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The Kodak patent portfolio, which it had claimed could be worth up to $2.6 billion, may now be sold for as little as $500 million. According to the Wall Street Journal, the troubled company has reached a deal with bondholders that would see it exit bankruptcy; however:"To get the financing, Kodak must sell a portfolio of 1,100 digital patents for at least $500 million."
According to the WSJ, Kodak remains in talks with a consortium of buyers which includes Apple, Google, Microsoft, Intellectual Ventures and RPX Corp. When that story first emerged in August, I poured scorn all over it, wondering why Kodak would agree to sell to companies that by rights should be bidding against each other. But I guess it gets to a point where if they are the only buyers and they will not be separated, there is no other choice if the future of the business depends on it.
Should the bondholder financing be dependent on a sale, that rules out Kodak developing its own assertion programme. Doing that would mean extra upfront cost at the beginning and no immediate big income hit - something that bondholders looking for a quick payback may not have been happy with, especially as nothing is ever guaranteed when it comes to a monetisation programme. There is an outside chance, I suppose, that another third party may now emerge to bid at or just above $500 million, which in turn may get that group of unlikely partners to go higher or lose their discipline and start to bid against each other. But you wouldn't bet on it. However, now there is a line in the sand figure, it would not be a huge surprise if a sale was concluded pretty swiftly.
Although there have been high valuations attached to the Kodak portfolio, some have cast serious doubt on these. Back in September 2011, M-CAM (which, admittedly, does not have a faultless track record on these things) stated:
… significant quality considerations have been identified in Kodak’s digital imaging patent portfolio. Any prospective bidder or financier would need to secure far greater specificity and clarity around the commercial options derived from the portfolio prior to estimating appropriate value and its associated cost of enforcement. The common bidding price being circulated for Kodak’s digital imaging patents is currently $3 billion for over 1,000 patents, 31% of which have impairment issues. The cost of procuring patents of dubious quality will be an ongoing and potentially unnecessary liability to any bidding company and its shareholders. In addition, the patents that Kodak is asserting against Apple and others – to generate cash flow – were all found to have substantial weaknesses. Recent patent acquisition activity in the tech sector by Google and others have resulted in multi billion dollar transactions that have lacked clarity as to patent quality and enforceability. To potential bidders for Kodak’s digital imaging portfolio, we repeat – “Caveat Emptor.”
While a few weeks before that, this blog (which is also far from flawless, of course!) warned against raised expectations as to how much the patents might generate. It looks as though on this occasion we could have been correct. Everyone is sometimes, I suppose.
Patents, IP business, IP valuation