Kodak in crisis mines patents for cash
Eastman Kodak Co., seeking to mine its multibillion-dollar patent portfolio for cash to fund structural changes as it tries to stave off bankruptcy, is taking a page from strategies used by Texas Instruments and IBM Corp.
Texas Instruments, the second-largest U.S. chipmaker, wrote the template decades ago on techniques to exploit patent holdings when a company is struggling, said Joseph Siino, who runs patent-consulting firm Ovidian Group. Losing market share to competitors, Texas Instruments used an aggressive litigation strategy that extracted royalties from those using the company's technology without permission, he said.
"Texas Instruments "at one point made more from patents than from its ongoing business," said Siino, who is based in Berkeley, Calif.
Kodak said in November that selling patents and refinancing debt will help determine its ability to continue operating in the next 12 months as declines in its traditional photography business hurt sales and cash reserves. Texas Instruments' patent strategy, also used successfully by Pitney Bowes and Xerox., may give Kodak the cash to fund a transition to the more profitable market for digital printing.
IBM, the largest U.S.-based patent owner, makes about $1 billion a year in intellectual-property revenue, said spokesman Chris Andrews.
IBM's strategy has its roots in the 1980s, when after helping pioneer the personal-computer market, the company found itself challenged by competitors. Stung by a money-losing quarter, IBM turned to its patents to ferret licensing deals, taking a unit that had generated less than $100 million in revenue a year to $1 billion annually, said Victor Siber, the company's chief intellectual property lawyer at the time.
Kodak, contending it invented many of the basic aspects of digital imaging and deserves to be compensated, has been shopping more than 1,100 patents since July, and is suing Apple, Research In Motion, HTC and other companies for royalties. The company generated $40 million in licensing revenue in the first nine months of last year, after getting $838 million in 2010, mainly from legal settlements in cases against Samsung Electronics and LG Electronics.
Kodak reportedly is in advanced talks with Citigroup Inc. to provide bankruptcy financing in the event it decides to file for protection from creditors. Kodak may seek about $1 billion in so-called debtor-in- possession financing, though terms may change.