Varying Kodak Patent Valuations Make Auction Price Difficult to Predict

Envision IP rounds up the different valuations by various firms of Kodak’s digital imaging and digital capture patent portfolio – and offers their own take on Kodak’s valuation.

kodak

Maulin V. Shah and S. Farhan Mustafa

July 30, 2012

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On Friday, the Wall Street Journal reported that multiple technology heavyweights are lining up to bid for Kodak’s digital imaging and digital capture patent portfolio. One consortium consists of Apple, Microsoft, and patent-aggregation firm Intellectual Ventures, while another consortium comprises Google, Samsung, LG, HTC, and another patent-aggregation firm, RPX Corp.

Over the past year, various firms and analysts have provided valuations as to the potential value of these Kodak patents, and what a patent sale or acquisition may fetch. Below is a summary of these valuations, and the basis for each calculation:

Envision IP, Inc.

In May 2012, Envision IP calculated the DC and KISS patent portfolios to be intrinsically valued at $818 million to $1.43 billion. Envision IP conducted a discounted cash flow analysis utilizing the forecasted licensing revenue figures provided in Kodak’s debtor’s motion (DIP Motion). Our valuation factored in a discount rate due to the invalidity of Kodak’s ’218 patent by the ITC.

284 Partners LLC

According to the DIP Motion filed by Eastmak Kodak Company before a United States Bankruptcy court on January 19, 2012, Kodak hired 284 Partners LLC to conduct a discounted cash flow valuation of the DC and KISS patent portfolios. 284 Partners intrinsically valued the patent portfolios at $2.21 to $2.57 billion. This valuation was released prior to the ITC invalidity ruling of the ’218 patent, and we have not yet seen a revised valuation publicly released by 284 Partners since that ruling.

MDB Capital Group

In August 2011, MDB Captial Group announced that they believed the Kodak patent portfolio to be worth $3 billion. Yesterday, the Financial Times reported that some investors, possibly including MDB Capital Group, now expect the patent auction to top $2 billion. The Financial Times also noted that MDB Capital owns Kodak bonds.

Intrinsic Asset Value Management, Inc.

Today, the Rochester Democrat and Chronicle reported that Intrinsic Asset Value Management, Inc. predicts the Kodak patent portfolio to be at least $4.5 billion. As of October 2011, Intrinsic Asset Value Management owned 3.8 million Kodak shares.

Summary

The large range in valuations, from $818 million to $4.5 billion, shows the wide range of factors, methodologies, and perspectives that analysts are using to determine the true value of Kodak’s patent portfolio. As the recent Nortel, Motorola, and AOL patent deals have shown, buyers may be willing to pay a premium on the intrinsic value of a patent portfolio, in order to strategically acquire the patents for licensing, litigation, commercialization, and/or blocking purposes.

Given this auction will pit several cash-fueled heavyweights against each other, it will be interesting to see the outcome of the Kodak patent auction, and how the final selling price compares with other recent deals driven by patent assets.