They are indeed using patents as originally envisioned: They have an effective monopoly on epaper displays. However their poor business decision of ultra-high pricing has prevented a serious market for their product from forming. Had they lowered their price per display, or done some kind of affordable licensing scheme with manufacturers, it's totally possible for them to have made tons of money while still allowing epaper displays to flourish in the market.
But that's not what they did; who knows what kind of money they're actually making, but the fact that the epaper market is basically on Kindle life support isn't the patent's fault.
(Edit: Perhaps Amazon had a hand in preventing wide adoption of epaper, in order to more effectively squash Kindle competitors?)