In the sort of Bizarro world we live in, hoarding patents can be far more profitable than actually producing real world product.  Many would argue that's a sign the system is broken -- others would disagree.

I. Kodak Profits From Change in Court Leadership

Regardless of who's right, that's precisely the situation that Eastman Kodak Comp. (EK) finds itself in.  To Kodak's credit, the company actually has been a pioneer in the field of imaging since the start of the twentieth century and was arguably the inventor of the digital camera.  But ultimately, Kodak was made obsolete by its own invention -- digital imaging.

Dropping from $30B USD down to a market cap of $698M USD, Kodak's pill has been a bitter pill to swallow.  But it make the best of its new lot, transitioning from a research & design mindset to a litigious one.

In an era of billion dollar patent suits, Kodak is riding the wave.  It won an undisclosed pair of settlements rumored to be around $950M USD, from Samsung Electronics (SEO 005930) and LG Electronics (SEO:066570).  Samsung’s phones were found to violate Kodak's digital imaging patents with their built-in cameras.

Now Kodak is right back in the mix in a $1B+ USD lawsuit again Canada's Research in Motion (TSE:RIM) and Cupertino, California's Apple, Inc. (AAPL).  Kodak had been locked in a series of losses and appeals [1][2] regarding the validity of its key patent involved in the claims.  However, it finally caught a break when the U.S. International Trade Commission's chief administrative law judge presiding over the case retired, just weeks before he was set to make a critical final ruling on the case.

Now a new judge is being assigned to the case.  And given that the last judge was very critical of Kodak's legal campaign, there's a good chance Kodak's prospects will at least improve slightly from the change in the bench.

Market analysts seem bullish that the shift may lead to favorable decisions, and allow Kodak to force Apple/RIM into lucrative licensing deals, like LG/Samsung before it.  Chris Marlett, CEO of the MDB Market Group, a company specializing in intellectual property estimates that Kodak is worth $3B USD -- almost five times its market cap.  

States Mr. Marlett in a Bloomberg interview, "[Kodak is] the lowest hanging fruit out there. [Their IP portfolio] could go for a huge number and nobody’s talking about it."

Fund manager Walter Todd agrees, saying that while Koday "missed the boat with the transition to digital" (ironic since they started it), their IP is incredibly valuable.

II. Who Needs to Compete, When You Have Patents!

The patent market has become a jungle over the past couple years with blockbuster infringement suits and epic acquisitions.  Some companies like Kodak and Apple have turned to wild campaigns of offensive lawsuits, while occasionally finding themselves the victim of a rival attack.

Apple was among the companies to acquire Nortel Networks' war chest of 6,000 patents and is rumored to be considering the patents to further expand its campaign of lawsuits.  Apple's chief victim has been Google Inc. (GOOG), who has seen its top hardware partners in the smart phone and tablet markets sued by Apple [1][2][3][4][5].

In that regard Apple illustrates an interesting emerging trend -- large companies that use patents, rather than competition to take control of a market, by banning successful competitors from selling their products.  Indeed, while Android outsells Apple's iPhone more than 2-to-1 worldwide, the top Android players could, in theory, be literally banned from selling tablets and phones, leaving Apple on top of the pile.

In response to this kind of behavior, companies who aren't looking to go on the offense have had to turn to defense.  Google on Monday announced its decision to purchase Motorola Mobility Solutions, Inc. (MMI) -- holder of over 17,000 patents -- in a bid to defend itself against Apple's legal might.

Returning to Kodak, the company is looking to sell its portfolio of 1,100 digital imaging patents.  One of the key prospective buyers is -- you guessed it -- Google.

Regardless of who gets Kodak's patents in the end -- be it a company desperate to defend itself like Google, a company looking to stifle the competition like Apple, or even the traditional-patent troll who produces nothing and makes its income exclusively from lawsuits -- one thing is for sure: Kodak will likely be earning a big payday.