During the “First Patent Auction by the Institute of Computing Technology of Chinese Academy of Sciences”, Beijing Unitalen Attorneys at Law (Unitalen), one of the organizers of the event, played a particularly eye-catching role.

Reasons behind Engagement with Unitalen

As a patent auction is very complicated, an auction organizer needs to have high professional competency. A joint working group is also needed to comprise technology transfer agencies, auction houses, and top IP legal service providers.

China Technology Exchange (CTEX), a technology transfer agency in patent auction, was engaged by the Institute of Computing Technology of Chinese Academy of Sciences (ICT) to seek well-known auction houses and IP legal service providers influential in the technology transfer area in a bid to jointly establish a project team for the patent auction.

Liang Yan, a lawyer and partner of Unitalen, also director of the Unitalen consultation department, told China IP about the detailed process of Unitalen’s participation in the event.

On August 6, 2010, Unitalen, upon invitation by CTEX to discuss possible cooperation in the patent auction, gave a detailed introduction to Unitalen’s experience and strength in the patent marketing, and outlined visions and plans for the patent auction. After several rounds of selection, CTEX decided to hire Unitalen as one of the organizers to provide legal supports for the first patent auction by ICT.

According to Liang Yan, the reason for choosing Unitalen was Unitalen’s relatively trailblazing awareness and unique advantages in patent marketing. Unitalen had years of experience in advising large and medium-sized domestic enterprises, and it learned that the traditional business modes failed to satisfy the high-end IP service needs of enterprises. Unitalen, knowing well customer needs, concluded that IP transfer and application would become one of the important parts in the overall IP services industry, and became the first explorer of patent marketing and technical achievements transfer in the IP intermediary market. From its wide experience in advising Huawei, Lenovo, China Railway Group and other customers for patent marketing and technology transfer, it had become the most experienced IP law firm in patent marketing and technology transfer.

“A patent auction, ultimately, is a process of legitimate rights transfer which is closely connected with IP legal work. Unitalen is the only IP agency that provides services for patent auction.” Liang Yan said, “to be specific, Unitalen has provided the following legal supports in the patent auction: analyzing the value of each patent and writing patent descriptions on the basis of industrial characteristics and technical background; checking the legal status of patents to be auctioned and filtering defective patents; providing IP legal consultations; soliciting bidders and answering their enquiries. After the patent auction, Unitalen was engaged to prepare market value forecast reports for one or more patents, analyze potential demands, assist in patent changes and patent pool maintenance for enterprises, among other value-added services.”

Professional Preparations

According to reports, Unitalen mainly made the following pre-auction preparations:

(1) Prepared a patent checklist and legal verification.

At this stage there were many legal risks. During the four months of the patent auction, there was possible untimely payment of annual fees for the patent rights to be auctioned; patents might be invalid due to nonpayment of the annual fees on the auction day; patent rights might be defective for being licensed or pledged. Unitalen advised ICT on the aforesaid legal risks to ensure minimum legal risks. Unitalen firmly grasped two key points: first, the importance of attorney’s double check of the patent information submitted by rights holders; second, double check of the patent information to reassure flawlessness of the patent rights to be auctioned.

(2) Writing patent descriptions.

Patent descriptions are equivalent to product descriptions and should be expressed in a concise legal language, so that enterprise managers will be able to understand the patent information and appraise the patent value shortly before deciding to participate in the auction. The quality of patent application documents heavily impacts the rights scope. A patent with well written documents has a higher market value and helps find buyers. To this end, participants set a clear division of labor: ICT researchers were to understand the use of technologies and their technical background, Unitalen patent lawyers were to understand industrial characteristics and concerns of enterprises, and Unitalen patent attorneys were to understand the scope of patent rights and writing value.

(3) Pre-solicitation and solicitation.

Participants at this stage were Unitalen with its branch offices and foreign partners, CTEX and its regional cooperative partners, Beijing Guoxin Xingye Auction Co., Ltd. (Guoxin Xingye) and ICT. Because overseas patent portfolios were more appealing to buyers, the key questions raised by the enterprises were mainly focused on:

1. whether an application for a foreign patent or a PCT had been filed?

2. whether the patent had passed the priority date of any foreign patent application?

3. whether an inspection was acceptable?

