Posts Tagged: "kodak"

There are few more interesting tragedies in the history of American business than the demise of Kodak, which filed for Chapter 11 bankruptcy in January 2012. and few that are more frustrating given the fact that the key to the company’s renewed success lay within its grasp for years. Digital photography, the technology that decimated Kodak in the 1990s and 2000s, was originally a Kodak innovation. The company’s stubborn refusal to support the development that rivalled its core product, film, should be a cautionary tale to any major corporation and a sign to innovative start-ups that even the most monolithic corporations can become vulnerable.

Without doubt, the biggest patent deal of the month related to Kodak’s sale of its non-core patent portfolio to Intellectual Ventures, RPX and others for $525 million. But there were other interesting patent business deals, including: (1) Microsoft and EINS Sign Android Patent Agreement; (2) NIH Awards Contract for Improved Anthrax Vaccine; (3) ARRIS To Acquire Motorola Home Business For $2.35 Billion; (4) Mylan Announces Comtan® Settlement Agreement; (5) Trovagene Licenses Duke University, Novartis; (6) Amgen Finalizes Agreement Resolving Federal Investigations; (7) GE Healthcare, CDI Agree to Sublicense for Cellular Assay Patents; and more.

Eastman Kodak Company, the once mighty technology juggernaut that has fallen on hard times and found itself fighting to get out of bankruptcy, has completed a series of agreements that successfully monetizes its digital imaging patents. Under the agreements, Kodak will receive approximately $525 million, a portion of which will be paid by 12 intellectual property licensees organized by Intellectual Ventures and RPX Corporation, with each licensee receiving 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.

First, remember that Steve Jobs once referred to the smartphone patent wars as the patent equivalent of global thermonuclear war. But will this be more like the Cold War or the Apocalypse? The only patent war that I can recall that actually approximated a patent version of the Apocalypse was the battle between Polaroid and Kodak. That saw a $909 million verdict in 1990, and ultimately settled for $925 million about a year later, but required total aggregate attorneys fees in the neighborhood of $550 million. The war lasted 15 years and didn’t achieve the $2.5 to $5 billion that once upon a time was believed possible. This was also at a time when these numbers were real money.

The financing commitment Kodak received is composed of new term loans of $476 million, as well as term loans of $317 million issued in a dollar-for-dollar exchange for amounts outstanding under the company’s pre-petition second lien notes. The financing, however, is predicated on certain conditions and Kodak’s achievement of certain milestones. Perhaps the main pre-condition, and one that may be quite difficult for the company to meet, is that Kodak must successfully complete the sale of it’s digital imaging patent portfolio and the sale much fetch no less than $500 million.

Kodak is continuing discussions with parties interested in acquiring the patents offered for sale through the court approved auction procedure.  These patents relate to the company’s digital imaging patent portfolio. Kodak reiterated yesterday that it has made no decision to sell the portfolio and they may, in consultation with creditors, ultimately decide to retain the portfolio as an alternative source of recovery for creditors.  If this announcement is anything other than posturing to make suitors nervous it would almost certainly signal that Kodak is not getting the high offers they feel the portfolio deserves.

Even if the dispute with Apple and FlashPoint has not been fully resolved by the time of the final sale of the patent assets Kodak may still be able to proceed with the sale if they establish “adequate protection” under the Bankruptcy Code for Apple and Flashpoint at the time of sale. Kodak’s adequate protection could take many forms depending on the value of any remaining alleged interests, the amount of the sale proceeds, and other factors. Alternatively, the Bankruptcy Court also authorized Kodak to sell the patents subject to Apple and FlashPoint’s claims, if mutually agreed between Kodak and the winning bidder.

The time has now come for Kodak to attempt to shed its non-strategic patents with the sale of roughly 10% of the overall Kodak patent portfolio.  Without an acceptable initial bid already in place Kodak will roll the dice and angle for an auction that would take place in early August 2012, assuming more than one bidder emerges.