Kodak Mulls Alternatives to Patents Auction, May Form Licensing Company
Eastman Kodak has told a bankruptcy court that it is exploring alternatives to the auction of its digital imaging patents, including keeping the patents and setting up a licensing company to repay creditors.
Kodak filed in June a motion before the U.S. Bankruptcy Court for the Southern District of New York seeking approval for confidential bidding for the auction of its digital patent portfolio, that it expected would be completed by August.(
But the final hearing for the sale, at which Kodak would seek approval from the court, was to be completed by Aug. 20 and has been postponed thrice so far, with the next hearing scheduled for Sept. 19, amid reports that Kodak has not been able to raise bids close to the US$2.6 billion it was expecting for the patents.
Kodak spokesman Christopher Veronda declined to comment on whether the company had delayed the finalization of the auction because it was not able to raise the expected $2.6 billion. "All parties are bound by the court not to discuss details of the auction," he said.
The delay in the auction will however not delay the date when Kodak plans to emerge out of bankruptcy protection, Veronda said.
In a filing on Friday, Kodak said that discussions with participants in the auction continues, but rather than filing additional serial extensions of the sale hearing date, it is adjourning the sale hearing until further notice.
The company however said that it was exploring other alternatives with regard to the digital imaging patent assets, and its intellectual property more broadly, and "may not reach acceptable terms with parties via the auction process."
"In the event that a potential transaction does not occur, the Debtors are consulting with the Reviewing Creditors with respect to the retention of the Digital Imaging Patent Assets and the creation of a newly-formed licensing company as a source of recovery for creditors in the plan of reorganization," it said.
Kodak, which filed for bankruptcy in January entered into a $950 million financing facility secured by its assets, including some of its digital imaging patents, which it was required to put up for sale. It said in its filing in June that it was selling two separate portfolios, called the Digital Capture and Kodak Imaging Systems and Services (KISS) portfolios, as they have different characteristics and may interest different buyers.
The company, which at one point said its portfolio was evaluated at up to $2.6 billion by a company interested in licensing the patents, is following in the footsteps of other technology companies who have raised funds through sales of patents. Bankrupt Nortel Networks for example raised $4.5 billion through the sale of patents and patent applications to a consortium consisting of Apple, EMC, Ericsson, Microsoft, RIM and Sony.
Kodak's patents may have been already devalued by a large number of licensing deals and litigation, which reduce the potential for new licensing deals, according to analysts.
It was also dealt a potential setback in July when the U.S. International Trade Commission affirmed a prior ruling that a Kodak patent asserted in a complaint against Apple and Research In Motion is invalid. U.S. Patent No. 6,292,218 relates to technology for previewing an image on a digital camera's LCD screen before the image is captured. Kodak has appealed the order before the U.S. Court of Appeals for the Federal Circuit.
The company has meanwhile decided to sell its personalized imaging and document imaging business, and is planning to lay off 1,000 staff by the end of this year in addition to 2,700 cuts since the beginning of 2012.
Kodak said in August it expects to complete the company's reorganization and emergence from Chapter 11 during 2013.