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Patent Sale to Lift Kodak from Bankruptcy

Posted Wednesday, December 19, 2012 by Mike Cicero

It’s been almost a year since the Eastman Kodak Company (Kodak) filed for Chapter 11 bankruptcy and now it appears that the company will likely be exiting bankruptcy in the first half of 2013. Kodak filed for bankruptcy in January 2012 following severe difficulties in monetizing its extensive patent portfolio, including a subset of patents known as the “Imaging Portfolio” which consists of approximately 1,150 patents. (Read more here). Under an agreement reached in November, Kodak needed to raise at least $500 million by auctioning off patents in order to secure $830 million in financing that would allow the company to exit bankruptcy within about 6 months. Kodak has reached an agreement with a group led by Intellectual Ventures Management LLC and RPX Corp. to sell a group of roughly 1,150 patents, most likely the “Imaging Portfolio,” for $525 million. The purchasing group is quite large and, according to court filings, includes Apple Inc., Google Inc., Research In Motion Ltd., Microsoft Corp., and Samsung Electronics Co. to name a few.

The patents sold for a fraction of the $2.6 billion that they were originally estimated to be worth by the firm 284 Partners LLC which specializes in advising on financial aspects of intellectual property. The lower than expected sale price came at a time when intellectual property values, and especially patent values, have sharply risen and competitors have been quite busy in patent litigation around the world. Having been following Kodak’s bankruptcy I certainly expected the patents to yield closer to their projected value. Especially since last year a group including many of the same companies that purchased Kodak’s patents here purchased a bundle of 6,000 patents for $4.5 billion. Even though the sale didn’t yield even close to the expected amount, it is still just enough to secure the financing that may lift the company from bankruptcy.

Kodak still must resolve additional issues before fully emerging from bankruptcy. For instance, it will be required to sell several subsidiary companies and also resolve its United Kingdom pension obligations. However, the patent sale is an enormous milestone and, according to Kodak’s Chairman and CEO Antonio Perez, the company’s “progress has accelerated over the past several weeks as [it prepares] to emerge as a strong, sustainable company.” While Kodak was once the king of the personal camera market and even invented the digital camera, it has simply been unsuccessful in its efforts to transition to the digital consumer camera market. If Kodak does eventually emerge from bankruptcy, it will be interesting to see whether the company continues to pursue this market at all or if it will shift its focus entirely into commercial printing and packaging.

The Kodak bankruptcy case is In Re: Eastman Kodak Co. et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-10202. The patent sale is still subject to Court approval.

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