

Bankrupt Kodak sells off patents to investors for $525M - dan1234
http://www.bbc.co.uk/news/technology-20787024

======
macavity23
_IV and RPX are so-called "patent aggregators" which dedicate themselves to
buying and then licensing out patent rights._

should be:

IV and RPX are so-called "patent trolls" which dedicate themselves to buying
patents and then extorting money from genuine innovators while creating zero
value themselves.

~~~
rayiner
The value created by IV and RPX in this situation is of the same character as
the value created by any transactionary middle-man: they create liquidity.
They enable "genuine innovators" to quickly cash out their invention in a
single transaction instead of either litigating themselves, or waiting to sell
the patents piecemeal to someone who will "actually use them." In this case,
Kodak isn't going to continue as an ongoing entity. It's better for Kodak, the
original inventors, to sell the patent to an aggregator than to drag out the
bankruptcy selling the patent portfolio piecemeal to companies that will
"actually use it." In turn, IV and RPX aren't doing anything Kodak, the
original inventors, couldn't already do. They are just taking advantage of
Kodak's need for expediency, hoping to make a profit on the discount Kodak is
willing to take in order to complete the transaction quickly.

Also, the use of the phrase "genuine innovator" is more than a bit editorial.
Who is to say that they aren't just opportunists seeking to take advantage of
the fact that Kodak can no longer practically enforce its rights? Kodak isn't
a software company--the probability that IV and RPX will just be going after
"innocent" third parties that just happened to stumble on the same invention
is lower than it would be in say the software patent context.

~~~
angersock
Their patents are _ideas_ , though--I can't imagine something with much more
liquidity. Better to have simply found some way of assigning the patents to
the public domain or somesuch.

How can you do much better for improving business than releasing the things to
everyone to try and build a business on, instead of having to license or fight
in court?

~~~
rayiner
First, you can't just ignore the fact that the quick sale of the patents helps
Kodak's pay off its creditors, etc. Facilitating that transaction has a
certain value. Second, you can't just look at the situation post-facto. Kodak
spent billions on research over the years, partly in reliance on the fact that
it would book the resulting patents as assets. Simply assigning them to the
public domain upon Kodak's dissolution doesn't protect that reliance.

We can have an argument about whether treating ideas as property creates
value, but that's a separate argument. Once you decide to treat ideas as
property, then as with any other kind of property there is a value created by
entities that facilitate transactions of that property.

~~~
angersock
Those problems are the creditors' problems, and it matters not a hoot in hell
how many billions Kodak spent previously--look where they are now. Better to
make the world a better place than try and help some creditors recoup a
percent of their investment.

EDIT: It doesn't matter to anyone who isn't on the Kodak board or a creditor
that those patents aren't being wrung out for every penny they're worth. Let's
not pretend that to everyone else in the market free access to those ideas
wouldn't be somehow a preferable state of affairs.

~~~
rayiner
None of your points are relevant to the issue at hand, which is that if you
are going to treat patents as property, then entities that don't actually use
that property directly, but exist to facilitate transactions regarding that
property, have a place in the market.

There is a whole debate about whether you should treat patents as property,
but I'm not really interested in getting into that debate in this thread.

~~~
angersock
If you aren't interested in the patents/ideas-as-property debate, my
objections/observations here carry without complain. You haven't explained
how, exactly, my points are incorrect--do you disagree that everyone would be
better off if these patents unencumbered were available?

~~~
rayiner
Entertain the assumption that patents as property is the right way to go. In
that case, no, it is not better if the patents are simply freed up for the
world to use in the case of bankruptcy. Companies count on being able to sell
their patent portfolio if things go south, just like with any other asset. If
the rules were such that the property right disappears as soon as the inventor
stops being able to produce products based on the patents, then the patents
become much more ephemeral property rights, and the incentive to invest in
patents is reduced, because businesses don't like to deal with fragile rights.

I'll use a concrete example. I used to work for a startup where the only thing
we really did was develop technology. We protected our technology with
patents. We had no interest in getting mired in competing with big companies
in producing actual products, because that wasn't a game we could win--whoever
had the best supply chain/cheapest Chinese labor would win that battle. In the
case of that company, if dissolution of the business meant losing the patents
to the public domain instead of being able to sell them off, then we would
have been very hestitant to invest in the technology in the first place. It
would have meant that if we couldn't go forward as a successful business, we
couldn't just sell off our assets and cut our losses. Rather, we would have
done years of research with nothing to show for it. From a business point of
view, there is a lot of value in being able to treat a patent like any other
piece of property, which you can buy, sell, leverage in bankruptcy, etc.

You can't just consider the case where good patents get put into the public
domain. You have to balance that against all the cases where people don't
invest in technology because they consider the resulting patents too fragile.
And I know on HN people develop technology just for the thrill of it (in their
free time no less), but in most of the engineering field technology
development is extremely capital intensive, and reducing the value of patents
by making them ephemeral would discourage R&D investment.

------
psykotic
This is why, as an employee, you shouldn't buy a company's line on defensive
patenting. Heartfelt as it may be, if the company's financials ever go
sufficiently south, none of that will count for anything, least of all in the
event of outright bankruptcy when vultures come to pick apart the corpse. This
argument applies with proportionately greater force to businesses whose
survival odds are slim. Like startups.

~~~
robrenaud
Do you think that twitter's innovators patent agreement fails at addressing
your concerns about defensive patents?

> The Innovators Patent Agreement (IPA) is a new way to do patent assignment
> that keeps control in the hands of engineers and designers. It is a
> commitment from a company to its employees that patents can only be used for
> defensive purposes. The company will not use the patents in offensive
> litigation without the permission of the inventors. This control flows with
> the patents, so if the company sells the patents to others, the assignee can
> only use the patents as the inventor intended.

