Patent Auction in China: "Yi, Er, San, SOLD?"

In October 2010, a 18th-century Chinese vase found in a London suburb stunned the auction world when it fetched a cool ₤53.1 million, shattering the record price of any single artwork in the world outside of paintings and bronze sculptures.  2010 witnessed another groundbreaking auction of the products of Chinese creative endeavors.  The first major Chinese patent auction took place in Beijing on December 12, 2010 in the hall of China Technology Exchange (CTEX).  Now one year later, the second CTEX patent auction took place live last week on October 27, 2011, with a later online bidding event scheduled for November 6 to 16, 2011.

The first auction combined the facilities of China Technology Exchange, the patent portfolio of the Institute of Computer Technology of the Chinese Academy of Sciences, the auction platform of Beijing Guoxin Xingye Auction Co., Ltd., and the legal assistance of Unitalen Attorneys at Law.  By the end of the auction, 28 of the 90 patents were sold for a total of about $400,000 (2.568 million RMB).  The most valuable patent fetched 1.2 million RMB, making up half of the final sale.  The 90 patents covered various fields of digital technology, including wireless communication, networking, information security, Internet of Things, and audio and video processing.  28 were offered among 8 technology packages with reservation, 38 were offered with reservation, and 24 patents were offered without reservation.  This first auction was a good pilot attempt and sets the stage for the second auction, which promises to put on the auction block 307 patents in the digital technology field.

It will be interesting to see how the second auction will pan out in the next few weeks (after both rounds of bidding close).  The recently concluded live round fetched 1.12 million RMB.  Those who follow patent auctions in the US, which began with Ocean Tomo's effort in 2006, know that they represent a challenging business model for monetizing patents.  Because the supply and demand for a particular technology are specific to business needs, those who specialize in technology transfer tend to deal directly with potential licensors/licensees and eschew public auctions.  It will be interesting to see if patent auctions are more viable in China.  Patrick Anderson at Gametime IP notes that the CTEX is now “the only game in town when it comes to large-scale, public patent auctions” anywhere in the world. 

An even better reason to watch this auction is the insight it can provide into the state of the Chinese patent system and innovation.  Much has been said about the rapid growth of Chinese patents, usually accompanied by a quality versus quantity debate.  A study of who is buying and selling these patents, and for what reason, should provide some hard-to-come-by data points to this debate.  For example, that most of the patents sold during the first auctions were from the non-reserved group suggests that there is yet a wide valuation gulf between the seller and buyer.  It may also be possible that patents are purchased to obtain government rewards or investor expectations instead of technical needs.  On the other hand, the price discovery function of an auction may reveal real treasures and reappraise our view of Chinese creations, be it ceramics or cell phone technology.