I was talking with my wife about her internship at Xerox Palo Alto Research Center the other day. She was talking about how much she likes the atmosphere there, working on a wide variety of research topics. When we started talking about the history of Xerox, I got interested in the history of Xerox’s stock price. I also found Eastman Kodak, which is another old-name company. I’m sure most people have heard of these two companies.

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Yellow line is Eastman Kodak, blue is Xerox and red is Dow Index from 1978 to present. Xerox and Kodak both dropped compared to 30 years ago, while the Dow Index rose close to 1300%. This means if you bought $1000 worth of Xerox and Kodak stock back in 1978, you would have less than $1000 left, even without considering inflation. You would have been much better off investing in a Dow Index fund, where they distribute their investments in a wide variety of companies to roughly track the Dow Index.

My first reaction was, “How can a company fawk up so much?”. At least they survived for 100 years, so they are better than the bunch of companies that went bust during that long time period. But Xerox and Kodak were not just “some company”. They had highly superior technologies compared to their competitors, was a market leader and had a bunch of cash to invest in their futures. Heck, “xerox” became a common noun replacing “photocopy”. What did they do with all that money? Across those 30 long years, how come there was no CEO who had the guts to use the cash to turn around the company and expand into different areas? I heard that Xerox has been trying to transform into a document services company, whatever that means. Getting rid of hardware and just including “services” does not guarantee high margins. Not everyone can pull off an IBM (wonder if HP can do it).

Even worse, there are news floating around that Kodak is going to have an auction for its huge pile of patents. Analysts are saying Kodak is sitting on a gold mine. This makes me wonder even more “How can they fawk up so much when sitting on a gold mine?”. Basically they are admitting they are too stupid to monetize superior technology, so they are letting other companies do that with their patents. Actually, most companies that are interested in Kodak’s patents already have the technology developed. It’s not like they would study the patents and build upon them to develop new technologies. They just want to buy the patents to protect themselves from future infringement.

One could argue that a successful patent auction would foster technology innovation because it rewards inventors. Basically, the auction would show that inventors can get financially rewarded without finding a way to develop a business with their technology. This could motivate people to concentrate on technology innovation without worrying too much about creating a business out of it.

I think this argument is flawed. I believe inventors and technology innovators can be two separate groups. Rewarding inventors might motivate people to write patents, but not lead to technology innovation. Since you can write a patent just with an idea without really demonstrating anything, one could just jot down ideas while others are putting in days, weeks and years into actually developing that idea into a valuable technology. When the hard-working guy finally get something working and starts to build a huge business around the technology, the guy jotting down ideas can come with a bunch of black-suited guys and say “I would hate to see this company burn down…”. Okay it won’t be exactly like that, but they could sue the company or ask for licensing fees. Basically, the patent system could be rewarding the wrong people. I wonder if it is possible to give patents only to ideas that have some amount of demonstration. It might be very hard to define “demonstartion” and how much demonstration you need.

I should stop rambling about patents and start working on documents for my new patent haha. Before I do, here’s a stock chart of Apple across 1980 – present. The Dow Index looks like a midget compared to Apple (almost 10,000% growth over 30 years). Note that the red line here is the same red line in the chart above.

(Update) My wife, an expert in OLED, says that Kodak first invented OLED, before all the academics and Samsung jumped in. If this is the case, I agree that they should be rewarded for their discoveries. It wasn’t like they merely scribbled some ideas (as in certain software and UI patents). Kodak created an entire field through extensive R&D efforts across many years. Academics built upon their initial works and Samsung invested heavily to make OLED manufacturing possible in large volumes. How to distinguish this kind of case from merely jotting down ideas without demonstrating might be one of the key elements of  patent reform.

Another question is why patents need to be written in a way that’s so hard to understand. I heard that the US government created patents to have inventors disclose their inventions in exchange for exclusive rights. The government wanted to encourage public disclosure of patents thinking it would allow other people to build upon inventions and stur innovation. I think the intention was good, but the problem is that no one (except for lawyers) nowadays reads patents. That’s because it’s almost impossible to get any valuable information out of patents. Had Kodak merely patented their OLED technologies, innovation in that field might have been much slower. Because they published research papers with significant details on the technology, academics and other companies were able to build upon their findings. I think patents can serve their initial purpose much better if they are written in a way that conveys more information in a more effective way. I wonder if the government could require people to include details in patents as in research papers and use the claims sections for all the incomprehensible legal phrases.

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