Friday, June 25, 2010

I don't believe in imaginary property

Okay.  That's an exaggeration.  But I certainly don't believe that companies should be allowed to choose to live off it in the lean times by extorting money from newer, smaller competition.  As Milton Friedman put it, not giving people the option to go back and decide to suck the the life out of their old patents is a "no-brainer".  Which is what makes something like Kodak's "strategy" distressing.

In commercial printing, Mr. Perez has high hopes for a fast digital printer introduced in the first quarter called Prosper Press, aimed at publishers and catalog makers. Mr. Perez says more than 100 companies have requested the Prosper Press but so far Kodak's only shipped four of them because of manufacturing complexities. The commercial printers cost $1.4 million to $4 million each.

He says Kodak so far is incapable of making more than "a few dozen" this year. "We're desperately trying to get the technology under control so we can expand," he says.

While he has worked to build these new businesses, patent payments have provided a cash cushion for the company. In 2008, he set a goal to generate between $250 million and $350 million on average each year in intellectual property licensing—mainly its digital imaging patents—through 2011. He later extended the target for that goal to 2012 but had disclosed little on his plans afterward.

In the past year, Kodak settled lawsuits with Samsung Electronics Co. and LG Electronics Inc. receiving lump sums of $550 million and $400 million respectively. In January, it filed lawsuits against Apple Inc. and Research in Motion Ltd. alleging their smart phones infringe Kodak's digital-imaging patents. Analysts say it may be difficult for Kodak to match its earlier success in the latest patent fights.

But Mr. Perez says he'll wean Kodak off the patent fights once the commercial and consumer printer businesses are profitable. "We'll find more value getting into business relationships that generate revenue working with some other partner rather than asking for cash," he says.

So your strategy for not having a strategy is to paper it over by legally shaking down smarter competitors till you (maybe) get back on your feet?  This is why we have patents?

Do we really think a system in which competition increasingly occurs in front of judges and behind closed congressional doors, instead of in the marketplace for products and ideas, is a system that will produce gains for everyone?  These games are zero-sum.  If we play more and more of them, that's exactly what we'll get.

No comments: