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Kodak may be sinking, but its patents are still highly coveted
The media has whipped up a storm in response to the imminent ’fall’ of Kodak. Speculation surrounding the outcome of the Chapter 11 bankruptcy proceedings and what will become of Kodak’s most valuable asset - its IP - is rife. What is the brand worth? Are the patents strong? Will Kodak be revived or will it simply fade to grey? Whatever the outcome, this household name is unlikely to go quietly.
The value of Kodak’s IP, specifically its patent portfolio, has been brought into question. Observers have asked why, if the portfolio was so valuable, had the rights, or a significant portion of them, not been sold or licensed more widely than they had been before Chapter 11. Several factors indicate that the rights may in fact be gaining in value even now.
First, Kodak filed patent infringement suits against Apple and HTC over digital imaging technology just before filing voluntarily for Chapter 11 reorganisation. Further suits followed against RIM (the company behind the BlackBerry) and Fujifilm.
These suits are likely to increase the value of the patents involved - settlement is always likely in this type of case, which could take the form of a licence from the parties challenged or perhaps, given Kodak’s position, a sale to either the defendants in the litigation or a third party.
Second, Kodak’s precarious financial position is likely to have put off potential suitors, who may have been concerned about a challenge to any pre-bankruptcy asset sale. By entering into Chapter 11, sales that may take place during those proceedings would be substantially free of such risk. This makes the assets more valuable, assuming that several parties join the bidding.
So, regardless of an objective valuation of the rights in isolation, these two things could increase their value and it is entirely possible that a suitor will appear with a realistic bid for at least some of Kodak’s patents. This portfolio is bound to include a number of patents, possibly hundreds, that read across to a key area of technology found in every smartphone and tablet computer: the digital camera.
As consumers, we are increasingly being led down the path of using one device for multiple functions and it is likely that we will gradually cease to use digital cameras, instead turning to our phones or tablets for this purpose.
This is where Kodak’s portfolio will be interesting. Although its patent filings appear to have been falling over the past 10 years or so, it is still strong in the field of image and data processing. The smartphone/tablet area is already chock-full of patent disputes and the digital imaging area is just another battleground.
So, what are we likely to see? Kodak insists that it is using Chapter 11 to monetise its non-core IP and allow it to revive itself so it can emerge strong and independent. That may be so - the proceedings could allow the litigation to run its course, at least to a licensing settlement, with revenue to be derived in that way.
But other scenarios are certainly possible. One or more of those already sued by Kodak under its digital imaging technology - or one or more of its competitors - are likely to be interested in these rights for the reasons already given here. This affair is a long way from over.