Execs From Bankrupt Kodak To Make Millions For Giving The Company's Patents To Trolls

from the this-is-not-innovation dept

Tue, Aug 7th 2012 2:35pm — Mike Masnick

We've written about the ridiculousness of the ongoing auction over Kodak's patents -- the final sad legacy for the once giant company. However, it's getting even more ridiculous. On Monday, a bankruptcy court judge approved about $6 million in "performance" bonuses for execs, including some that are based on how much the company gets from these auctions. Think about the ridiculous incentive structure here. You have executives who are running a bankrupt company, who are set to make millions (in a court approved manner), for handing off the company's patents to trolls, so they can go out and sue the actual innovators.

The execs make out like bandits. The buyers likely make out like bandits after shaking down some companies. The lawyers (of course) make out like bandits. And... who gets screwed? Oh yeah, the companies who are actually innovating successfully in the market and the public (who we thought the patent system was supposed to benefit).

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Filed Under: auction, incentives, patent trolls, patents
Companies: kodak

34 Comments

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rw (profile), 7 Aug 2012 @ 1:57pm

Benefit
The public is supposed to benefit? I thought it was just lawyers.
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:Lobo Santo (profile), 7 Aug 2012 @ 2:41pm

Re: Benefit
"The Public" is a code-word which means: "the lawyers, and the wealthiest 0.01% of the world/nation population, and the lawyers."
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The eejit (profile), 7 Aug 2012 @ 2:42pm

Re: Benefit
Nah, they jumped on the bandwagon. Movie studios were pulling this shit before it was cool.
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drew (profile), 7 Aug 2012 @ 2:51pm

I'm waiting...
... for the usual defenders to come out with a statement on this one.
Probably something about it being legal and written into the contracts of the execs.
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Anonymous Coward, 7 Aug 2012 @ 2:52pm

you can blame the system for this type of reckless behaviour but in this instance you can actually blame the judge for acting like complete and utter dick brain idiot!
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weneedhelp (profile), 7 Aug 2012 @ 2:55pm

Yeah!!!!
Screw the employees, retirees, and stockholders. Lets make sure those execs get paid. F'in insane.
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Vog (profile), 7 Aug 2012 @ 2:55pm

"Performance" bonuses? This is a euphemism, isn't it??
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Anonymous Coward, 7 Aug 2012 @ 3:13pm

Re:
Euphemism for acting play may be.

Because surely can't be about good performance of that company in the market.
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LDoBe (profile), 7 Aug 2012 @ 3:24pm

Re:
Yeah. The execs gave the judge a performance of fellatio that exceeded last quarter's standard. Now they get incentivized to do even better in another 3 months.
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Mike42 (profile), 7 Aug 2012 @ 3:44pm

Re:
Hell yes performance bonuses! It takes a lot of hard work to run an established business with name recognition and a patent trove so far into the ground that they have to sell everything off. I bet those execs had to put in 40 hours a week to acomplish it!
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Tunnen (profile), 7 Aug 2012 @ 3:45pm

the public (who we thought the patent system was supposed to benefit).

What strange world have you been living on? I don't think anyone ever expected a patent system to benefit the public. Similar to how the public would never think that a politician was above corruption, a CEO was looking out for the little guy, or the RIAA to ever get a clue. =P
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Anonymous Coward, 7 Aug 2012 @ 4:24pm

Yellow journalism part 2. If you can't prove your point in a really long post that tries to discredit selling of the patents, let's move along to smearing the people involved.

You are nothing if you are not predictable.
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Lawrence D'Oliveiro, 7 Aug 2012 @ 5:18pm

Re: ...smearing the people involved.
If you can�t prove your point in a really long post that tries to discredit immoral activity, let�s move along to smearing the people involved.

