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Auction offers companies a place to surrender unwanted patents

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Ocean Tomo LLC, a Chicago-based merchant bank, hosted a live public auction for hundreds of castoff patents, with the goal of establishing a regular market for intellectual property.

The April 5-6 event at San Francisco's Ritz-Carlton Hotel included patents from stain-removal enzymes to automotive-piston assemblies that owners no longer needed or didn't think they could market. The patents were once owned by companies including Ford Motor Co. (NYSE: F), Clorox Co. (NYSE: CLX), Siemens AG (NYSE: SI) and Motorola Inc.(NYSE: MOT). Some are now owned by universities or individual inventors.

The auction catalog valued the patents at $100,000 to more than $5 million. Most of the bidders acted anonymously to avoid tipping off competitors in business or in the auction process, said Ocean Tomo President James Malackowski, 42. He declined to say how much the bank made in fees.

Among patents being offered were ones for brake controls and traction-control systems once owned by Cleveland-based Eaton Corp. (NYSE: ETN), the world's biggest maker of hydraulic equipment.

"They no longer fit into our business focus and product mix," said Eaton spokesman Tony Kozlowski. "We donated them to charity and they can do whatever they want with them."

Eaton donated its patents in return for tax breaks. Some of the patents went to the National Institute for Strategic Technology Acquisition and Commercialization, a nonprofit group based in Manhattan, Kan., that licenses technology and helps local start-ups.

This was the first time that the group, affiliated with Kansas State University, sought to auction any of the 1,100 patents it obtained through donations.

Ocean Tomo created a scorecard for all patents issued since 1982, based on criteria including the type of technology and whether it had been licensed to anyone. Each patent was assigned a score, with 100 as average. Several of the patents being auctioned were rated A-plus, with scores of 125 or higher.

The catalog warned would-be buyers that all patents were sold "as is," and there was no guarantee of their value.

"Basically, it's caveat emptor," said Warren MacRae, 44, a partner in the intellectual property group at the law firm of Bryan Cave LLP in New York. "It's very analogous to buying a car at auction. Sometimes you can get a diamond in the rough; sometimes you get a lemon."

Similar auction events could be held twice a year, Malackowski said.

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