Kodak Consulting With Creditors About Retaining Patents

Eastman Kodak Co. (EKDKQ), which put patents up for sale at a bankruptcy auction, is consulting with creditors about retaining the patents and forming a licensing company.

Kodak has been engaged in “extensive ongoing negotiations” for a potential sale and licensing transaction, the company said in a filing today in U.S. Bankruptcy Court in Manhattan.

“The debtors are continuing to explore other alternatives with respect to the digital imaging patent assets, and their intellectual property more broadly, and may not reach acceptable terms with parties via the auction process,” Kodak said.

Kodak, based in Rochester, New York, put more than 1,000 patents on the auction block to finance a turnaround after filing for bankruptcy in January. The patents may be worth $2.2 billion to $2.6 billion based on an estimate by 284 Partners LLC, the company said in court papers.

A newly formed licensing company would be a “source of recovery” for creditors, Kodak said in its court filing.

Kodak can make more money by forming a licensing company to enforce the patents instead of selling them at an auction, said Alexander Poltorak, chief executive of General Patent Corp., which represents clients in patent licensing and enforcement matters. Kodak’s valuation of more than $2 billion for the portfolio was too high, according to Poltorak. The patents may be worth about 10 percent of that amount, he said.

‘Colossal Fiasco’

“The sale was a colossal fiasco,” Poltorak said. “They should have been realistic about what value to expect.”

The auction was scheduled to begin Aug. 8 after U.S. Bankruptcy Judge Allan Gropper in Manhattan, who is overseeing Kodak’s bankruptcy, said the auction could proceed. A court hearing to approve the sale has been postponed several times. Kodak said it was adjourning the sale hearing “until further notice.”

“The company reiterates that it has not reached a determination or agreement to sell the digital imaging patent portfolio and may, in consultation with its creditors, decide to retain and license these assets as a source of recovery for creditors,” Stefanie Goodsell, a Kodak spokeswoman, said in a statement.

The case is In re Eastman Kodak Co., 12-10202, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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