Because, you know, like being �involved� doesn�t actually mean you have anything to do with what�s going on...
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Thomas (profile), 7 Aug 2012 @ 5:23pm

does the judge
who approved the bonuses get a cut? I wouldn't be surprised. Companies that are owed money by Kodak should be outraged. Giving away valuable patents instead of selling them is typical of the way executives work in these days.
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Anonymous Coward, 7 Aug 2012 @ 7:49pm

Re:
"Yellow journalism part 2. If you can't prove your point in a really long post that tries to discredit selling of the patents, let's move along to smearing the people involved."

Great job. According to your logic, you can't disprove his point, so you've moved on to "smearing the people involved."
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Anonymous Coward, 7 Aug 2012 @ 8:05pm

You can't sell the right to sue, so why should you be allowed to sell a patent.
If Kodak fall let their patents die as well, if someone wants them they can buy Kodak itself, and keep it a running company, for once it stops being an active company it's patens go away.

Thats how it should be.
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Anonymous Coward, 7 Aug 2012 @ 8:37pm

Re:
He is not trying to discredit selling the patents. The patents are an asset of a bankrupt company, being sold off to pay creditors plus the unhappy shareholders. The real story is about elite greed. The executives are not entitled to any of the proceeds of the sale of any of the assets, including the patents. That money should be going to creditors in the first instance, then shareholders after the creditors are all paid off. The executives get to draw their normal salaries, for as long as their jobs last, and that is it. Their salaries may be reduced by decision of the receiver. They may be dismissed at any time by the receiver.
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Anonymous Coward, 7 Aug 2012 @ 10:20pm

So the executives who steered the company into bankruptcy get to leave their failed tenure with millions of dollars while the workers get what? I love how American capitalism seems to now lavishly award failure as long as you are an executive or higher.
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Anonymous Coward, 7 Aug 2012 @ 11:06pm

Re: Re:
Yes, and if the performance bonuses are part of their contracts, should they not get paid?

Techdirt has posts already suggesting that the patents shouldn't be sold (and possibly should be stripped from the company and perhaps made nul and void), now Mike is ragging on the executives for getting paid.

It's swarmy, shitty, and petty. He knows he's wrong, but he does it anyway.
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Rikuo (profile), 7 Aug 2012 @ 11:33pm

Re: Re: Re:
Performance bonuses...for an exec running a bankrupt company? That's what has Masnick and myself scratching our heads. Why should these execs be rewarded for running their company into the ground?
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drew (profile), 8 Aug 2012 @ 12:56am

Re: Re: Re:
warned you...
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Josef Anvil (profile), 8 Aug 2012 @ 12:57am

Other industries should take note
In 1990, Kodak was worth $7 billion. Cameras used film. Photographers needed film, and lots of it, then digital photography came along; but the tech was new and the quality was low and Kodak saw it as a novelty niche. There was no real threat from digital media. $7 billion is a lot of money and the company employs a lot of people.

Currently Kodak is worth -$1.7 billion and it's largest source of revenue was through the licensing of its patents to companies that actually leveraged the digital revolution.

Lesson: If you do not adapt to the change in technology, there is little hope of surviving in the market.

In related news, Apple has teamed up with Intellectual Ventures to bid on Kodak's patents (ewwww).
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Ninja (profile), 8 Aug 2012 @ 3:29am

Hopefully the trolls will bring the world to a halt so our politicians will actually stop and think "seems we have a problem". Sponsored by the tech companies that can't keep moving obviously.

It's much like the MAFIAA.

MAFIAA: Here's your pay check Senator.
Senator: How much is it?
MAFIAA: 50.000 neurons. I mean, dollars.
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Anonymous Coward, 8 Aug 2012 @ 6:06am

Re:
I believe there thinking is "Hey, at least it's not Chapter 7 and we managed to put off Chapter 11 as long as we did, and the Chapter 11 is going so smoothly."
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Anonymous Coward, 8 Aug 2012 @ 6:11am

Re:
TIL factual reporting on what the judge allowed and who will benefit from it is 'yellow journalism' and 'smearing the people involved.'

