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December 20, 2012

Bankrupt Kodak Selling Patents for $525M

Eastman Kodak Co will sell approximately 1,100 of its digital imaging patents for $525 million to a number of technology companies in a bid to emerge from bankruptcy in the first half of 2013.

The deal will enable the photography company to satisfy a condition for acquiring $830 million in financing.

Intellectual Ventures and RPX Corp arranged a consortium of 12 technology giants — Adobe, Amazon, Apple, Facebook, Fujifilm, Google, HTC, Huawei, Microsoft, RIM, Samsung and Shutterfly — which will license or acquire the patents, according to court documents, Wired reported Dec. 19. The companies will split the $525 million cost.

The deal will most benefit the firms Kodak sued over patent infringement: Apple, RIM, Fujifilm, HTC, Samsung and Shutterfly. The lawsuits will be resolved under the deal.

According to Wired, the portfolio was worth roughly $2.5 billion, but Kodak, which has little ability to negotiate, took the $525 million offered. The value of the patents was also affected because Kodak extensively licensed them to other companies.

Despite the deal, Kodak will still be forced to sell its personalized and document-imaging businesses as part of the financing package. It must also resolve its U.S. retiree non-pension benefits plan.

Kodak said in a statement the patent deal means it is well on its way to emerge from Chapter 11 in the first half of 2013.

“This monetization of patents is another major milestone toward successful emergence,” said Kodak chairman and CEO Antonio M. Perez in a company statement.

“Our progress has accelerated over the past several weeks as we prepare to emerge as a strong, sustainable company. This proposed transaction enables Kodak to repay a substantial amount of our initial DIP loan, satisfy a key condition for our new financing facility, and position our Commercial Imaging business for further growth and success.”

The transaction enables Kodak to continue innovating in its core commercial imaging technologies — an aspect of the business that is key to Kodak’s future, Perez said.

“Kodak remains a major center of invention and innovation,” Perez said, adding that commercial imaging is a business in which Kodak has significant competitive advantages and strong growth prospects.