Patent Brokers and their Headaches

Assume you are a patent broker. You are being approached by a party who is extremely enthusiastic about his patent, it’s the invention that will change the world, where anyone has been waiting for or that multiple parties use (read: infringe). However he tried to sell himself but he either did not get any bid, or thought the bids he did get were too low. So, he engages an IP broker. As any broker works in the world, he only takes the job if he thinks the patent is sellable, that there is a market. The broker will require a small upfront amount to cover the initial administrative costs as well as a percentage when he succeeds to sell. So far so good. Lets assume further that the seller has no funds nor did he do any “homework” to allow the broker to make a documented sales pitch. The honest broker then spells out the options given the small financial capabilities (or willingness) of the seller. One of the options is a closed auction.  The other option is a more elaborated sales enterprise which requires the making of claim charts, technical market and financial analysis and normally adds up quite a bit in terms of costs. So the patent owner goes for the closed auction option. The broker either has developed his own closed auction software, or has bought a license. The potential candidates for the auction must be invited, the reserve price needs to be set, supporting documents need to be checked and uploaded to the closed auction website, where potential bidders can access these details and, if impressed and interested, can bid.

Let’s assume that out of a number of invited parties (nobody knows who the other bidders are) only one bid is being made. The bid is a interesting bid but below the reserve price (the price below which the seller is not willing to sell (he told you). The bid is low, as the bidder calculates that he only need to bid a low amount to stay in the race as most bidding procedures know a second –and sometimes even a third  – stage where the best bidders can do better in the 2nd or 3rd round or do nothing and take the risk that they are being outbidded). So now the patent owner /seller is really disappointed and guess who’s fault this is? The broker, of course. So he goes back to the broker and says, this deal is off, I withdraw my patent as the brokerage is “unsuccessful” . What he does not say but what he really wants is to sell directly to  the one bidder, surpassing the broker and sell the patent behind his back, thus avoiding to pay the broker’s commission. That’s the sorry state of how patent brokerage still works in many places.  Is this wrong? Yes we would say so, by going to a broker after failing to sell by yourself you have to take the risk that eventually you do not get a better bid than you had yourself before you went to the bidder, but now you have to pay the broker as well, so basically end up getting less then before you went to the broker. But that’s all in the game. If not, brokerage is just a further headache in the sorry state of patent sales. Reality or Fiction?

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