IEEE Spectrum February, 2014 - 31

In January 2012, Kodak filed for

Chapter 11 bankruptcy protection, having succumbed to a digital revolution in
photography that it had helped to start.
But the company's managers still hoped to
escape from bankruptcy and have another
shot at greatness by selling part of a portfolio of patents
that experts valued as high as US $4.5 billion.
Eleven months later, those roughly 1700 patents (together
with 655 patent applications) sold for just $94 million-
less than the licensing fees Kodak had collected in its worstever year in recent history. What's more, the company
licensed its remaining 20 000 patents to a dozen leading technology companies for only $433 million, severely
restricting future earnings from them.
Without its anticipated multibillion-dollar payoff, the
company was forced to hand over its iconic photographic
film and paper businesses, as well as potentially lucrative
new technologies like digital printing kiosks, to a spin-off
owned by its U.K. pension fund. In September 2013, Kodak
finally limped out of bankruptcy, a shadow of its former
self. The following month, Standard & Poor's Ratings
Services assigned the slimmed-down Kodak a B- for corporate credit-a junk-grade rating.
So what exactly happened? Did the consortium of firms
that bought the Kodak patents simply make a killer deal?
Or were the patents overvalued to start with? In either case,
how could such seemingly precious assets lose 95 percent
of their value in under a year?

For virtually all of the 20th century, Eastman Kodak

Co. dominated photography. It produced the inexpensive
Brownie camera, made 9 out of 10 rolls of film bought in
America, and gave the world billions of colorful "Kodak
moments." In 1969, Kodak built a stereoscopic camera for
the Apollo 11 astronauts, and six years later Kodak engineer
Steven Sasson invented the world's first digital camera.
But there was something wrong with this picture. Kodak
executives saw digital as a threat to its film business. And
its chief intellectual property officer, Timothy Lynch, says,
"[we] basically told Sasson to take that box and go away;
we don't ever want to see you again." A complacent Kodak
also underestimated competition from Fuji's color films. In
the 2000s, digital cameras flooded in from Asia, and first
camera phones and then smartphones decimated Kodak's

Kodak

The shocking paTenT deal
ThaT nearly sank
a Technology gianT
By Mark Harris
SPectrUm.ieee.orG

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north american

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Table of Contents for the Digital Edition of IEEE Spectrum February, 2014

IEEE Spectrum February, 2014 - Cover1
IEEE Spectrum February, 2014 - Cover2
IEEE Spectrum February, 2014 - 1
IEEE Spectrum February, 2014 - 2
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IEEE Spectrum February, 2014 - Cover3
IEEE Spectrum February, 2014 - Cover4
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