Facebook recently filed for its long-awaited initial public offering that some speculate could be valued up to $100 billion – a valuation which will be strongly based on a combination of both intellectual and intangible assets, particularly Mark Zuckerberg and the company’s valuable patents. It leads us to wonder, if you begin to treat patents as an asset class, what’s ultimately more valuable to a brand: The patents or the people behind them?
In January, another tech giant in its own right, Kodak, filed for bankruptcy protection. The company will now try to sell what it claims are more than $2 billion worth of patents and, if successful, reinvent itself as what will most likely be a printer company. (Interestingly, Kodak also used a bankruptcy proceeding last month to terminate its nearly $4 million per year naming rights deal for the landmark Kodak Theater, site of the Oscars).
The new printer company will have far fewer employees. Kodak’s workforce is currently at 17,000 and decreasing quickly, down from 64,000 in 2003. It is this same workforce of tens of thousands that was responsible for the $2 billion patent war chest that now serves as Kodak’s lifeline. Kodak’s story isn’t unique. Our track record of valuing or even understanding what it takes to nurture intellectual assets, or human capital, (who we sometimes seem to forget as the driving force behind intangible assets, including patents) is not great. In fact, many have speculated that what was largely missing during our recent economic recession and current recovery was financial incentives and better support for our country’s entrepreneurs and innovators.
Soon after the news this summer of Kodak’s attempt to sell its patent portfolio outside of bankruptcy protection, Ben Popper of the New York Observer profiled an entrepreneur in New York who is working to produce the world’s first affordable, handheld, panoramic video camera. To achieve this feat, the start-up turned to Rochester, N.Y., former headquarters of Kodak – not to claim Kodak’s patents, but rather to canvass the thousands of laid off Kodak engineers, machinists and optical experts residing there.
Popper wrote in a preview of that feature article, that tech companies currently have so much cash (led by Apple’s nearly $100 billion) that we have to look at what is more valuable long-term – “scooping up patent portfolios” or putting it “toward building out the next generation of mobile hardware and putting thousands of talented Americans back to work.”
It is apparent that corporate and investor interest in patents is increasing (see our recent post on the long-standing practice to leverage the profitability of patents here). As Popper wrote, “Kodak may be worth the most right now, on paper, when it’s cut up into pieces for its patents. But to build a sustainable future, American companies should be focused on people, not patents.”
If only it were that easy. On Wall Street, today’s public companies need to be focused on both people and patents, communicating how their pipelines are being fueled by a combination of human capital and promising patents. Facebook is already doing a good job of this by sharing stories like how it developed the Facebook photo tagging application nearly overnight (a technology that Facebook battled successfully in court to patent).
Looking ahead with a hundred billion dollars’ worth of shareholders, it will be interesting to see how Facebook continues to tell the story of its people and its patents. A few years from now, Billy Crystal could be hosting the Oscars (again), from the Facebook Theater.