Sean Lahman

Patents columnist

The article takes a critical look at how Kodak sold part of its intellectual property portfolio.

Without the sale, author says, "Kodak very likely would have been split up or simply shut down."

Article: "Kodak's fire sale shifted decades of intellectual capital, at pennies on the dollar."

Because I cover technology, I come in contact with a lot of people who are smarter than I am. Physicists and chemistry Ph.Ds and electrical engineers, all very passionate about their work and patient enough to explain their innovations in a way that even I can understand.

Many of those folks are former Eastman Kodak Co. researchers, and they lit up my inbox last weekend, alerting me to an article in Spectrum, the journal of the Institute of Electrical and Electronics Engineers and arguably the world's leading technology publication.

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The article, called "The Lowballing of Kodak's Patent Portfolio," takes a very critical look at how the former photo giant converted a sizable chunk of its intellectual property portfolio into the cash it needed to survive bankruptcy. It also offers new details that make the disappointing deal look even worse.

Mark Harris, a science journalism fellow at MIT, describes how the process unfolded. Kodak hired an outside firm to calculate how much revenue the patents could generate in licensing fees, and they came up with a figure of $3 billion between 2012 and 2020. That's value, for sure, but a company in bankruptcy couldn't wait that long. Kodak needed a quick infusion of cash, and a sales price in the ballpark of $2 billion seemed reasonable.

They hoped a bidding war would ensue, with the world's biggest technology companies likely to get involved: Apple, Google, Amazon, and Microsoft and others. But the early offers were low, and rather than competing with each other, the bidders joined together to form a consortium, offering a "take-it-or-leave-it" bid that Kodak had no choice but to take.

"If they didn't take this offer, there was simply no one else out there to buy them," Harris writes, "and Kodak very likely would have been split up or simply shut down."

Kodak announced the deal in February 2013 "for net proceeds of $527 million," which led some to conclude that this figure represented the sale price. But Harris reports that the 2,300 patents sold for just $94 million, plus a licensing deal on remaining patents that netted $433 million.

"Kodak's fire sale shifted decades of intellectual capital, at pennies on the dollar," Harris concludes.

Terry Taber, Kodak's chief technical officer, thinks the doom and gloom of Harris' article is unwarranted. "We continue to maintain a vast patent portfolio aligned with our current businesses," he said, "and we continue to innovate by investing significantly in cutting edge research and development tied to our businesses."

And he's right. The sale of the digital imaging patents, regardless of the price they fetched, was part of an intentional strategy to shift away from those businesses. The remaining portfolio includes more than 7,000 patents in the area of graphic packaging and functional printing, areas where the new Kodak is focusing. More new patents are already in the pipeline.

For the former Kodakers I hear from, the patent sale and the bankruptcy don't just mark the end of a golden era. They say it feels like a disregard for their years of work. There is a sadness at the realization the fruits of their work won't make it into a Kodak product.

Some of these technologies may live on and find new life with another company, but many former Kodak researchers fear that their inventions may never see the light of day as a result of the sale.

Steve Sasson built the first digital camera prototype in 1975, and it sat on a shelf for 15 years before Kodak brought a commercial version to market. Who knows what inventions may be languishing now?

Lahman's patents column appears on Sundays. Follow him on Twitter @SeanLahman, or reach him at (585) 258-2369.