H-P, Google moves fuel patent speculation
IP experts say Palm, Kodak portfolios may draw increased interest
By Dawn Lim, MarketWatch
NEW YORK (MarketWatch) — It’s been a big week for those in the patent business, and signs are indicating that more action may be coming in the months ahead.
Palm
Palm was an early pioneer in smartphones with the Treo, and had amassed more than 1,650 patents before its acquisition by H-P last year.
Earlier in the week, Google Inc.’s (NASDAQ:GOOG) $12.5 billion purchase of Motorola Mobility Holdings Inc. (NYSE:MMI) showed how a sweet an offer -- a 63% premium over Motorola’s most recent closing price -- that tech companies would make to stake out large patent holdings.
On Thursday, Hewlett-Packard Co. (NYSE:HPQ) said that it would be exiting the smartphone market and pulling the plug on the webOS mobile-operating system that it bought from Palm Inc., which ignited speculation about the value of a patent portfolio that may now be up for grabs.
Also during the week, Eastman Kodak Co. (NYSE:EK) shares jumped 25% on news that its patent portfolio was being marketed.
“We have seen significant interest in the acquisition of large patent portfolios, as the market is placing a premium on the strategic value of ownership,” said James Malackowski, chief executive of intellectual property services firm Ocean Tomo. “This is especially true given current market inefficiency, which limits pricing transparency.”
Malackowski said he sees a potential deal involving the Palm/H-P patents as “analogy” to Google’s purchase of Motorola.
“Both have patent portfolios relevant to mobile operators and a history of cross-licensing agreements,” he said.
Why Google bought Motorola
Google's purchase of Motorola Mobility was cheered by the street, as Google looks to control more of its handset maker of its Android phones. The deal also gives Google access to a library of patents, which can be used to protect the Android operating system, George Stahl reports. (Photo: AFP / Getty Images.)
Cross-licensing agreements serve as permission slips allowing companies to be protected by one other’s patents.
Ocean Tomo has played a role in a number of closely-watched patent transactions, such as valuing handset-related patents in Nortel Networks Corp.’s (OTN:NRTLQ) 4,500-strong patent portfolio that was sold last month for $4.5 billion to a consortium of tech companies that included Apple Inc. (NASDAQ:AAPL) , Microsoft (NASDAQ:MSFT) and Research in Motion Ltd. (NASDAQ:RIMM) .
Perceptions of a bull market for patents have pushed some companies into exploring selling, rather than licensing out their intellectual property holdings.
While a patent owner can get a steady revenue stream from licensing out intellectual property, “the challenge on licensing is delayed gratification. It takes an ongoing sales force and more effort,” said Tyron Stading, chief technology officer at Innography, which provides data on intellectual property. “It’s not like winning the lottery.”
On the flipside, paying licensing fees to a patent-holder “is buying protection so you don’t get a missile fired at you,” said Stading, “It’s not the same thing as buying a missile.”
Palm, one of the early pioneers in the smartphone arena, reported more than 1,650 patents granted and applied for in its fiscal year ended in May 2009 -- about 11 months before the H-P acquisition.
Palm, bought up by H-P for $1.2 billion in cash last year, has been in spats with Apple over whether its Pre handset infringed on its patents, but no lawsuits between the two companies were filed over the matter. Apple has sued companies such as Samsung, HTC and Motorola over their Android smartphone and tablet devices.
“The trend of companies thinking they can monetize their patents by selling them would be disturbing if everybody did it en masse,” said John Amster, chief executive at RPX Corp., a company that buys patents to guard clients from intellectual property lawsuits. Not everyone would have an equitable slice of the pie, he said. “This would have a devastating impact on innovation.”
But it’s a solution for companies in need of fast cash.
Kodak’s stock has been down 43% this year as the once-dominant film and imaging company has struggled to find its footing in the digital world.
In July, the U.S. International Trade Commission remanded part of a patent case bought by Kodak against Apple and RIM back to the original trial judge for review, putting cold water on a near-term settlement.
Kodak announced that it was exploring “strategic alternatives” for its digital imaging patents on July 20. Kodak’s 1,100 digital imaging patents make up 10% of its total U.S. patent portfolio. Laura Quatela, Kodak’s general counsel and senior vice president, said in a statement that “trends in the marketplace for intellectual property” made it the right time to look at opportunities.
Kodak has a stronger patent position in the digital imaging fields than its Asian competitors Panasonic, Ricoh, and Canon, as well as U.S. competitors H-P, according to intellectual property data provider Innography. Kodak, or Lazard Ltd, the financial advisory marketing its portfolio, would not comment on the latest news.
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