Monopsony

[Mike Farley]

No, this is not a new camera from a well known manufacturer which only shoots in black and white, but what happens when a buyer is in a strong position to dictate terms to the seller. This is exactly what happened to Kodak while it was raising funds to get itself out of Chapter 11 bankruptcy protection. Over the years it had invested significantly in R & D and had a patent portfolio which in other circumstances would have been worth $ billions. The trouble was, Kodak had to sell and all the potential buyers knew it. When they formed a consortium to acquire the patents, there were no other bidders to which Kodak could turn to raise the price. It was forced to sell not only those patents which it had initially offered, but many thousands of others for a fraction of their true worth.

The story is in this article, which not only tells the story of how Kodak lost out, but also describes how the world of patents work. One surprise was that companies suing each other over patent contraventions is not new and as far back as 1850 this was happening on a larger scale than today during the "sewing machine wars". The strategies developed then are still in use today.

There is a quote from the article which confirms what everyone already knew - Steven Sasson of Kodak invented digital imaging but as an incumbent and major player heavily committed to the manufacture of film based products, to its eventual cost Kodak failed to exploit the technology. " ...... its chief intellectual property officer, Timothy Lynch, says, “[we] basically told Sasson to take that box and go away; we don’t ever want to see you again.”

http://spectrum.ieee.org/at-work/innova ... -portfolio