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P738 Profiting from Intellectual Capital

Diigii-Fiillm™ D g -F m™

Robin L. M. Cheung Student #0024338 For Professor M. Mongeon Friday, February 15, 2002 McMaster University

278.000 units per year. Digi-Film™ is fundamentally different to all of them. . it differs significantly in form and functionality. with venture capital comprising the remainder. 5% of which would be considered to be “top-of-the-line” consumer models. Although US Patent 6. A comparison between this and other patents with Digi-Film™ was completed.000 digital camera units sold in the US. Although devices allowing dual mode film/digital imaging have already been patented.481 provides similar functionality.000.Executiive Summary Execut ve Summary Digital photography has experienced an explosion in popularity in the latter part of the past decade. The Digi-Film program is expected to require approximately $4 million in start-up capital. Digi-Film’s potential market size would be approximately 25. Assuming 2001 industry size of 5. This has been met with considerable improvement to existing lines and innovation of new ideas. This analysis revealed that Digi-Film’s patentability depends on its form-factor and superior technology. a digital image acquisition device comprising a CCD sensor positioned behind a standard 35mm shutter and circuitry located within a standard film canister housing is proposed. Digi-Film. Angel investors who are digital photography enthusiasts will be the initial source of capital. Investors can expect to make 88% return on investment and double their initial investment in just under three years. This represents a great potential for patentability and subsequent licensure.

and these images could only be viewed after being transferred to a computer. A CCD or similar image capture sensor attached to the film prosthetic captures images behind the shutter as would traditional film.000 in the early stages. This device. Images are stored in memory in the film-shaped canister portion. For professional photographers. The single-lens reflex (SLR) camera popular among serious hobbyists and professional photographers offer advanced features. The global digital imaging market is estimated at $225 billion and growing at 50% per year. manual focusing and light metering capability. In many cases. adding digital media to a professional photographer’s toolkit is still a costly venture. could be modified through a computer link and conveyed to the camera’s DX encoding circuitry by placing electrodes on the film canister where standard DX-encoded conductors are. These images can be transferred with a standard A-B USB (Universal Serial Bus) cable. digital photography is still very much in its infancy. Times have changed. While the list price of these professional digital cameras continues to drop. and the ability to interchange zoom. Whereas CCDs (charge coupled devices. falling from over $25.IIntroductiion ntroduct on Background: The Device Digital Imaging is hot. DigiFilm™ would allow professional photographers to leverage their significant investment in film-based equipment. such as manual shutter speed and aperture adjustment. professional lenses are brand-specific. or “macro” lenses easily. to capture images) in consumer digital cameras currently emulate ISO 100 film. telephoto. offering tremendous versatility to the professional photographer to operate in low-light or high-speedaction situations. It consists of two main portions: a thin. flat image capture sensor. . and only to a limited extent. however. projected to cost around $2.000 USD in 2000 to $7. fits into a standard 35mm camera in the film compartment. and a film canistershaped processing/storage unit. however. Consumer digital cameras now support resolutions in the millions of pixels (picture elements) and the ability to expand storage capacity easily with industry-standard memory modules. digital cameras were large and bulky. When digital photography was first introduced in the 1990s. This setting. making digital imaging practical for amateur photographers. These capabilities are offered only in top-of-the-line professional digital cameras. The average price of a digital camera also has dropped significantly. They could store a limited number of low-resolution images. and may cost upwards of several thousand dollars each. existing CCD technologies used in professional digital photography can approximate film ISO 800 speeds.000 USD in 2002 for equivalent Kodak models.

