August 9, 1999

PATENTS

Auctioning Intellectual Property Online

By SABRA CHARTRAND

ficionados of eBay, one of the most popular and successful commercial sites on the Internet, often spend hours scrolling through lists of items offered for sale there, submitting bids for antiques, computer equipment, art, furniture and even cars. But so far, no one has tried to auction any intellectual property -- patents, trademarks or copyrights -- on the vast site.

Like the seller with a closet full of Elvis dolls or a cherry 1957 Chevy convertible, independent inventors own a piece of property that many of them would like to sell outright or license to someone who can turn a patented idea into a tangible product. But most independent inventors flounder when it comes to getting a patent into the hands of the right investor or manufacturer.

Part of the problem is that while independent inventors may have a special idea born of a specific profession, skill or hobby, they frequently lack business, manufacturing or marketing know-how.

They usually take the first step of contacting the biggest manufacturers in their field, hoping that their invention can be licensed and added to the company's product line. That's when they learn their first hard lesson -- manufacturers are often reluctant to embrace ideas from outsiders.

EBay, though, has demonstrated that buyers can find sellers when people from around the country or the world come together electronically, and that has inspired copycat Web sites. Borrowing from the eBay model, a Texas entrepreneur and inveterate inventor has started a similar Internet auction clearinghouse for intellectual property.

The inventor, Brian Donzis, has faced the "what next?" hurdle that stymies many others. Donzis holds 200 patents for innovations ranging from construction equipment to immune-system drugs to tennis-court designs.

One of his biggest successes came in 1977, after he bribed his way into the hospital room of Dan Pastorini, the injured Houston Oilers quarterback, and persuaded him to try a protective vest he'd patented. Donzis sold his vest to the National Football League, and the rest is rags-to-riches history. Since then, he has made the patenting and marketing of inventions his life's work, and passion.

Recognizing that most independent inventors don't have the nerve, opportunity or foresight to barge into a hospital room, Donzis hopes to eliminate the need for those circumstances with a 2-month old Web site called PatentAuction.com.

"My wife is the reason I got into auctioning," said Donzis, 67, who lives in San Antonio. "She got into eBay, and I saw the excitement among people all over the world in affinity groups who were in contact with each other."

He added, "I had spent so much time beating my brains out finding a way to let people know what I had, to make a product or sell a license, that I got interested in the Web as a way to communicate my stuff and then everybody else's stuff all over the world."

PatentAuction's home page bills it as "a comprehensive online auction for buying, selling or licensing intellectual property; patents, patent applications, technical know-how, trade secrets, trademarks, copyrights, music, art, registered domain names and more."

One of the first pages on the site is the Intellectual Property Catalog, which the site ballyhoos as "the California gold rush, the diamond mines of South Africa and the Alaskan oil boom all rolled into one."

So far, it is something less than any of those. Recently, the database offered 90 categories of inventions listing 255 patents for auction.

The descriptions were so brief as to be of little use to an interested buyer: A patent for a wireless color camera, for example, was described only as a "low-cost wireless color camera, utilizing new CMOS camera technology." There was no definition of CMOS technology for the uninitiated, and no further explanation of why this particular camera was innovative enough to win a patent and pique the interest of investors.

A random look at other listings found that they all skimped on detail, and many had spelling or grammatical errors, too.

But Donzis said that a patent for a pharmaceutical product and another for an athletic shoe have already been sold through PatentAuction, and that eight more involving kitchenware, toys, medical and cigarette products were "in the transition stage."

"A lot of inventors are very, very cautious about going online," Donzis said in explaining the inadequate patent descriptions submitted by sellers. "I'm not thrilled with the way it looks now. But most of them said they'd put out a brief description, and if someone signs up and wants to talk to them, they'll provide more. We're trying to convince them to show the patent and provide more details. But we just got started, and I think people will relax as they see things moving."

Each patent listing is followed by a form allowing interested buyers to submit a bid. Bidders must first register with the site; they get a user name and a password. Winning bidders pay PatentAuction a buyer's premium of 15 percent on purchases up to $50,000 and 10 percent on anything higher.

The site cautions that bids of more than $100,000 "require a financial authorization form," but the form included asks only for a name, street and e-mail addresses, phone and Social Security numbers, birth date and a signature.

Sellers are charged a "display package fee" that is automatically credited to the commission they must also pay if a patent sells. The commission can be hefty -- 20 percent for patents sold for $2,000 or less, 15 percent on sales up to $7,500, and 10 percent on sales up to $250,000.

The display fee ranges from $195 to $595, and buys the seller a 180-day posting on the site. If the patent idea does not sell in that time, the posting can be renewed for six months, free of charge. The costlier fees include extra pages on the site for additional descriptions of the patent or graphics, and translation into one or two foreign languages.

The site assures buyers and sellers that "PatentAuction facilitates the tedious aspects of technology transfer," promising that a certified check or credit-card charge will be deposited into "an escrow account managed by a well-known international intellectual-property law firm."

In exchange, Donzis says he does not just post the patent on the Web site. He also e-mails the listing to U.S. embassies around the world through an agreement with the Commerce Department to encourage the export of intellectual property, and to a roster of Web sites and databases that he believes represent interested buyers.

He also offers consulting services for inventors who need help with business plans, financing, industrial design, building prototypes, or marketing and advertising.

"I thought we'd have more sellers than buyers, but we have a lot more buyers, maybe 20-to-1," Donzis said. He adds patents every day, he said, and remains optimistic. At the bottom of each page of PatentAuction, he has added a caveat: "This site and its method of doing business are patent pending."

Patents may be viewed on the Web at www.uspto.gov or may be ordered through the mail, by patent number, for $3 from the Patent and Trademark Office, Washington DC 20231.

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Related Sites
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• eBay

• PatentAuction.com