The “First Patent Auction by the Institute of Computing Technology of Chinese Academy of Sciences” was the first public exhibition of a large number of patents by domestic professional research institutions, and also the first pioneering exploration for marketing scientific and technological achievements by auction. As one of the organizers and sponsors of the auction, China Technology Exchange (CTEX) has brilliantly accomplished the tasks entrusted by the principal and played an irreplaceable role.

The Fourth Party Platform

At the signing ceremony of sold items after the patent auction, Xiong Yan, board chairman of CTEX said, “Shortly after CTEX was established, top Beijing Party leaders, during their research into CTEX’s work, called for vigorous creation of a technology transaction service mode and bold exploration of auction patterns for facilitating technology transaction. This poses a major challege to us.”

“Seen from the results of the auction, the Beijing leaders have keen eyes. At this auction, 28 patented technology items, 40% of the total, were sold at a turnover of approximately 2.57 million Yuan, the largest of its kind. As the first marketized auction, in China, of patented technology in large quantities for state-funded research institutions, it is a complete success.” said Xiong Yan. It is generally agreed within the industry that the patent auction has erected a new standardized transfer platform for activating the inventory of intangible assets from research institutes, universities and other state-owned scientific research institutions, and thus it is a positive, meaningful innovation.

President of CTEX Guo Shugui held the view that patent auctioning has been a mature trading pattern for technology trade in the United States and other developed countries, while it has not been effectively utilized in China. This is mainly because, unlike the traditional auction of physical objects and assets, patent auction is more complex and more demanding on capacities of auction organizers. Talking about the role CTEX played in the patent auction, Xiong Yan said CTEX positioned itself as the “fourth party platform”. According to the understanding of Xiong Yan, an exchange is a high-end market form, and its core feature is to act as a neutral fourth party. It can not be a buyer, a seller or an intermediary. Otherwise, it is a player and a referee at the same time. The first requirement for a neutral fourth party is that it can not play in the game, and can not have direct associations with the trading parties. For example, a gambling house cannot play cards; if it does that, players would have difficulty in playing the game.

Dual Innovative Mechanisms

The success of the patent auction was attributed to many factors; the most important one was the “integrated intermediary services” provided by CTEX, which, as Guo Shugui put, “called together the best intermediaries to provide the best intermediary services; integrated the best channels and resources to find the most suitable bidders.” “Through organizing and hosting the patent auction, we set up upon exploration a set of successful mechanisms for competitive bidding in technology transfer. We called them ‘dual innovative mechanisms’, namely, ‘innovative organizational mechanism’ and ‘excellent working mechanism’.” Guo Shugui said, “to be specific, we aimed to build a competitive auction platform for patent transaction, explore new ways for intangible asset transfer, integrate the best resources in technology services, and develop a cooperation mechanism for synergy in innovation.”

According to Guo Shugui, during the auction, CTEX, by fully utilizing its advantages of integrating the resources as the “fourth party platform”, and breaking the original “take care of one’s own business” mode among modern service agencies, set up a joint working group of technology transfer intermediaries, IP legal service providers and professional auction houses (see Chart 1 ). The auction house was responsible for the auction and related procedures; IP ser vice intermediaries for verifying, analyzing and processing the legal status of patents and relevant information; CTEX for standardized transactions, promotions and financial settlement. The integrated open platform, in the new form of “resource sharing, mutual cooperation, joint development and collaborative management”, was aimed to create an innovative and collaborative mechanism in technology services.

Meanwhile, in order to ensure high efficiency and market orientation in the auction, CETX took a bold attempt to establish a joint working mechanism of “one axis, two steps and three systems” (see Chart 2). One axis refers to the work schedule with time limits for every step; two steps are the step of target bidders solicitation and the step of in-depth value analysis of patents; three systems are the resources integration system, the information collection and feed-back system, and the standardized bidders solicitation system. This mechanism is designed to use all sides’ advantageous resources under a comprehensive arrangement. The win-win mechanism was an important guarantee for the success of the auction, and was well received in practice by all parties involved. The auction gave a full play to the supporting and facilitating roles of modern service organizations in technical innovation, research results transfer and IP exploitation in the field science and technology. It was a new, market-oriented circulation mode for intangible assets, and a new channel for scientific and technological achievements to serve enterprises in their innovation. A “win-win mode” was thus established for enterprises to reduce development costs and shorten development cycles, and for research institutes to rapidly transfer scientific achievements.

