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Posted Friday, January 27, 2012 by Mike Cicero

Last week, the Eastman Kodak Company (Kodak) filed for Chapter 11 bankruptcy. For many this came as quite a surprise. After all Kodak had once been the leading producer of film products which helped the company to grow into an industry giant. Moreover, Kodak did not exactly sit around and idly watch as consumers replaced their Minolta 35mm cameras with newer digital technology. Kodak initiated this transition when it invented the first digital camera in 1975.

Since inventing the digital camera, Kodak has continued to emphasize research and development in its daily operations. According to its bankruptcy documents, Kodak has worked diligently to protect its intellectual property through traditional avenues. Today, Kodak’s overall intellectual property portfolio consists of approximately 13,100 foreign patents and trademark registrations, and an additional 8,900 patents and trademark registrations in the United States. Within its overall portfolio is a very valuable subset of approximately 1,150 patents known as the “Imaging Portfolio.” Kodak claims that the “Imaging Portfolio pertains to capturing, processing, storing, organizing, editing, sharing and monetizing digital images, and is fundamental to the digital imaging industry, including the cell phone, tablet and social networking markets.” Kodak further claims that the Imaging Portfolio: (1) is one of the world’s largest collections of digital image related intellectual property; (2) reflects billions of dollars in R&D; (3) has no foreseeable expiration date(s) that will materially impact revenues; and (4) continues to grow.

Through 2010 Kodak had negotiated $3 billion in licensing revenue from its Imaging Portfolio; however, in 2011 it received only a mere $98 million, or alternatively 3.3% of the negotiated revenue. Kodak claims that its difficulties in licensing negotiations and revenue collection began only after the global recession had impaired the company’s liquidity making it difficult for the company to enforce its rights. Kodak has since initiated patent litigation against Apple Inc. (Apple), Research In Motion, Corp., and HTC Corp. in an effort to recover substantial royalties which Kodak claims it is owed. This is not first time these companies have quarreled over patents. As recently as 2010 Apple Inc. filed a lawsuit against Kodak claiming patent infringement. The claims were ultimately rejected. Subsequently, in another patent infringement suit, Kodak prevailed in a claim against both Apple and Research In Motion, Corp. Interestingly those two companies, having entered licensing agreements after the unfavorable ruling, are now allegedly at the heart of Kodak’s financial troubles. Making matters worse for Kodak, Apple is claiming that Kodak does not even own the patents in question, but rather Apple does. In light of recent events, Kodak has certainly seen better times, and now only time will tell whether the company that dominated the imagery market in the 20th century will be able to survive the 21st century.

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