bibliographic indicators and patent characteristics on the economic value of patents put on sale in an auction, considering different typologies of sellers and buyers. A unique dataset covering all patent auctions held until the end of 2008 by Ocean Tomo is used. We employ two measures of patent value drawn from the auction process: the offer price (ex-ante value set by the seller) and the closing price (the market-value determined by the buyers) of patent lots. We find a positive correlation between forward citations and the economic value of patents, while backward citations have a positive and significant impact on the lot offer price, but turn to be negatively related to the lot closing price. The number of claims does not affect significantly the lot offer price, while it has a clear positive impact on the lot closing price. Also, the degree of technological congruence of the patents included in a lot, which is positively and significantly related to the lot offer price, turns to be still positive but not significant if we consider the lot closing price. This evidence is interpreted in the light of the different typologies of buyers and sellers participating at the auction event.

The Uneasy Case for Patent Races Over Auctions

In advancing his prospect theory of patents, Edmund Kitch dismissed the possibility of distributing rights to particular inventions through auctions, arguing that the patent system avoids the need for governmental officials to define the boundaries of inventions that have not yet been created. Auctions for patent rights to entire inventive fields, however, might accentuate the benefits of a prospect approach, by allowing for earlier and broader patents. Auction designs that award the patent to the bidder that commits the most money to research and development or that agrees to charge the lowest price, meanwhile, can reduce the costs of the prospect approach. Concerns about the government's ability to decide correctly when to hold auctions, however, provide an uneasy case for patent races over patent auctions. More modest uses of auctions might improve welfare, though. For example, an auction to a small number of parties of the right to race in a technological field might reduce wasteful duplication and thus accelerate innovation. Similarly, patentees might be allowed to demand auctions for extended patent scope, with the caveat that a patentee would need to outbid others by a substantial amount to win such an auction.

The Brothers Grimm Book of Business Models: A Survey of Literature and Developments in Patent Acquisition and Litigation

Although they have received the lion’s share of the limelight in recent years, it is not just “trolls” shaping the patent landscape today; “giants” and “dwarves” are in the thicket as well. The trolls are the patent holders that do not practice their patents, but instead seek to profit from litigation them; the are the large, multinational firms with both extensive patent portfolios and products practicing them; the are firms with a large presence in one market but are entering another market for which they have few or no relevant patents. This article provides a survey of key patent-related events taking place in 2011 and takes stock of the current patent acquisition and litigation landscape. Specifically, this article reviews the empirical literature on patent assertion entities, assesses the patent auctions that were held throughout 2011 and over which the giants and dwarves battled fiercely, and surveys the numerous patent infringement lawsuits currently underway, cases which include troll, giant, and dwarf plaintiffs.

Effect of firm variables on patent price

In this study, using singleton patent auction price data from Ocean Tomo, LLC, we analyse the effect of firm variables on patent price. Patents owned by small firms attract higher price than patents owned by large firms, if they engage in multi-country filings. The patents owned by small firms get cited more than the patents owned by large firms. The patents owned by individual inventors attract a higher price than the patents owned by organisations when multi-country filings are not included. We believe that the lack of resources is preventing individual inventors from engaging in multi-country filings and maximising the revenue from their invention. A larger representative data should be used to replicate the results before generalising it.

Orphan Drugs for Rare Diseases

Orphan drugs are intended for diseases with a very low prevalence, and many countries have implemented legislation to support market access of orphan drugs. We argue that it is time to revisit the special market access status of orphan drugs. Indeed, evidence suggests that there is no societal preference for treating rare diseases. Although society appears to assign a greater value to severity of disease, this criterion is equally relevant to many common diseases. Furthermore, the criterion of equity in access to treatment, which underpins orphan drug legislation, puts more value on health improvement in rare diseases than in common diseases and implies that population health is not maximized. Finally, incentives for the development, pricing and reimbursement of orphan drugs have created market failures, including monopolistic prices and the artificial creation of rare diseases. We argue that, instead of awarding special market access status to orphan drugs, there is scope to optimize research and development (R&D) of orphan drugs and to control prices of orphan drugs by means of, for example, patent auctions, advance purchase commitments, pay-as-you-go schemes and dose-modification studies. Governments should consider carefully the right incentive strategy for R&D of orphan drugs in rare diseases.

Dynamics between patent latent variables and patent price

This paper focuses on studying the relationship between patent latent variables and patent price. From the existing literature, seven patent latent variables, namely age, generality, originality, foreign filings, technology field, forward citations, and backward citations were identified as having an influence on patent value. We used Ocean Tomo's patent auction price data in this study. We transformed the price and the predictor variables (excluding the dummy variables) to its logarithmic value. The OLS estimates revealed that forward citations and foreign filings were positively correlated to price. Both the variables jointly explained 14.79% of the variance in patent pricing. We did not find sufficient evidence to come up with any definite conclusions on the relationship between price and the variables such as age, technology field, generality, backward citations and originality. The Heckman two-stage sample selection model was used to test for selection bias.

Patent Auctions and the Value of Patents

Patent Auctions and the Value of Patents

Different characteristics between auctioned and non-auctioned patents

In recent years, firms have increased their use of internal and external knowledge through intermediaries. Knowledge brokers match buyers and sellers in the technology marketplace as well as connect and combine existing knowledge. We discuss how financial incentives in the technology marketplace can address challenges to open innovation, and how the marketplace could make individual inventors essential contributors. And then, we identify the key determinants of intellectual-property auction bids and different characteristics of auctioned and non-auctioned patents. Relevance, the scope of patents, and other factors suggested in the literature impact patent auctions, as mediated by knowledge brokers.

Selling ideas: the determinants of patent value in an auction environment

Although previous empirical studies have found relationships between patent characteristics and value, none have determined how specific attributes relate to auction value or even the probability of a successful auction sale. Using a Heckman two‐step model, we regress 13 independent variables against unique patent auction data, finding that publicly owned and frequently referenced patents are more valuable, and that other things being equal, there is an optimal time to offer a patent up for auction.

Patent auctions: business and investment strategy in IP commercialization

Legal context. This article concerns patent sale and licensing, asset deals connected with M&A and intangible asset transactions. Key points. Patent owners might find patent auctions a fast way to sell or license their patents. There is a high probability that bidders will purchase or license low- or no- value patents because patent auctions set a very tight time frame for bidders’ due diligence. The nature of the patent right creates a big imbalance in terms of knowledge between owner of the patent and the purchaser or licensee; the latter party can only minimize the risk of purchasing or licensing a “zero” or low value patent by receiving sufficient time to investigate the patents. IP auctions may however be a better and safer means of purchasing or licensing domain names or trade marks, due to their legal nature. Practical significance. Many companies might believe that patent auction is a swift and effective way to find a purchaser or a licensee for their IP rights. Even so, it is imperative that the bidders themselves conduct a proper due diligence of the patents offered, corresponding to their needs and to their assessment of their true financial and business value.

Patent Auctions

Patent Auctions