Sparkfun CEO Explains IP Obesity: Companies Who Rely Too Much On IP Flop

from the a-primer dept

A few folks sent over a great blog post by Sparkfun CEO Nathan Seidle about a recent TEDx presentation he did on the topic of “IP Obesity,” in which he argues that companies that focus on patents tend to get fat and lazy while others out-innovate them. He provides the following example, showing this chart:

Here’s an interesting example. Kodak is an amazing company that has been in operation for over 130 years. In 1978 Kodak filed for a patent for an electronic still camera, the precursor to the digital photography industry. They had a 25 year head start on the industry. What did Kodak do? They licensed their patent and filed suit against other companies that possibly infringed upon it.

A graph showing the stock value changes of two companies over the past 25 years. I’ll let you guess who is Canon and who is Kodak. What happened? Kodak relied too much on their patents. They rested on their laurels and become intellectually unfit. They were afflicted by IP Obesity.

Of course, that’s just a single example, but we’ve noticed it in other cases as well. When we see bigger companies getting more aggressive with patents, it almost always seems to signal a decline in prospects for the company — because they’ve become fat and happy resting on their laurels and government-granted monopoly privileges, rather than continuing to innovate in the market place. It’s the exact opposite of what we’re told patents are for.

You should check out the rest of the post, but Seidle goes on to talk about how ideas get copied all the time, and why that shouldn’t concern you. He explains why it makes much more sense to focus on just building your business — and he’s got Sparkfun to prove it. If you don’t know (and you should) it’s an open source hardware company that has done over $75 million in business since its inception and is apparently on pace to do $25 million alone this year. Seems like you really can build a pretty good business while still being pretty open and not worrying about others copying you.

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Companies: sparkfun

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Comments on “Sparkfun CEO Explains IP Obesity: Companies Who Rely Too Much On IP Flop”

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Anonymous Coward says:

When the guy with the gun (the government) is no longer there to protect the idea that a company holds hostage, only companies that truly add value will exist… as it should be.

If FoxCon can build and distribute iPhones better than apple, let them. Apple could either make the phones themselves or come up with better ideas.

Anonymous Coward says:

Re: Re:

Yeah, I notice after awhile a lot of movies have become remakes or sequels to old stuff in the copyright vault.

If those old works went PD the studios would have to do something original with the works to stand out amoung competitors who would then be able to use them too.

“Foreever minus a day” copyright kills creativity

Anonymous Coward says:

This IP obesity concept has a tiny flaw – patent trolls.

If we were to apply the concept of IP obesity to patent trolls, they would be like incredibly obese (since they NEVER exercise) bullies, who live off stealing lunch money from the “other kids” in the playground. And, accordingly, they should have died of multiple heart attacks long ago…but as we know, they are still alive and well (apart from the whole being fat monsters thing).

What gives?

Keroberos (profile) says:

Re: Re:

What gives?

Time. Going by the chart above, Kodak has been in its death spiral for about 15 years, and in trouble for longer. The pure patent trolls that produce nothing haven’t been truly around for even a fraction of that time. And if nothing changes on the patent front they may actually enjoy greater longevity–they don’t have any R&D or production costs to bog them down, and a plentiful supply of cheap patents from companies that have gone belly-up.

bob (profile) says:

Such foolishness

And what about the old patent case between Polaroid and Kodak? In the 70s and 80s, Kodak tried to get into the instant film business because it saw how well it was working for Polaroid. They came up with some of their own cameras but eventually were driven out of the marketplace. Polaroid sued them with a huge portfolio of patents and eventually won. The lesson to Kodak was simple: IP cements dominance.

And then there’s the fact that the only thing left at Kodak is the patent portfolio built up from their years of research. They may have failed at building cameras but at least they have some patents that are worth something. Again the message is: patent early and patent often.

But this doesn’t fit the narrative around this loony bin. Can IP-heavy companies fail? Sure. But the fact remains that it’s very hard to justify research if you’re going to end up sharing all of your hard work with freeriders who just follow in your footsteps.

Keroberos (profile) says:

Re: Such foolishness

Not true. The entire tech industry as it exists today is because the early innovators shared ideas between themselves. Focusing more on IP protection instead of innovating is a short term solution. In the long run your competitors will innovate around any IP you have and eat your lunch.

IP cements dominance–but only in the short term.

Mike42 (profile) says:

Re: Such foolishness

Wow! Excellent choice of examples, bob.
Polaroid? Yeah, I have one of their tablets… wait, Polaroid is defunct, and they sold their name to another outfit who is trying to make their cheap electronics sound legit.

You are attempting to discredit an article about the longevity of a company that relied too heavily on IP by highlighting a lawsuit with a company that went bankrupt even earlier! Even your IP-addled gray matter should comprehend this.

