Here is a link to a page on the COPA website that should answer all (or most) of your questions:

https://www.copaair.com/sites/cc/en/...-upgrades.aspx

It appears that mileage upgrades take precedence over the bids. When you enter the auction, you are placing a bid and are not charged at that time. At T-23, COPA determines how many seats will be released to the program after Mileage Plus members eligible for an upgrade and those buying with miles have been accommodated.

I would have thought that there would be enough Premiere Plus members on a JFK-PTY flight to fill the front cabin, though. Maybe that's not true in this case, or they send the email anyway just in case a seat goes empty. You need to keep in mind that even if you are the highest bidder, there is no guarantee that a seat will be available at T-23.

If you are a winning bidder, you will be notified and charged at T-22. If you are not, you will be notified at T-12, not charged and fly on your original reservation.

That's what they say, anyway. I am a little skeptical that they won't be tempted to bump some people who are otherwise entitled to a free upgrade, but we will see. They have been doing this for a while now (bid emails were reported in the United Forum back in March), and I have not missed a free upgrade on about 16 flights since then, so it does seem to be working as promised for the moment.