Kodak Patents Could Save It From Chapter 11

The patent lawyers didn't take a very long holiday break, and are now back in full flow, with Samsung losing a second bid to block Apple's iPhone 4S, this time in Italy. As the major players still try to bolster their own IPR stockpiles in order to fend off legal attack, RIM remains under pressure to sell some of its patents, but the biggest prize in the early part of this year is likely to be Kodak's mountain of IPR related to digital imaging and cameras, elements of almost every handset.

Focal Points:

• The venerable photography giant is reported to be preparing a Chapter 11 bankruptcy filing. According to The Wall Street Journal, the firm wants $1bn in debtor-in possession financing, which keeps companies operating during a major reorganization, and would achieve this partly through the sale of its patents. The company has already been trying to enhance the perceived value of its assets, bringing infringement lawsuits against Apple and RIM. However, these battles have also obstructed its efforts to find a buyer, since interested parties have been waiting for a final decision by the US International Trade Commission before valuing the IPR.
• Rafferty Capital analyst Mark Kaufman wrote in a recent research note: "In an effort to accelerate the monetization of its intellectual property, Kodak has been seeking the sale of its 1,100 digital imaging patents since late summer. There has been serious interest by various companies, but delays in the final determination by the US ITC in the patent infringement action brought by Kodak against Apple and RIM, has potentially delayed a meeting of the minds on price."
• Sale of the patents could save 131-year old Kodak from Chapter 11, though the firm has started making preparations for a filing in case those efforts fail, according to insiders, and that step could come as early as this month or early February. That would then place the IPR mountain on the table with a court-supervised auction, as seen last year at Nortel. Kodak invented the digital camera in 1975, and this was the basis for many of the patents, which will be most appealing to mobile players. However, it never fully capitalized on this innovation, and the rot set in from the 1980s, when foreign rivals started to eat into its dominance of film. Matters worsened when it was outgunned in the camera-phone sector, which is increasingly important in the overall photography landscape, and despite strengths in some areas, such as printers, many analysts believe the patents are now the most valuable element of the company.
• Meanwhile, Samsung has lost its latest case against Apple, as both firms increasingly see their more aggressive bids - to bar one another's products entirely from certain markets - being rejected by courts. Apple has seen a preliminary injunction against the Galaxy Tab 10.1 reversed in Australia and has failed to win bans in some other jurisdictions, with judges often taking the view that injunctions should only be granted once a patent infringement has actually been proven, not on the off-chance. Similarly, Samsung failed to get the new iPhone 4S barred in France before the holiday, and has now suffered a similar blow in Italy. Samsung is accusing Apple of infringing two patents related to W-CDMA in the 4S.

Editor’s Note: While the sale of its patents may save Kodak from Chapter 11, this is only a temporary measure. The changes to the photography business have been significant; there are similarities between the crises faced by book, newspaper and photography-based businesses. It is surprising that companies, like Kodak, haven’t been better prepared for the changes that have come and will come to pass.