RD says:

Re: Such foolishness

“But this doesn’t fit the narrative around this loony bin. Can IP-heavy companies fail? Sure. But the fact remains that it’s very hard to justify research if you’re going to end up sharing all of your hard work with freeriders who just follow in your footsteps.”

Guess what shitbob? Patents are only for a limited time. So, the “freeriders” get the benefit anyway after a comparatively short time.

Anonymous Coward says:

Re: Such foolishness

Perhaps my experience is different, but I do not recall ever having working with companies that became fat and happy resting on their laurels and government-granted monopoly privileges, rather than continuing to innovate in the market place. Quite the contrary. R&D, product improvements, manufacturing improvements, etc. continued along at a rapid pace.

Unfortunately, far too many examples of “laziness” regularly offered up here do not reflect the reality of how businesses with multiple product lines actually operate. Having developed via R&D and shown via proof of principle a fantastic new device, method, etc. does not automatically mean that a company has “blown it” because it is not taken to market. Things change. Markets change. Product line emphasis changes. The list goes on.

Of course, given the choice between simply “shelving” it where it gathers dust or transfering it to another company (established or startup) for which it is a much better fit, I recommend the latter course every time.

Anonymous Coward says:

It’s wonderful graph that is perhaps a better indicator of other things than some phony “IP obesity”.

Kodak’s issue has to do more with having been the very best in a narrow, dying field. It has little to do with IP.

Comparing them to Canon is meaningless, because except for the superficial “both work with images”, they are not at all compatible companies. Canon is also a wildly diversified company (as is common for Japanese companies) and Kodak is a narrow best in field company.

The companies also have different positions in their relative markets. Canon is an equipment maker, Kodak has been almost exclusively a media maker (media as in film). Kodak made instamatic cameras for a while, but they never really aimed for a market higher than instant cameras, and got out of that a long time ago when they realized there was no margin left in it.

It’s not a question of IP or IP enforcement at all – it’s a question of Kodak not reacting to a market that moved away from it’s key products. This the perfect case where your overused “buggy whip” thing comes in handy. Basically, they are the best buggy whip makers in the world, and the world no longer needs buggy whips. It doesn’t matter how much IP they have over buggy whips, they were sunk.

Canon on the other hand is in the printer market, the video camera market, and as a result in the digital imaging market very early. They are a diversified hardware imagine company, not a media company.

The graphic perhaps best explains how the market moved away from solid media and into digital, and not much more. Using it to try to slam patents is pretty much a fail.

Andrew D. Todd (user link) says:

Re: Kodak and Fine Cameras

Well, I think I would take the view that Thomas P. Hughes expressed in his biography of Elmer Sperry– that people begin collecting patents when their businesses are going wrong.

Anonymous Coward #25 is right to observe that Kodak had certain capabilities– these were mostly centered around the chemistry of making and processing film. Of course, Kodak produced some very sophisticated high-end cameras for specialist laboratory use and the like, but it did not get into the business of mass-producing good cameras, things like the Hasselblad 60mm Single Lens Reflex (SLR), the Linhoff view cameras, the Arriflex and Bolex movie cameras, the Nikon F 35m SLR, and the compact Olympus OM-1 35mm SLR. The market opportunity when electronic cameras were emerging was to democratize a good camera by eliminating its dependence on film and processing. In fact, one of the earliest commercially available electronic cameras was an interchangeable unit for the Hasselblad, which installed in place of the film magazine/film holder assembly. Kodak sold cheap cameras (“Instamatic”), but by the time the price of electronic cameras got down to that range, the die was cast. At the critical point, it worked out to Hasselblad or Nikon saying to the professional photographer: “buy this three thousand dollar accessory, and it will save you time and money in the long run.” Kodak simply wasn’t positioned to do that kind of thing. By contrast, the upscale camera manufacturers had sold things like expensive lenses to the photographer, and an electronic camera was not so much of a leap in the dark. One illustrative case: Nikon had developed a special 200mm macro lens, with a built-in electronic flash, designed for documenting medical operations while standing well back, behind the surgeon’s shoulder. Cannon (and Minolta) would have been described as second-string players in Nikon’s market, not as fine as Nikon, not as dashing as Olympus.

Kodak’s specialty products tended to be special films, for use in odd light conditions. For example some photographers discovered that if you used Kodak’s color infrared film to photograph banal subjects, you could get some really spooky effects. Of course, nowadays, you can do that kind of thing in Photoshop.

Bob Webster (profile) says:


When a company’s business is in decline for whatever reason, whether lack of innovation, poot marketing, or lack of management competency, they need money.

Maybe the boss says, “We’ve got to increase revenue!” Someone pipes up, “We’ve got all this valuable IP we’re not utilizing…”.

The company turns to lawsuits as a business so they execs can keep their jobs, since without income there’s no money for salaries and bonuses.

Even SCO used to produce something.

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