Kodak Saga Reveals Many Subsets of Stories

Reading the Wall Street Journal’s (@wsj) article on Kodak’s disappointing patent situation by Dana Mattioli (@DanaMattioli) and (@Mike_Spector), I could not help but experience a myriad of thoughts on this once titan’s struggling saga to maintain some relevance in the 21st century.

Foremost, I believe Kodak represents a paradigmatic example of a technology company (or organization) becoming too entrenched in its own culture and status quo.  As I mentioned in a presentation on P2P and BitTorrent copyright litigation this past week before members of the Kane County Bar Association at its Intellectual Property Seminar, Kodak follows the path of the Recording Industry Association of America and its members in failing to identify a dramatic shift in technology and adapt to the changes produced therefrom.  However much the RIAA defends its suit of individual file-sharers (with which I strongly disagree) and cites the existing venues for legal downloading of copyrighted works (with which I do agree), the RIAA and its members failed to recognize the shift in consumer consumption of music and has suffered because of this failure.  Rather than recognize the opportunity to develop an iTunes-esque platform catering to developing shifts in technology and consumerism, it adopted a defensive legal strategy that eventually led to suing its customers and demanding from them $3,000+ settlements.

With technology changing exponentially from day to day, I imagine that we will continue to see once industry titans fail because their older technology becomes irrelevant.  That being said, the value – at whatever price – of Kodak’s patents suggest its technology has some relevance (the article suggests some believe above $2 billion).  Indeed, the patents purportedly cover technology for previewing digital photographs on cameras and online.  So, the failure must emerge from a combination of entrenchment, which leads to a culture fostering lack of ingenuity, and a disconnect between technology and implementing products.  The solution may be found in a Leapfrog strategy from Steve Jobs’ management playbook.

Regardless, it remains somewhat sad to see an American titan of technology and innovation relegated to searching for suitors to purchase its patent portfolio.

Beyond contemplating the demise of Kodak, the Mattioli and Spector article furthered my continued fascination with the patent process.  (Now, I do practice intellectual property.  However, I do not do patents.  Though intrigued by the process, I am comfortable focusing my IP practice on copyright and trademark prosecution, trade secrets, and related litigation.)  The value of patent portfolios, the purchase of the portfolios, and the use of the portfolios to initiate litigation for purposes of securing licensing fees simply intrigues me.  It clearly becomes essential – it seems – for companies to acquire patents not to control the market in technology but rather to facilitate a revenue stream.  In any case, the patent wars will continue.  The litigation will continue.  We will see collaborators working together on one front and sue each another on another front.  Intriguing.

For example, the established process for patent auctions and sales – described quite well by Mattioli and Spector for purposes of the article – including “stalking horses,” “breakup fees,” and the related strategies should interest and intrigue any observer of the patent wars.  More importantly, any participant in emerging technologies must have some understanding and appreciation – obviously – for the post-prosecution patent stratagem.

Finally, the loss by Kodak of a patent claim against Apple and RIM for technology use in image previews intrigues.  In fact, more interesting is the fact – reported by Mattioli and Spector – that Kodak had won “suits or secured settlements 32 times when it brought claims, mainly against smartphone makers, involving digital imaging.”  Thus, the technology arguably existed in technology devices used by millions of individuals.  This suggests, to me, that s strategy placing to much reliance on patent wars and not technological foresight will relegate a company to falling behind.  Falling behind so much that it finds itself looking for a “stalking horse” to prop up the value of the very patents and technologies litigated (and over which it fought) for the purpose of securing emergence from bankruptcy.

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