Storied American imaging and photographic equipment company Eastman Kodak has agreed to sell over 1,000 patents related to digital imaging as part of deal to receive $830 million in financing. While the plan is still subject to approval by a United State bankruptcy judge, the plan calls for Kodak to sell the patents to companies also involved in the digital imaging market for $525 million. The companies to receive the patents are Adobe, Amazon, Facebook, Fujifilm, Google, Huawei, Microsoft, Research in Motion, Samsung, and Shutterfly. Along with the sale of the patents, in order to be eligible to receive the financing the company must also sell its document-imaging business and resolve outstanding pension obligations in the United Kingdom.
Kodak first started to have financial problems in the late 1990’s with the rise in digital photography. The company experienced a steep decline in sales of photographic film and also was late in getting into the digital photography market, in spite of having invented technology essential to making digital photography available. The company had initially developed the first digital camera in 1975, but declined to develop it due to concerns about the product cutting into the company’s photographic film business.
Kodak’s patent portfolio has been part its long-term strategy to return to solvency, with initial estimates valuing the patents at between $2.2 and $2.6 billion. However, due to Google’s purchase of Motorola, the company no longer is willing to pay any price to obtain digital imaging patents, deflating the market for such intellectual property.
The agreement calls for a pledge for the companies to license the patents back to Kodak so that the company can continue to use them as it moves forward. Kodak has stated that it expects to emerge from bankruptcy in the first half of 2013.
Chapter 11 bankruptcy is a type of bankruptcy generally used by corporate structures under financial duress. As opposed to a Chapter 7 liquidation bankruptcy, it allows the company to continue to operate as it attempts to return to profitability. Companies under Chapter 11 bankruptcy also enjoy the benefits of the automatic stay, which stops most pending litigation against the company.
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