Shutterfly Accuses Kodak of Breaching Gallery Sale Deal

Shutterfly Inc., the online photo-sharing service, sued bankrupt Eastman Kodak Co., accusing it of violating a noncompetition agreement included in the sale of its Kodak Gallery business.

A Kodak service called My Kodak Moments, which allows users to create photo books and order prints from their smartphones, is “explicitly prohibited” under the agreement, Shutterfly said in a complaint filed today in U.S. Bankruptcy Court in Manhattan.

Shutterfly, based in Redwood City, California, last year agreed to buy Kodak Gallery, another online photo-sharing business, for $23.8 million. Kodak Gallery competed with Shutterfly, and a “significant driver” of the purchase price was the noncompete agreement, Shutterfly said in its court filing.

Stefanie Goodsell, a spokeswoman for Rochester, New York-based Kodak, declined to comment on the lawsuit.

Kodak, which filed for bankruptcy in January 2012, said in court papers last year that Kodak Gallery required a “significant investment” to become competitive and that it was selling the business because it was “no longer an important component” to its strategy.

The case is Shutterfly Inc. v. Kodak Imaging Network Inc., 13-ap-01310, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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