IEEE Spectrum February, 2014 - 59

Snapping Up Kodak
of its assignment
number, had previously been used to secure licensing deals with LG and Samsung
for a reported $414 million and $550 million,
respectively. (Annoyingly for LG and Samsung, such deals are usually final, with no
recourse should the patent later be thrown
out.) The USITC decision would not necessarily affect 218's value in domestic litigation, but untangling the mess would take
time that Kodak did not have.
"We were floored by that decision," says
Kodak's Lynch. "Weeks earlier, the same
patent had survived re-exam and came out
with absolutely no changes. If we'd had the
resources and the financial stability, we
would have taken this to the Federal Circuit and gotten it righted...but that's just
not the way it works in bankruptcy. You
start to lose control of the process and timcontinued from page 33 |

Nortel

6000
patents

1700
patents

Actual
value:
$4.5
billion

US $, billions

Kodak

Projected
value*:
$2.2-2.6
billion

Projected
value*:
$1 billion
Actual
value:
$94
million

0
* Projected value determined by 284 Partners
DetermININg the vAlUe of intellectual property
can be very difficult. Nortel's wireless patents
raised 450 percent of their presale estimate,
Kodak's imaging patents less than 5 percent.

ing and you just have to drive forward. It's
a freight train."
Lasinski of 284 Partners still has a nondisclosure agreement in place for the Kodak
deal and so can't comment on the particulars. "Speaking generally," he says, "when
cash is required quickly and you have to
switch a strategy from a certain patent to
other patents, that can impact their value."
Envision IP, an IP research firm not directly
involved in the case, duly reduced its valuation of Kodak's portfolio by around $1 billion, to $1.4 billion at most.
Such reversals of fortune are commonplace in IP litigation. Billion-dollar judgments are regularly overturned on appeal,
and even a patent that has held up in court
multiple times, like Kodak's 218, can be
judged worthless at new proceedings. Part
of the problem is that while patent attorneys must hold an engineering or science
degree, there are no such requirements for
judges or juries, leading to some technically
dubious decisions.
A bigger issue, though, goes to the heart
of the patent system. "You can't tell at the
time of a patent grant precisely what it
covers," says Feldman of the University of
California. "You're using language that's
going to be compared to something that
doesn't exist at the time you write it." By
the time an industry grows up around a
patent, a decade or more down the road,
its text may seem obsolete, absurdly irrelevant, or excessively broad.
Nokia estimates that as many as 250 000
existing patents could apply to smartphones.
If each patent added just one cent to the
cost of a handset in licensing, the dumbest
smartphone would be liable for $2500 in
fees. That doesn't happen, in part because of
cross licensing of IP between manufacturers
but also because most patents are virtually
worthless. An estimated 90 percent of patents never earn a direct return, and threequarters of U.S. patents are abandoned seven
years after being issued, when extra fees to
keep them in force become due.
Even without 218, Kodak had a wide-ranging
and substantial portfolio. And so when the
auction opened on 8 August 2012, the company still expected multiple bids above a billion
dollars. But when the envelopes were opened,
it had received just two offers, the highest of
which was reportedly a mere $250 million.

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