“By 2005 Kodak ranked No. 1 in digital camera sales that surged 40% to 5.7 billion dollars. Despite high growth, Kodak failed to anticipate how fast these digital cameras became commodities with low profit margins, as more companies entered the markets in the mid-2000′s” – Eastman Kodak – Wiki Article (video above)
The power of patents is so great that when Polaroid invented instant photography around 1950, even 25 years later their instant photography market was a protected monopoly. Polaroid invented a market that Kodak also wanted a piece of though and Kodak attempted to invent likewise technology to compete. Polaroid ended up suing Kodak and after a five year trial, Kodak was forced out of the instant picture business all at once. In October 2001 though, Polaroid Corporation filed for federal bankruptcy protection. After having to sell all it assets, it was practically nothing but a name with an office to redirect calls. As a wiki article states, “it conducts no commercial business and has no employees.” Not solely relying no a film process turned out to be a plus for Kodak and enabled them to survive much longer in this current digital age.
Ironically, Kodak actually developed a digital camera in 1975, but they also made the mistake of stopping development on it. Their reason? They thought it would threaten their photographic film business. Well, they were right about that threat, but their lack of proactive movement in the the digital photography market also was the turning point for their downfall. Around 2007-2010 Kodak began selling off its film assets and was even removed from the S&P 500 index due to its severe decline in business, and in 2012, the walls have come tumbling down:
Patents can be of such value that a company’s worth can actually ride on its ability to control a market with its patent power alone. Then again, they can mean nothing if you don’t have a way to use them. Apple and Google are no strangers to that fact and have even set aside their corporate rivalry in order to team up just to salvage some of the failing Kodak’s long list of patents. Patents that will probably lock-in some up-coming products from the two. As such, it can be seen why Apple and Google are offering Kodak more than $500M by the to buy their patents.
A Bloomberg report states that “the two companies, competing for dominance of the smart-phone market, have partnered after leading two separate groups this summer to buy some of Kodak’s 1,100 imaging patents”. Although Google and Apple have made headlines in the Kodak patent frenzy, the list of those involved is actually a bit longer than just the two. As Bloomberg also reports, “the Apple-led group pursuing Kodak’s patents included Microsoft and Intellectual Ventures Management LLC as of July, the people said, while Google’s partners included patent- aggregation company RPX Corp. and Asian makers of Google’s Android phones.”
Some may be wondering just why so many companies have teamed up to purchase 500 million in patents when either Google or Apple could have done it alone with nor financial trouble at all, Ehrlickman of IPofferings states it best when he says that, “The portfolio is actually worth much less because it has been widely licensed”. Of course though, once you own a patent and develop a product based around it, you practically corner a market. Hence the major efforts by Apple and Google to obtain a lion’s share of Kodak digital research.