said in an August. With a 36.88 x 36. each 9 µm2) chip is currently available for prototyping at a cost of $400 directly from Kodak’s Image Sensor Solutions division. This chip is ideally suited for DigiFilm™. Its low current requirements and low-light capabilities offer tremendous versatility to the upper mid-range digital photo enthusiast. has shifted its strategy to focus its competition in the highend professional arena only. however.” At the heart of Digi-Film™ would lie the middle-of-the-line Kodak Digital Science™ KAF-16801E digital CCD sensor (detailed in Appendix 2). . In August 2000.88 mm image acquisition area and 100% fill factor. These “camera backs” are placed on large-format portrait cameras in place of film. Most of the chip is exposed through a clear window. but we will have the best parts available. This 16. allowing incident light to be recorded by the chip.The Technollogy The Techno ogy Charge-Couple Devices (CCDs) are the “film” in digital cameras. 2000 EETimes article. Chris McNiffe. Kodak announced it would offer its internal CCD image capture chips—the heart of any digital imaging system—to the open market. It is 0. Kodak recently. “We won’t have the cheapest parts out in the market. it is able to capture the full 35 mm frame. which sense the strength of the light and translates this into electrical signals to be processed and stored digitally.075” thick. vice president of marketing and sales for Kodak’s Rochester-based Image Sensor Solutions unit. however. The surface of this exposed area is covered with image acquisition pixels. We’re not targeting the Barbie-cam market.8 megapixel (4096 x 4096 pixels. making it an ideal film prosthetic. Kodak has recently released two professional large-format digital camera “backs” to penetrate this segment. Kodak has been making image sensors for over 30 years but had previously hoarded its CCD chips to protect its own digital camera market. there are currently no products that take the place of film in traditional SLR cameras. and now offers its CCD to other digital camera developers.

the time to break-even would be almost two years. If the market turns out softer than anticipated. sales grew by 38%.000 units. Industry Size $800 Sales Volume ($ billions) $700 $600 $500 $400 $300 $200 $100 $0 2001 2002 Year 2003 2004 Consumers are beginning to embrace digital photography. While digital camera sales increased only 17% last year. Any cursory review of consumer retail electronics advertisements is direct evidence of this explosive growth. Digi-Film’s potential initial market is estimated at 25.IIndustry Trends and Market Anallysiis ndustry Trends and Market Ana ys s 50% per Year Growth According to the Kodak 2001 Annual Report.1% of rolls processed to 6. In fact. Digi-Film’s Market Potential The market potential for consumer digital cameras is estimated at 5. While digital imaging is still in its adolescence. Kodak reports that the number of Picture CD’s processed grew 63% last year.000 units per year in the US.000. . the market is expected to sustain growth at 50% per year.7%. from 4. Dutch sales of digital cameras grew 85% last year. with a return on investment of 53%.000 units are sold.000 units per year. The high growth rate with low proportion indicates digital imaging is still in its growth phase and timing to enter the market is crucial to take advantage of this exponential growth. outside the US. Assuming approximately 10% of these cameras are in the upper-middle range. assuming only 10. further. Assuming a required market share of 5% on introduction. the digital imaging market is estimated at $225 billion. Appendix 3 outlines the pro forma income statement projecting a break-even time of approximately eight months with a return on investment of 88%. the growth rate in Picture CD processing corroborates the macro scale industry growth rate outlined above. DigiFilm’s potential US market size would be approximately 500. Based on Kodak’s CCD production projections for the next three years.

Digital Imaging Platform Kodak’s new “Ofoto” online digital processing service is currently growing at 12% per month. Unique Positioning and Competitive Advantage Digi-Film’s competitive advantage lies in its unique positioning. Digi-Film targets a segment between the bourgeoning low-end consumer digital camera market and the professional segments. products are polarized—most consumer digital cameras are lowcost. low-flexibility. Digi-Film will enter the market with no competitors. This service allows digital photographers to have their photographs professional processed to photographic paper and novelty items. while professional digital products are high-cost. On a product map. a similar online processing service should be offered. with service sample coupons included in Digi-Film packages. Kodak® Professional Cameras P r i c e Consumer Retail Digital Cameras Flexibility-Performance . Digi-Film users would stand to benefit from a service like this. high-flexibility. In order to continue generating residual revenues after sales of Digi-Film units.