Tell us oh wise AC, which facts in the above report are not well researched news? Is Kodak not filing for Chapter 11 bankruptcy? Are they not selling their patents? Did the judge not just approve the payments totally ~$6 million in performance bonuses to roughly the top 15 executives at Kodak? Do the executives not get even bigger bonuses under the incentive structure if the patents are sold?
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Anonymous Coward, 8 Aug 2012 @ 6:14am

Re: Re: Re:
No, they shouldn't get performance bonuses.

Chapter. 11. Bankruptcy.

No one said anything about stripping them of their salary, this is about performance incentives.

Conflating performance bonuses with actual wages as if the executives need or are owed that money in a base attempt to discredit Mike is swarmy, shitty, and petty. You know you're wrong, but you do it anyway.
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Anonymous Coward, 8 Aug 2012 @ 6:15am

Re: Re: Re: Re:
Well, this particular AC is nothing if not predictable.
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abc gum, 8 Aug 2012 @ 6:20am

Some days TD is not journalism, the next it is yellow journalism. Make up your frickin mind already.
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Anonymous Coward, 8 Aug 2012 @ 7:41am

As pissed off as I am at the execs, you really have to blame the system on this...

People are driven by money. If you can steal/weasle $15M and get a $5M fine for it, what's the incentive to play by the rules and play fair? If you can find someone who thinks you deserve a "performance" award for failing, why not just continue to fail? There is no incentive to work/succeed when you can just work the legal system in your favor...
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Digger, 8 Aug 2012 @ 7:58am

Bankruptcy should mean IP goes public domain
If a company goes bankrupt, it shouldn't be able to sell off patents, they should roll right into the public domain.

Patents are there to give the *inventor* first rights at making a profit off of them. Then shortly after that, they are to roll into the public domain for the good of the general public. Not fall into the hands of non practicing entities for extortion.

Courts allowing this sort of sale off of the public's property are in collusion with this extortion racket and should be brought to justice.

Ban NPEs, ban sale of patents in bankruptcy. Watch the world become a better place.
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John Fenderson (profile), 8 Aug 2012 @ 9:39am

Re: Re: Re:
if the performance bonuses are part of their contracts, should they not get paid?

Not if they didn't perform well, and that the company went bankrupt would seem to indicate that they didn't.

My company provides quarterly performance bonuses. It's part of my contract. If I get 100% of them, they increase my gross income by about 20%. But I have to demonstrate that I have actually performed well. If I have not, or even if I have but my department or company has not, then my bonus is reduced or eliminated.

A bonus isn't regular pay. It's a bonus, a reward, and should never be guaranteed. If it's guaranteed, then it's regular pay.
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John Fenderson (profile), 8 Aug 2012 @ 9:44am

Re:
"Yellow journalism" is apparently the new phrase that the paid trolls are being required to use. It's a particularly odd choice and a stingless insult, as TD isn't journalism at all, and specifically claims to not be journalism, so it can't be "yellow" or any other color.

I say let them run with it. it's a harmless barb.
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John Fenderson (profile), 8 Aug 2012 @ 9:48am

Re:
People are driven by money.

Some people are driven by greed.

If you can steal/weasle $15M and get a $5M fine for it, what's the incentive to play by the rules and play fair?

Because it's the right thing to do. Most people are not greedy scumbags, and most people would not consider doing a profitable wrong just because it can be done.

The people doing this or that think it's OK to do it have a strong sociopathic streak. They are not representative of the average person.
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JEDIDIAH, 8 Aug 2012 @ 2:41pm

Reactionary old codger.
> I don't think anyone ever expected a patent system to benefit the public.

The Brits did when they created theirs. Our founding fathers felt the same way.

Patents exist to encourage the disclosure of useful trade secrets that will improve the state of the art in the industry. It's intended to improve the intellectual capital for the entire nation.
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