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Court OKs Kodak patent auction process

Rochester Business Journal
July 3, 2012

Eastman Kodak Co. said late Monday it received Bankruptcy Court approval to auction off two digital patent portfolios.

The court’s OK means Kodak can move ahead with the planned auction to sell its digital capture and Kodak imaging systems and services patent portfolios, the company said.

The company, which filed for Chapter 11 protection on Jan. 19, is counting on the sale of the two portfolios of patents to provide cash needed to power its post-bankruptcy turnaround. Estimates have put the value of those patents at more than $2 billion. The auction is expected to attract interest from key players in the technology industry.

Kodak’s motion was contested by Apple Inc. and FlashPoint Technology Inc., which have asserted ownership interests in a small number of the 1,100 patents in the portfolios, Kodak said. The Bankruptcy Court found all of the patents in the digital capture and KISS patent portfolios are property of Kodak’s estate.

The court granted Kodak the right to sell these patents free and clear of Apple and FlashPoint’s claims at the auction, subject to the applicable provisions of the U.S. Bankruptcy Code, Kodak said. The ruling provides a path to separate the auction process from continuing litigation about the Apple and Flashpoint claims, Kodak added.

The company maintains the Apple and FlashPoint claims are without merit, and is seeking a determination on summary judgment, expected to be heard in July, that the claims are time-barred, officials said.

“Today’s ruling provides a court-approved process allowing buyers to acquire the patents free and clear of all ownership allegations, regardless of the status of the dispute with Apple and Flashpoint at the time of closing,” said Timothy Lynch, Kodak’s chief intellectual property officer, in a statement.

Even if the dispute with Apple and FlashPoint has not been resolved by the closing of the patent sale, Kodak may still sell the patents free and clear of the claims by establishing “adequate protection” under the Bankruptcy Code for Apple and Flashpoint, Kodak said.

Adequate protection could take various forms depending on the value of any remaining alleged interests, the amount of the sale proceeds and other factors, the company said. Alternatively, the Bankruptcy Court authorized Kodak to sell the patents subject to Apple and FlashPoint’s claims, if mutually agreed between Kodak and the winning bidder.

“We are gratified that the court has enabled us to move ahead with our patent auction in a timely manner and with clarity on ownership for the winning buyer,” Lynch said.

Kodak in June announced its plans for the auction. Those plans call for interested buyers to submit bids on a confidential basis, subject to review by Kodak, certain of its creditors and the Bankruptcy Court. The auction is expected to be held in early August. Kodak has said it court documents it plans to hold the digital capture auction beginning Aug. 8.

Kodak officials have noted the two portfolios being sold have different characteristics and may interest different buyers.

The digital capture portfolio includes more than 700 patents, covering key aspects of image capture, processing and transmission technologies related to the design and operation of digital cameras and multifunction devices, including camera-enabled smartphones and tablets, Kodak said.

The Kodak imaging systems and services, or KISS, portfolio includes more than 400 patents that cover technologies including image analysis, manipulation and tagging, and network-based services, including image storage, access and fulfillment, the company said.

Since 2001, Kodak has generated more than $3 billion from licensing its digital imaging portfolio.

(c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.
 


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