Another Chicago futures innovation
Ocean Tomo, the Chicago-based bank, has quietly held the world's largest live intellectual-property auction of patents belonging to companies ranging from BellSouth to 3Com to Freescale Semiconductor.
An innovation in trading in a city that hosts the most innovative exchanges in the world, including the Chicago Board of Trade, the Chicago Mercantile Exchange and the Chicago Board Options Exchange, Ocean Tomo's successful auction has earned it a 2006 Chicago Innovation Award.
Ocean Tomo's concept -- that intellectual property can be assessed a value -- got its start in 1988 when James E. Malackowski and four partners founded IPC Group, Inc. (now known as InteCap, part of CRA International).
Malackowski's belief that transactions could be appraised, and intellectual property given a value was groundbreaking when he started the practice. Today, it is commonplace.
The complicated origins of Ocean Tomo's name reflect the smart thinking of its openly boastful executives. Malackowski, a former Formula Car racer, has gained a reputation as a foremost expert in intellectual property.
"Ocean" conveys a global ideal, and it also reflects the legal acronym for the adverse possession of property: Open, continuous, exclusive, adverse and notorious, a concept relevant to many forms of intellectual capital.
"Tomo" is Japanese for "friendly" and "intelligent," and reflects the importance of the Japanese market to the company's business. Malackowski noticed that clients wanted more than just an assessment of their intellectual property. They needed capital.
"I believed companies could be worth investing in, based primarily on their patent," he said, playing the contrarian to the conventional idea that a management team and business model were most important. Malackowski honed his theory by reading about merchant banks in the 1800s. The banks started as experts in a particular industry, such as petroleum or agriculture, before branching into finance ventures in those industries.
"I decided we could take those lessons, and apply them to intellectual property," he said.
Ocean Tomo's latest breakthrough is holding auctions for the intellectual property the company appraises. On April 6, Ocean Tomo held its first auction at the Ritz Carlton in San Francisco, and filled the room with bidders.
"It's the first time there's even been a large public forum" for such an auction, Malackowski said. The auction sold 31 lots of patents for $8.45 million, with nearly 52 percent of the sellers finding buyers. The auction is set up much like a Christie's or Sotheby's auction, with minimum prices below which sellers are unwilling to sell. Potential buyers can research a patent's quality, validity and other disclosures online at www.OceanTomoAuctions.com
Ocean Tomo's next step is to auction trademarks, copyrights and domain names, in addition to patents. The auction will take place Thursday in New York City.
The company, with 75 employees, $12 million in revenue last year and $20 million in expected 2006 revenue, is staying true to its roots in Chicago. After this week's auction in New York, its April and October auctions will take place here.
Further, Ocean Tomo has formed a non-profit to work with the Illinois Department of Commerce and Economic Opportunity to lay the foundation for an intellectual-property-based exchange. To support the effort, Ocean Tomo has started plans for an intellectual property zone. Malackowski envisions a location, analogous to the Merchandise Mart, where companies could house their intellectual property teams to make it easier for them to sell, license and invest intellectual property assets.