Commerce One Patents Auctioned Off

In a controversial auction, 39 Web services patents developed by Commerce One went to mysterious high bidder JGR Acquisition for $15.5 million.

In a move that sparked some controversy, Commerce One Inc. held a fire sale in the U.S. Bankruptcy Court for the Northern District of California, auctioning off not only the company, but the companys intellectual assets.

The sale of 39 Web services patents developed by Commerce One went to mysterious high bidder JGR Acquisition Inc. for $15.5 million, at the San Francisco auction held Monday.

Institutional investment firm ComVest Investment Partners acquired Commerce Ones remaining assets for $4.1 million. The cash from both sales went to pay off some of the debt Commerce One owed to ComVest and other investors, according to Securities and Exchange Commission filings.

The patents, which amounted to seven actual patents and 32 patent applications, include technology that broadly describes the framework for electronic communication and connectivity between a company and its partners, customers and trading partners using XML—better known as Web services.

The fear of some major companies using Web services is that a new owner could use the patents for financial gain, rather than technological advances.

"These patents, in the wrong hands would be used to shake down any companies that operate in Web services and use standards," said Jason Schultz, patent attorney with the Electronic Frontier Organization, a technology activist company.

The thought is that an aggressive owner of the Internet-based patents could go "door-to-door" with infringement lawsuits, according to Schultz.

Last month Schultz worked with IT consortium CommerceNet on a plan to acquire the patents. Craig Smith, CommerceNets chief operating officer, led a conference call with software giants Oracle Corp., Google Inc., Sun Microsystems Inc. and about a dozen other IT companies to discuss the possibility of contributing to a fund that would purchase the patents and essentially retire them. The idea, however, never got off the ground due to a lack of contributions—and time—according to Smith, in Mountain View, Calif.

Rather, the highly secretive JGR acquired the patents Monday. John Amster, managing director of the Mergers & Acquisitions Advisory group at ICMB Ocean Tomo LLC, which handled the sale of the patents, declined to comment on JGRs backers. Little information is available from court documents to confirm who is behind the company, or provide a clue as to what they might do with the technology rights.

The patents, based on XML document flow technology acquired from VEO Inc. in 1997, held some promise for Commerce One.

A high-flying e-business applications developer in the late 1990s with heavy backing from software giant SAP AG—the German software company owned 20 percent of Commerce One—the company faltered around the turn of the millennium. After several missteps, it began to focus its efforts on XML and the VEO technology, developing a new platform that focused on business process management, transaction management and B2B integration. The idea was for Commerce One to provide an open enterprise hub that customers could utilize to connect and adapt applications, using Web services to support changing business processes.

It was a move that then Chairman and CEO Mark Hoffman hoped would pull the company out of its doldrums. With fierce competition from industry giants like Microsoft Corp. (and ironically SAP itself), Commerce Ones efforts failed.

As it stands now, JGR will enter into a patent license agreement with ComVest, according to the SEC documents. The company beat out seven other bidders for the patents, including two that are connected to Intellectual Ventures, a company run by former Microsoft executive Nathan Myhrvold—and founded specifically to invest in innovation. The runner-up patent bid, at $14.9 million, came from Brissac Electronics Holdings, according to Commerce Ones attorney, Craig Prim, of Murray & Murray, in Cupertino, Calif. Myhrvold is also employed by Brissac.

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