As the Ministry of Commerce classified technology imports into free exports, restricted exports and prohibited exports, Chinese patent rights holders that plan to transfer their patent rights to foreign enterprises should go to the Ministry of Commerce and Beijing Municipal Commission of Commerce for approval on technology exports. Only approved patents are transferable to foreign enterprises. The organizers also planned to attract bids from foreign enterprises. A patent auction notice is binding in law, so before it is made public, a pre-auction application for examination should be filed with the Beijing Municipal Commission of Commerce for obtaining technology export approval. Unitalen suggested that the pre-auction examination of technology exports should be made in advance. Its lawyers reminded the organizers and sponsor of the legal risks at the pre-solicitation stage, and suggested an application be filed with the commerce commission. Without a pre-auction examination, in the follow-up performance of patent rights transfer formalities, liabilities arising from the breach of contract may ensue as a result of ultimate failure to transfer technology.

(4) Press conferences.

Unitalen actively cooperated with the sponsor and the other organizers, and with their participation, held a press conference in Beijing on October 26, inviting professional media to report the auction in advance.

(5) Patent presentations in three places.

During the patents presentations in Beijing, Shanghai and Shenzhen, Unitalen issued a due diligence reports on the legal status of each patent. After the presentations, Unitalen handed out questionnaires to the organizers’ staff members involved in the solicitation and the patent presentations, who represented the 60 participating enterprises, in a bid to accumulate experience for the next patent auction. During the presentations, enterprises raised many specific questions, such as whether ICT could provide services for the technology transfer; whether the patent to be auctioned had been licensed or pledged; whether there were patents related to standards; whether they could participate by telephone; whether the patent transfer contract was a standard form contract, and whether the contract articles could be revised.

(6) Preparing patent auction documents and patent notices, including contracts for patent transfer and other related documents.

The key point at this stage is that a patent auction, different from a traditional auction, should include in its process a legal statement on IP rights attached to the auction documents, such as reminders of annual fees, patent licenses and pledges, and disclaimers of policy risks, so that bidders would be able to know in advance. Unitalen lawyers drafted the legal statement.

The Auction and Other Follow-up Work

On December 16, 2010, the “First Patent Auction by the Institute of Computing Technology of Chinese Academy of Sciences” was formally opened. According to Zhu Fengchun, a lawyer who participated in the patent auction from the beginning to the end, the main work of Unitalen at that day was to offer bidding enterprises legal consultation on IP, and prepare legal documents for patent winners in the auction. During the process, the emphasis was put on “duplicate checks” advocated by lawyers. The first was the duplicate check on signers’ qualifications for the goal of preventing ineffective signature; the second was on the patent names to ensure those in the patent rights transfer certification and contract were the same as on the patent search website of the State Intellectual Property, for the purpose of avoiding possible future corrections for the patent transfer.

After the patent auction, Unitalen still has a series of follow-up work to do, such as financial accounting of the auction prices, signing of the relevant legal documents related to the patent transfer, performance of formalities in the transfer, in-depth analysis of the purchased patent for the transferee enterprise, consultation and cooperation with ICT in the area of technology transfer. In the meanwhile, active preparations shall also be made for future patent auctions.

The “First Patent Auction by the Institute of Computing Technology of Chinese Academy of Sciences” was successfully concluded. But were there any comments on the results of the auction? Were there any problems revealed in the process that needed to be solved or avoided in the future? Focused on these questions, Liang Yan noted, “After the auction, we carefully went over the whole process and reached our conclusions. 1. It was really a pity that some enterprises prepared inadequate budgets for the auction and thus failed to purchase the desired patents; 2. The current method of technology transfer is far from enough. More ways needed to be discovered to promote technology transfer and patent marketing; 3. The objects of patent auction should be diversified to include more besides computing technology. Patents in the fields of new materials, energy, biology, chemistry and others may also be transferred by auction in the future; 4. Technology transfer intermediaries should offer more services, and the transfer market for technology and patent rights calls for more intermediaries that are capable of providing comprehensive analyses; 5. The technology transferor shall pay attention to the follow-up technical guidance for the transferee. Transferees were very concerned about follow-up guidance after the transfer. Transferors therefore should spend more time on related services; 6. The transferor should pay attention to related patents and consider in advance the quality of patent formulation and related overseas patents, in order to satisfy the transferee’s needs for patents and further market development. Meanwhile, he can also sell his patent at a higher price.”

“Judged from its turnover and the success rate, the first patent auction is a great success. However, we can still do more for future patent auctions.” said Liang Yan.

(Translated by Wang Hongjun)