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Patent sale marks big step for Kodak

Rochester Business Journal
December 21, 2012

Exactly 11 months after Eastman Kodak Co. jolted Rochester by filing for Chapter 11 protection, the company took a crucial step on the road to emergence from bankruptcy.
 
Kodak agreed this week to sell and license its digital imaging patents for some $525 million. The long-awaited move is crucial to its efforts to emerge from bankruptcy in the first half of 2013.
 
Kodak has said its objectives in bankruptcy were to bolster liquidity, monetize non-strategic intellectual property, fairly resolve its legacy liabilities and enable the company to focus on its most valuable business lines.
 
The deal achieves one of those top restructuring goals. It follows agreements for interim and exit financing for its emergence from Chapter 11, as well as resolution of U.S. retiree non-pension benefit liabilities, the company said.
 
Still on tap for Kodak is selling off various pieces of what it now views as non-core businesses. The company also must file and win approval for its reorganization plan.
 
The Bankruptcy Court in November permitted Kodak to retain exclusive control of its bankruptcy through Feb. 28; that means creditors cannot bring forth competing plans. Kodak's emergence plan would outline how it expects to repay creditors and would give more details on what the company would look like after bankruptcy.
 
A consortium organized by Intellectual Ventures Management LLC and RPX Corp. has agreed to buy Kodak's digital imaging patents. The series of agreements, involving sales and licenses, successfully monetizes that intellectual property, Kodak officials said Wednesday.
 
The proposed transaction is subject to approval of the Bankruptcy Court and other conditions. The hearing is slated for Jan. 11, court papers show. Kodak filed for bankruptcy on Jan. 19.
 
Under the agreements, Kodak will receive approximately $525 million, a portion of which will be paid by 12 IP licensees organized by Intellectual Ventures and RPX. Each licensee will receive rights with respect to the digital imaging patent portfolio and certain other Kodak patents.
 
Another portion will be paid by Intellectual Ventures, which is acquiring the digital imaging patent portfolio subject to these new licenses, as well as previously existing licenses.
 
The 12 licensees, court filings show, include giants of the online and digital world and longtime rivals: Apple Inc.; an Amazon.com Inc. subsidiary; Facebook Inc.; longtime silver halide rival Fujifilm Corp.; Google Inc.; HTC Corp.; Microsoft Corp.; Research in Motion Ltd., maker of BlackBerrys; and Samsung Electronics Co.
 
"This monetization of patents is another major milestone toward successful emergence," said Antonio Perez, Kodak chairman and CEO, in a statement. "Our progress has accelerated over the past several weeks as we prepare to emerge as a strong, sustainable company."
 
The proposed transaction enables Kodak to repay a substantial amount of its initial debtor-in-possession loan, satisfy a key condition for its new financing facility and position its commercial imaging business for growth and success, Perez added.
 
Kodak said last month that it had accepted an $830 million financing offer from a group of bondholders that replaced a $793 million package announced earlier in November. Both offers were contingent on the sale of Kodak's digital imaging patent portfolio for no less than $500 million.
 
The IP deal includes an agreement to settle current patent-related litigation between the participants and Kodak, which avoids additional litigation costs and helps to ensure that management and the company's resources focus on enhancing the operations of its core future businesses, Kodak said.
 
The sale of the 1,100 patents initially was projected to fetch as much as $2.6 billion in a Bankruptcy Court auction, which had been slated to take place this past summer. Kodak had begun the effort to sell the patents last year in hope of finding a buyer in 2011.
 
Kodak previously has said the digital capture portfolio includes more than 700 patents covering 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.
 
The Kodak imaging systems and services 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 has said.

12/21/12 (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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