Kodak in $ 525 million patent deal, eyes bankruptcy end

Reuters: Eastman Kodak agreed to sell its digital imaging patents for about US$ 525 million, a key step to bringing the photography pioneer out of bankruptcy in the first half of 2013.

The deal for the 1,100 patents allows Kodak to fulfil a condition for securing US$ 830 million in financing.

The patent deal was reached with a consortium led by Intellectual Ventures and RPX Corp, and which includes some of the world’s biggest technology companies, which will license or acquire the patents.

Those companies are Adobe Systems, Amazon.com, Apple, Facebook, Fujifilm, Google, Huawei Technologies, HTC, Microsoft, Research In Motion, Samsung Electronics and Shutterfly, according to court documents.

Kodak still must sell its personalised and document-imaging businesses as part of the financing package, and also has to resolve its UK pension obligation.

Kodak said the patent deal puts it on a path to emerge from Chapter 11 in the first half of 2013.

“Our progress has accelerated over the past several weeks as we prepare to emerge as a strong, sustainable company,” said Rochester, New York-based company chairman and chief executive Antonio Perez.

The patent portfolio was expected to be a major asset for Kodak when it filed for bankruptcy in January. An outside firm had estimated the patents could be worth as much as US$ 2.6 billion.

Kodak’s patents hit the market as intellectual property values have soared and technology companies have plowed money into patent-related litigation.

For example, last year Nortel Networks sold 6,000 wireless patents in a bankruptcy auction for US$ 4.5 billion and earlier this year Google spent US$ 12.5 billion for patent-rich Motorola Mobility.

But Kodak’s patent auction dragged on beyond the initial expectation that it would be wrapped up in August. One patent specialist blamed those early, overly optimistic valuations, which he said encouraged Kodak’s team to set their sights too high.

“Unfortunately (Kodak management) was misled into thinking it was worth billions of Dollars and it wasn’t,” said General Patent Chairman Alex Poltorak, a patent licensing firm. “I think they sold them at a very good price.”

He said after Google acquired Motorola, the search engine company no longer needed patents at any price, deflating the intellectual property market.

Kodak traces its roots to the 19th century and invented the handheld camera. But it has been unable to successfully shift to digital imaging.

It will likely be a different company when it exits bankruptcy, out of the consumer business and focused instead on providing products and services to the commercial imaging market.

The patent sale is subject to approval by the US Bankruptcy Court in Manhattan.

The Kodak bankruptcy case is in Re: Eastman Kodak. et al, US Bankruptcy Court, Southern District of New York, No. 12-10202.