Smile and say…sell! After filing for Chapter 11 protection almost a year ago, this Friday the bankruptcy court is expected to approve Kodak’s proposed agreement to sell its digital-photography patents for about $525 million. The buyers, a consortium led by Intellectual Ventures and RPX Corp., are seemingly getting a bargain price, as the portfolio was once speculated to sell as much as $2.6 billion.
Are the buyers stealing Kodak blind, or is this a black and white deal? Kodak had to sell patent assets for at least $500 million as a condition for the DIP (debtor-in-possession) loan Kodak received in November, so the sale satisfies that requirement. The sale will also settle current patent-related litigation between Kodak and the participants, which will avoid heavy litigation costs. That is a plus for both Kodak and the buyers, a consortium including Apple, Microsoft, Google, Adobe Systems, Research in Motion (makes Blackberry), Samsung Electronics, Fujifilm, Facebook, Huawei Technologies (a unit of Amazon), and Shutterfly. These hi-tech heavyweights who will also likely benefit from the opportunity to license the patents. Sounds like a beneficial deal for all parties.
(Note: the sale does not take into account the recent patent-infringement suit just filed by Kyocera, which alleges infringement occurred during the bankruptcy.)
Comments have been made that Kodak’s patents are being sold for a bargain basement price. In reality, as with real estate, sometimes you need to look at IP value as what the seller is willing to accept and what the buyer is willing to pay. No matter what valuation methods are applied, this is the reality of the market conditions. At CONSOR, we like to illustrate this with the equation of:
CONTEXT + TIME = VALUE
In the context of the bankruptcy, and the timing of the sale, we get the resulting value of the technology. It’s really that simple.
Kodak’s Chairman and CEO Antonio M. Perez commented that “this monetization of patents is another major milestone toward successful emergence.” He goes on to say that “this proposed transaction enables Kodak to repay a substantial amount of our initial DIP loan, satisfy a key condition for our new financing facility, and position our Commercial Imaging business for further growth and success. Kodak remains a major center of invention and innovation.”
The key issue here may not necessarily be whether Kodak is selling its IP assets below market value, but can Kodak continue to capitalize on its remaining IP? The value in the name Kodak is still strong. But can it stay relevant?