The patents that Kodak is auctioning off to pay its creditors—and those it is holding onto—provide some clue as to what kind of company might emerge from bankruptcy.
Kodak is a shell of the industrial icon that spent decades leading the analog film and camera business. Despite inventing the first digital camera in 1975, Kodak was late to enter that market and, even then, it didn’t consider it a crucial business until the mid-2000s.
The company is now auctioning off 1,100 patents, mainly related to digital image capture, manipulation, and sharing, or about 10 percent of its total portfolio, as it struggles to emerge from bankruptcy.
But people familiar with Kodak’s technology portfolio say it would be a mistake to discount the 132-year-old business completely. Long an R&D powerhouse, Kodak holds a trove of intellectual property from which an innovative business could still emerge. “They’ve built a very robust, valuable patent portfolio, but they are keeping the best patents for themselves,” says Alexander Poltorak, CEO of the intellectual property firm General Patent Corp.
This week, Kodak also released a business plan that partly bets its future on “creating a new company” based specifically on materials science, digital imaging, and deposition technologies, as well as on “aggressively monetizing” its remaining intellectual property portfolio to bring in up to $400 million a year.
Two emerging markets that Kodak expects to be a crucial growth area is printed electronics and functional printing, or producing materials for commercial applications like packaging and biotech.
David Martin, head of the innovation assets firm M-CAM, says Kodak has strong intellectual property in the area of printed circuit boards, including methods of dispersing heat—a property that becomes more important as electronics become smaller. And its chemistry and materials research has led it to advances in inks that conduct electricity, which promise to be useful in a variety of electronic products and in thin-film coatings and membranes used for solar cells and batteries. Kodak also has developed color matching technologies that Martin calls “invaluable” because it can precisely match colors displayed online to the colors that are used on a product.
According to Martin, Kodak has not fully harnessed the value of many of these technologies yet, instead betting its future on chasing a business that it was always way behind in—digital imaging.
Entrepreneurs in Kodak’s hometown of Rochester, New York, are also exploring the company’s cobwebbed basements in hopes of starting new companies based on its innovations.
High Tech Rochester, a local economic development organization, has identified 12 families of technologies, largely in materials and optics, that Kodak never developed and that could prove valuable. These technologies represent market opportunities that may have been too small or tangential for Kodak, but could prove sizeable for a startup. The company hopes to work with Kodak to license patents to create new companies in a region that has suffered the most as Kodak’s workforce shrunk from 64,000 to 17,000 in the last decade.
The group has already used this strategy to help launch one startup, a company called Lumetrics, which licensed Kodak technology to develop more precise ways to measure the thickness of ultra-thin materials. “In many cases, there are prototypes already built, and we know the technology is sound,” says High Tech Rochester president James Sennall. However, his talks with Kodak executives have slowed since the company entered bankruptcy proceedings.
Kodak was hoping the patent auction this week would take in more than $2 billion dollars, helping it to become solvent again. The Wall Street Journal reported that the early bids, from consortiums including Google and its device makers on one side and Apple and Microsoft on the other, were far lower than hoped and, as a result, on Monday, the auction’s deadline was extended. One problem is that many of the patents, says Martin, are already heavily licensed, including by at least two of the bidders, Samsung and HTC, and many of the technologies are already ubiquitous features in mobile devices today. So they are of dubious value except as extra ammunition in the escalating wars between mobile device makers.
“The question they [the bidding companies] are asking is: in the hands of my competitor, will they sue me?” says Martin. “They are trying to buy confirmation that their shipments won’t be blocked.”