film. Inc. Digi-Film differs. US 6. it also comprises circuitry that interfaces with the camera’s DX-encoding mechanism to communicate exposure settings to the camera. These findings are used to determine the grounds by which Digi-Film can be patented. patented a system similar to Digi-Film in 2001.Appendiix 1:: Patent Classifications Append x 1 Patent Classifications Catch Words The following catch-words were associated with the digital photographic device: digital. non-broadcast television systems. and stores said image to internal memory.” actuated by a light-sensitive switch. however. this corresponds to H04N 7/18: Electric Pictoral Communication. Photography.” 348/64 currently comprises 65 existing US patents. whereby a “photocard. digital photography. utilizing space where a film canister and film would otherwise sit inside the camera. Patent Classification The United States Patent Classification (UPC) code for digital photographic equipment is 348/64 “Combined electronic sensing and photos:graphic film cameras. for circuitry and power sources. however. Digi-Film would not be classified under Class 396. and CCD (charge couple device). acquires an image behind a standard camera shutter. Under the International Patent Classification scheme (IPC). The 481 Photocard patent also describes a method of RS-232 communication. further. Digi-Film would likely comprise a Universal Serial Bus (USB) interface where a normal film canister would otherwise have a film advance sprocket. because devices comprising “image pickup” or “image sensors”—photographic devices employing non-chemical image acquisition technologies—are expressly covered under class 348. converts said image to digital format by means of an integrated analogue/digital converter.. camera.481 Photocard Dominik Schmidt of Airify Communications. The 35mm film canister housing for the circuitry is included under 242/74 “Cartridge storage.” Exiistiing Patents Ex st ng Patents The US Patent and Trademarks Office (USPTO) web site as well as World Intellectual Property Office (WIPO) and Espacenet were thoroughly investigated to determine prior art and existing patents and applications. in that it is expressly designed to fit the standard 35-mm film form factor rather than simply utilize extra space at either end of the image acquisition device. .278. This patent does include a claim whereby the photocard may be made thicker at both ends.

rather than an accessory that fits within one.US 6.or film-based mode. Shaped like their popular i-Zone camera system. US Patent 6. Whereas 955 specified a single-lens reflex camera system. The key to Patent 147 lies in its mechanism whereby the detachable backing and CCD device are accurately aligned with the shutter such that images are accurately aligned on the CCD detector without complex adjustments. . It specifies the use of the proprietary SLR camera only.955 Dual-Mode SLR Camera US Patent 955 describes a single-lens reflex camera system which comprises an interchangeable backing allowing use of either a film-based or electronics-based image acquisition module. Although this mechanism permits the selective use of either digital. allowing the operator to retain any proprietary lenses and filters.035.320. 147 specifies only that the camera allow a detachable backing. Although this incorporates the existing CCD technology DigiFilm is likely to use. it restricts application to the physical embodiment of an actual camera.337. US Patent 6.or filmphotography.607 Electronic Still Camera Konika Corporation’s 2001 Patent 607 describes a camera that comprises an optical pickup system and analogue-digital convertor. US Patent Application Number 09/771. this camera does not accept interchangeable lenses or filters. Patent 147 describes an exchangeable-backed system for digital. and is a proprietary system.767 Combination Camera Polaroid Corporation has submitted an application to patent a combination camera which uses a two-lens system to capture images to both film and CCD concurrently. it does not allow “digitalizing” any camera.147 CCD Mounting For Camera Back Similarly to Patent 955. This and Patent 147 are both classified therefore under Class 396 as primarily cameras with digital function.