And the agreement text:

[https://github.com/twitter/innovators-patent-
agreement/blob/...](https://github.com/twitter/innovators-patent-
agreement/blob/master/innovators-patent-agreement.md)

~~~
psykotic
That looks like a great initiative!

My biggest concern is how individual employees are supposed to enforce this
kind of agreement if the patent owner reneges. A random programmer is not
going to have the financial means or a strong enough incentive to pursue
violations.

------
dbrian
Why do patents need to be transferable at all? The whole idea is to give the
inventor time to bring her invention to market. Once the original innovator is
out of the picture, what’s the point to granting a monopoly on the technology?

~~~
rayiner
Because it facilitates division of labor, and competition based on competitive
advantage. A product is more than just one piece of technology, and inventors
should be focused on technology, instead of getting mired up in everything
that is involved in developing a product.

------
colkassad
So what mistakes did they make? It's obvious they are some sort of textbook
case of failing to adjust to change in technology. There was a time when Kodak
was synonymous with photography. Sad.

~~~
potatolicious
> _"It's obvious they are some sort of textbook case of failing to adjust to
> change in technology."_

I don't think that's obvious at all. Kodak I think is more of a story of
distracted noncommittal execution combined with the standard woes of
dramatically changing the primary competency of a large company to something
entirely different.

Contrary to popular belief, Kodak didn't stick its head in the sand while
digital ate the world - they were there right at the beginning.

Kodak literally invented the digital camera in 1975, though obviously it was
wildly impractical at the time. More importantly, they were first to market
with a DSLR all the way back in 1993:
<http://en.wikipedia.org/wiki/Kodak_DCS_100>

Yeah, get a load of that backpack you needed to carry ;)

They continued releasing DSLRs until 2004, when they were obviously hopelessly
outgunned by Canon and Nikon.

Beyond cameras, they were, for a long time, the only people working on digital
sensors at all (besides Canon), and they supplied many of Canon's competitors.
The sensors themselves were no slouches technically either - they were highly
competitive for their time. Perhaps most famously, Kodak supplied the sensors
in the Leica M8 and M9, both of which were known at the time for their
incredible image quality, and optical achievement (i.e. microlensing to reduce
the flange-focal distance). In fact, for a short time Kodak supplied Canon
themselves.

OEMs abandoned Kodak in droves only in the last few years, when their
financial troubles made the prospect of building an entire product around
their sensors questionable. This, obviously, did no favors for Kodak. The rise
of other medium format sensor companies also ate their top end market for
lunch - Phase One and Leaf (now Mamiya-Leaf) being most notable.

So all of this sounds pretty rosy, so why did Kodak die? It's really hard to
say. I suspect a large part of the problem was that becoming the world's
digital imaging sensor vendor would not have financially supported a company
the size of Kodak, even if they had committed to that path, and the company
was loathe to downsize and reorganize the workforce to something that they
would barely recognize.

So they branched into many other lines of business that were, even at the
time, poor bets. They targeted low-margin markets (HP style!) and went
hardcore into digital photo frames and various cheapo consumer knick-knacks
that you might find at Sharper Image. IMO this was a large distraction that
never should have been pursued in the first place. They even tried to copy HP
by going in on the printer-ink business. That failed too.

Their stance in the digital imaging aspect of their business was always a bit
noncommittal. IMO Kodak would have survived if they trimmed their business
down and became _the_ image sensor R&D company of the world. Their work force
was too large and committed to the wrong lines of business all the way to the
end.

Interesting note: Kodak's film business is actually profitable.

~~~
devb
What do you think of their future chances of succeeding with printing will be?
Is film profitable enough for them to stick with it?

~~~
potatolicious
The "sell them a cheapass printer and bilk them on ink" model I don't think
really works for anyone, not even the companies that have a firm foot in the
space like HP. Photo printing in particular I just don't see as a viable mass-
market product anymore

There's no sense keeping a big photo printer in your home, stock it with
(expensive) paper and (even more expensive) ink considering most people don't
print that many pictures.

When they need to, the local Walgreens will have a kiosk that will put the
pricing of maintaining a home printer to shame. The quality will be better
too.

It's a fundamental shift in the way we use photography - people used to go and
get entire rolls of film printed as a matter of course, but nowadays
consumption is almost entirely digital.

> _"Is film profitable enough for them to stick with it?"_

Every impression I've gotten from Kodak is that they're looking to sell the
division. As a film user my fear is whoever buys it will shut it down and keep
the IP. Or worse, buy the brand names and stick them on unrelated merchandise.

------
arbuge
IV? RPX? So Google and Apple are in bed with the patent trolls now.

~~~
prodigal_erik
"Those who beat their swords into plowshares will be forced to plow for those
who don't." All tech companies with deep pockets now find themselves on a
battlefield with very perverse incentives enshrined in law.

------
robomartin
The Innovators Dileamma.

As far as I am concerned, required reading for every entrepreneur, manager and
executive today.

[http://www.amazon.com/The-Innovators-Dilemma-
Revolutionary-B...](http://www.amazon.com/The-Innovators-Dilemma-
Revolutionary-
Business/dp/0062060244/ref=sr_1_1?ie=UTF8&qid=1355939138&sr=8-1&keywords=the+innovators+dilemma)

~~~
mark-r
It's bigger than that.

In the film era, they were collecting a tax on every single picture taken.
What part of the digital imaging process could they have taken over that would
have replaced that entire revenue stream? I'm taking 100x the pictures I took
15 years ago because the incremental cost has all but disappeared. They were
doomed before they even started, and I doubt there's a management decision
that could have prevented it.

