Compliance Toolkit

Mystery surrounds Web patents acquisition

Alorie Gilbert CNET News.com

Published: 07 Dec 2004 11:00 GMT

A mysterious bidder paid $15.5m on Monday in a bankruptcy court auction of dozens of Internet-related patents -- and then rushed out of the courtroom.

On the United States Bankruptcy Court auction block were 39 patents owned by Commerce One, a bankrupt software company in Santa Clara, California, that's in the process of shutting down and liquidating its assets.

The patents cover a set of key technical protocols known as Web services, a popular method for exchanging business documents over the Internet. The protocols are in wide use today; Microsoft, IBM and other software companies both large and small have incorporated them into their programs.

The winning bidder was a company called JGR Acquisitions. An attorney representing JGR kept mum about his client, dodging reporters' questions as he rushed out of the court room at the close of the auction.

Attorneys for Commerce One and the bankers who solicited bids for the auction also declined to discuss JGR. A document the company filed with the court was scarce on information as well, so JGR's business, its owners, location and its plans for the newly acquired patents all remain mysteries.

Although the patents may be too broad to enforce or may be otherwise invalidated if challenged, the auction has drawn the attention of some big names in Silicon Valley, including Google, Oracle and Sun. Representatives for those and about a dozen other firms convened a meeting last month to discuss the auction and the danger of infringement suits from whomever won it.

The companies also considered a proposal to pool funds in order to jointly bid on the patents and retire them if they won. But the effort apparently never got off the ground. CommerceNet, the non-profit group that floated the proposal and offered to place the joint bid, did not participate in Monday's auction.

Some fear that the new owner of the patents will seek royalties for technology that Commerce One had invited the industry to use freely. If JGR is looking for a lucrative profit on the deal, it may seek upward of $100m in royalties or settlements, said intellectual property attorney Lee Van Pelt of Van Pelt & Yi. Companies with deep pockets, such as Microsoft and IBM, are likely enforcement targets, he said.

Commerce One's bankruptcy lawyers appeared pleased with the sale. "I think everything came up roses for Commerce One today," said attorney Craig Prim of the law firm Murray & Murray, which represents the company.

Van Pelt, who did not represent any of the bidders, had predicted the patents would sell for at least $10m.

JGR beat out seven other bidders, including two companies connected to Nathan Myhrvold, a former Microsoft executive who now runs Intellectual Ventures, a company that collects patents. One of those companies was ThinkFire Services USA, an intellectual property consulting firm in Clinton, New Jersey. The firm, where Myhrvold serves as chairman and co-founder, bid as high as $14.3m. Brissac, which also employs Myrhvold, bid as high as $14.9m.

In another unusual twist, the identities of two bidders who placed bids through their attorneys remained undisclosed. Judge Dennis Montali, who is hearing the bankruptcy case, said he'd never encountered that condition before and allowed it despite an objection from one of the other bidders.

The other three bidders included LG Electronics, Conductor Resources and Commerce One Acquisition. The minimum bid required to participate in the auction was $1m.