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Inventors look for cash, recognition at patent auction

Patents may have a bad reputation with some segments of the public, but inventors say it's the only way to prevent big companies from owning everything.

SAN FRANCISCO--Mike Voticky is here because of a bad voice mail experience.

Years ago, Voticky was finishing up a trip from Europe when he decided to check his voice mail.

"I had 24 messages," he said. "I was pissed. I had to go through all of them to get to the last one from my wife."

During the plane ride home, he sketched out a patent for prioritizing messages through a database. He got the patent and is auctioning it off at taking place here today. He thought about forming a company around the patent but hasn't had time.

When the average person hears the words "patent auction" they almost invariably think "patent troll." The common perception is that buyers are here to scoop up these patents and then file a raft of lawsuits against innocent, well-meaning corporations.

Not so, says Ocean Tomo CEO Jim Malackowski. The company has held several large live patent auctions starting in 2006 and so far only one--"maybe two"--lawsuits have emerged from patents sold at one of these auctions, he said. In most cases, the buyers incorporate the ideas inside the patent into their own IP portfolios or insulate themselves from possible claims. Still, he conceded that some buyers are "patent enforcement firms," which is the politically correct term for patent trolls. The auctions typically result in $8 million to $15 million in sales.

The bidding in the auctions is open--people hold paddles to bid and an auctioneer sounds out the tally--but everyone remains anonymous. This is one of the few corporate events where people do not have name tags. The buyers in most instances do not want to be identified, said Malackowski. Neither do those who come in second or third place. If they got identified, it might make it easier for the buyer to contact potential licensees.

Although the public seems to take a dim view of patents and the patent system these days, independent inventors say auctions represent an opportunity to finally make some money off their creations. Edward Hyman, for instance, is trying to auction off a patent for a silicon chip where functions are performed in individual computational cells--sort of like how an FPGA (field-programmable gate array) functions. The chip could be used in spacecraft and other rugged environments as a microcontroller. If one of the cells dies out, the task can be picked up by another cell.

The patent was issued in 1997, but Hyman hasn't had a ton of luck licensing it. One company was close to licensing it, but then they underwent a change in management and the deal fell through the cracks. Hyman is also a lone inventor, he added, so he doesn't have a permanent legal or marketing team to help.

Yongyong Xu, meanwhile, wants recognition. He has devised a communication patent that he believes is incorporated, without a proper license, in Ajax and peer-to-peer programming. He doesn't want to form a company around the patent because, he says, he's a technician at heart. (He filed the so-called Ajax patent in 1999, by the way.)

"To do IP is to be lonely. Patents are a way to get recognition," he said. Without patents, he added, "big companies will have everything."