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Your Patents Won't Protect You

http://www.fool.com/investing/general/2012/12/20/your-patents-wont-protect-you.aspx

Rich Duprey
December 20, 2012

It was a sad note to read this morning that bankrupt film and camera maker Eastman Kodak (NASDAQOTH: EKDKQ) was seeking agreement to sell some 1,100 patents for $525 million to private equity investor Intellectual Ventures and patent risk manager RPX (NASDAQ: RPXC).

It wasn't that long ago that, despite experiencing financial difficulties, Kodak eschewed possible life-saving partnerships and stubbornly sat on what it thought it was a gold mine of opportunity: its vaunted patent portfolio that it believed would fill its coffers with riches.

Kodak pursued many tech companies including Apple (NASDAQ: AAPL), Research In Motion (NASDAQ: RIMM), Samsung, and others, bludgeoning them with threats of massive fines for patent infringement. Some, like Samsung and LG Electronics, caved and voluntarily cross-licensed the technology. Others pushed back on the notion they were in violation, and ultimately were vindicated.

The go-go months
Yet those were heady times, and after a consortium of tech companies bought up bankrupt Nortel Network's patents for $4.5 billion, followed by Google (NASDAQ: GOOG) paying $12 billion mostly just to get hold of Motorola's patent portfolio, suddenly dollar signs were in everyone's eyes.

We saw InterDigital (NASDAQ: IDCC) soar because it owned essential patents in the mobile communications space and VirnetX Holdings (NYSEMKT: VHC) jumped as well because it basically owns the patents on communication security.

Kodak was not immune. The one patent it was using as a cudgel against the tech giants was said to be worth $1 billion in royalties alone. With a portfolio containing 10,000 times that many patents, the sky was the limit... but only if someone was willing to buy them, and when you're teetering on the edge of bankruptcy, there's not a lot of incentive for buyers to pay a premium. Better to let the company crash and buy the patents for