In the case that Digi-Film’s CCD module can be adjusted to accommodate faster exposure times or lowerlight conditions. the traditional camera and digital camera both record a photograph with the single press of a common button. This device would be impractical for everyday photography. as well as a USB computer interface. Protruding from the film slot will be the CCD image acquisition module. US Patent 3. Digi-Film must accommodate DX technology which is present in many major SLR cameras. rather. allows a camera to sense automatically the exposure characteristics of the film in it without user intervention. Dual-mode operation is achieved by essentially tying together the controls for two separate cameras. its exposure characteristics must be communicated to the camera. the camera operator was required to specify the film ISO or ASA speed to the camera in order to effect proper shutter exposure and aperture on automatic cameras. WO Patent 01/51988 Film and Digital Camera Combination This unit allows photography on both chemical-based film as well as digital storage.255 Electronic Camera with Solid State Sensor The first application for a “digital camera” which recorded images to a solid state sensor rather than film was filed in 1979. since it relies on a motor-driven scanning mechanism that would require significant periods of time to scan each image. This technology likely would have to be licenced from Kodak.756. Instead of carrying a spool of photographic film in the cartridge.528 35 mm Film Cartridge In 1973.200. US Patent 4. Fuji Photo patented the now-ubiquitous 35mm film cartridge. Patent 255 was granted for a rather crude implementation. does not employ CCD technology to acquire images. DX encoding relies on patterns of conductivity that are detected with small electrodes on the wall of the film cartridge space in the DX-enabled camera. This is the form factor DigiFilm will use.US Patent 4. This solid state imaging device.371 DX Encoding DX encoding. however.667. developed by the Eastman Kodak Company the 1970s. however. it moves arrays of light-sensitive devices progressively to scan an entire image. In 1987. . thus. Previously. Digi-Film will carry electronics and a power supply.

whereas.337.147 4 WO 01/51988 Allows Dual Film/Digital Photography Charge Coupled Device Image Sensor Film Canister-Shaped Main Compartment DX®-Encoding Support Universal Serial Bus Support Fits Inside Camera Fits any 35mm Camera 2 3 1 with red background indicates overlap Green boxes indicate potential overlap or similar feature Notes: 1 Although the 481 patent does not specify a film cartridge shape.278. .607 US 6. is a business that renders restorative services. In fact. it does allow for protrusion into the film cartridge space within the camera. Digi-Film™ represents an electronic consumer product. DigiFilm Services Inc. 3. Digi-Film was the trademark for a company specializing in photographic restoration services.481 US 6. DigiFilm Services Inc.955 US 6. 2 The 481 patent specifies the much slower and older RS-232 communication interface. it is still live in the US for the same company providing the same services. does not produce any digital photographic equipment. 4 The 955 and 147 patents describe a system whereby dual film/digital modes are achieved by interchanging the back portion of a proprietary camera.Trade-mark Regiistratiion Trade-mark Reg strat on Originally filed in 1993.035. Patent Anallysiis Patent Ana ys s US 6. Although this trade-mark has lapsed in Canada and is available.320.

Recent developments indicate development of a dual-mode film/digital camera is under way and numerous related patents have already been filed and granted. but physically emulating a 35mm film canister is one of Digi-Film’s defining characteristics. Although Patent 481 apparently offers similar functionality. The Patent 481 device also does not support DX-encoding. Not only fitting inside the film compartment.Diigii-Fiillm™ Future Prospects D g -F m™ Future Prospects Digi-Film™ is currently an ideal candidate for patenting and licensing. the 481 device depends on a light sensor to detect shutter opening and begin image capture.” Although the claims specify that the film cartridge space inside the camera could be used to house circuitry. The 481 Patent specifies that the unit is a “photocard. specifying instead the much slower RS-232c interface. it is appropriate only for slow shutter speeds. DX-compatibility is contingent upon the unit being based on a 35-mm film canister form factor in order to present electrodes to the DX circuitry inside the camera housing. aperture size and shutter speed) for each exposure are. it lacks support for Universal Serial Bus. since processor latency precludes this mechanism for fast shutter speeds.e. This is a critical feature that communicates to the camera what the appropriate exposure settings (i. Securing intellectual property rights to the Digi-Film™ system is a time-sensitive initiative that should be undertaken immediately. it does not specify this as a requirement. . Further. While this seems a logical solution.