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Ocean Tomo has sold its famed but struggling patent auction business to British brokerage ICAP for $10 million, the companies announced Tuesday.

The sale of Ocean Tomo's transaction department, which includes the auction and patent brokerage, comes as revenue has plunged and key transaction leaders have left the company.

"Most of the talent had left at this point and there was a lot of uncertainty about the live auction model," said Ron Laurie, who owns the IP consulting firm Inflexion Point Strategy in Palo Alto. "It was really a distressed-asset sale."

ICAP will pay $5 million in cash and $5 million in restricted stock for Ocean Tomo's best-known line of business. Founded in 2003, the company helped create a market for patents with its lavish and highly publicized auctions.

For a time it prospered. In 2008, Ocean Tomo sold more than $40 million worth of patents at three auctions. From those and other sales, its transactions department brought in between $12 millionand $14 million in revenue, according to sources familiar with the situation, making it the largest revenue stream for the company.

But this year, Andrew Ramer, transaction chief and auction organizer, left with his two top deputies ahead of the March auction held at the San Francisco Ritz Carlton. That event was a bust , with just a handful of patents selling for $2.7 million. At the time, the company blamed the poor economy.

Ocean Tomo CEO James Malackowski acknowledged Tuesday that "maybe it's a smaller deal than we could've done a year ago," but emphasized that "it's a very good day for Ocean Tomo and a very good day for the industry."

The new owner will continue to hold the live patent auctions and has one scheduled for July in Chicago and another forNovember in Paris. Ocean Tomo's vice chairman, Dean Becker, and nine employees will be joining ICAP to run the business.

"Patent brokerage is an exciting new field that will help to provide a marketplace and access to liquidity for an asset that has historically not been served by a vibrant trading market," Michael Spencer, ICAP's Group Chief Executive Officer, saidin a press release.

But while ICAP is bullish on patent auctions, observers say the dot-com-esque rise and fall of the Ocean Tomo auction business — selling for less than its 2008 revenue — is a sign, in part, of a business model that may have run its course.

"In this market it's all about patent quality, and they had specifically targeted the low end of the value chain — the sort of unproven patents," said Laurie.

"There are two problems: One is that that market is gone because no one has money to speculate," Laurie said. "The other problem is that the platform was inherently inefficient for high-value transactions because of the limited opportunity for diligence."

Ocean Tomo will keep its lesser-known lines of business, like its expert-witness service. Aside from management departures, the company had also laid off staff over the last year.

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