Lengthy Four Months

“I was not truly at ease until the auctioneer banged the gavel.” Talking about the auction process, Ms Gu Yanchen still felt excited. “I felt the past four months were as long as one year.” he added. As the business manager of equity incentives consultation service center of CTEX, Gu Yanchen took part in the whole process of the patent auction. She told the reporter that they started their preparation after CTEX received ICT's authorization in July, 2010. The first step they took was to set up a joint working group. “For all the services of indexing, ownership clarification, assessment, counseling, auction and account clearing that would be involved in the whole process of technology transfer, we selected through bidding the best professionals and admitted them as our members.”

“To choose auctioneers, we selected 15 member organizations from our databank and sent them notices on our intention. Two days later we received 13 applications with very detailed specifications. After open evaluation and grading, we had three candidates, from which we finally chose through interviews and negotiations, Guoxin Xingye, the most competent of all.” Gu Yanchen said, “The next we worked on was to find out an IP agency. President Guo Shugui repeatedly emphasized that finding and analyzing patent value was the prerequisite for a solicitation and the foundation of a successful auction. Based on the perception, we made a careful selection in the databank and finally chose Unitalen. Our choices were later proved to be correct.”

Ms Gu said, “After the joint working group was set up, we met every two weeks at the early stage, and then every week or even every day at the last stage. Each staff member made selfless contributions, paying no attention to personal gains or losses. ”

“The next was pre-solicitation and solicitation. At the pre-solicitation stage, we advertised to targeted enterprises. At the solicitation stage, we held project managers responsible for communication with prospective enterprises. The project managers helped enterprises understand bidding requirements and skills, and go though all required procedures. ”

According to Ms Gu, the promotional activities and solicitations went on simultaneously. CTEX organized and coordinated the promotional activities, made full preparations beforehand and worked out contingency plans. “Warm-up” promotions were made at the pre-solicitation stage, from the perspective of IP and industrial distribution. Periodicals were chosen as they have a relatively large number of readers and the advertisement period can be extended with their circulation, though they are not so timely as other media. During the solicitation period, newspapers, radio and television stations were chosen for systematic coverage. According to preliminary statistics of CTEX, a total of 138 news stories covered this event and yielded good publicity effects

On October 26, 2010, the organizer and sponsors held in Beijing a press conference, with 50 media present, to publicize the patent auction and attract the attention of potential buyers. After the conference, 50 media reported the auction and many others reprinted the reports, drawing extensive public attention.

From November to December 2010, the organizer and sponsors held patent presentations in Beijing, Shanghai and Shenzhen, to answer the technical, legal, procedural questions of perspective enterprises.

The first patent presentation was held on November 23 in Beijing. At the meeting, ICT introduced each patent to the audience; Unitalen issued its due diligence reports on the legal status of each patent; Guoxin Xingye briefed the enterprises on the auction rules and procedures.

“In order for technological achievements from Beijing-based research institutes to radiate outward into enterprises across China, the organizer chose the Yangtze River Delta and Pearl River Delta for presentations on the technical specifications and bidding formalities of nearly 100 key patents that comply with the development trend of local enterprises.” Gu Yanchen said. From December 1 to 3, the presentation team made a non-stop travel to Beijing, Shanghai and Shenzhen.

On December 1, the paten working group and Shanghai Technology Exchange jointly held a presentation for projects in the Yangtze River Delta region. Considering the specific features of the local enterprises, the presenters explained in detail the technical application orientation of the intelligent information, wireless communications, Internet of things and high-performance computing technologies. Representatives from the organizer and sponsors answered the over 30 participating enterprises’ questions as to patent ownership and follow-up technical support and implementation.

The next day, the working group traveled to Shenzhen for the third patent presentation for the Pearl River Delta region. The presentation was jointly held for high-tech enterprises with the National Patent Technology Exhibition and Trade Center (Shenzhen and Dongguan) at the Nanshan District Science Park. The presentation gave detailed presentations on the technical applications of intelligent information, network security, wireless communication and Internet of things in line with characteristics of Pearl River Delta-based enterprises. More than 20 IP heads and patent engineers from domestic large and medium-sized high-tech enterprises attended. The participants felt that the patent auction was a milestone experiment, and would open up a new channel of patent transfer to enterprises that need outstanding patented achievements from research institutes.

“We dare say that the entire auction process was truly market-oriented, and there was no invisible hand to interfere during the period. No prior arrangement was made beyond the procedures, and all bidders were really using money to purchase what they wanted. We’d rather see the auction fail than accept any fraud.” Li Zhonghua, an assistant to CTEX president, told China IP , “This auction got strong support from governments at all levels and attracted attention from domestic and foreign enterprises. It was also acclaimed by all the industries involved. Some in the auction industry commented that we have done something that they wished, but hesitated, to do.”

(Translated by Wang Hongjun)