Eastman Kodak Co.'s plan to reap a windfall by selling roughly 1,100 imaging patents as it restructures in bankruptcy just got a little more tenuous.
On Friday, the United States International Trade Commission ruled against the troubled imaging company, closing one chapter in a long-running dispute between Kodak and smartphone manufacturers Research in Motion and Apple, an outcome that could make the patent portfolio the company is shopping around less appealing to potential buyers.
"Obviously, this is a big blow to the company," said Jim Kelleher, director of research at Argus Research. "They certainly hoped to monetize all their patents," and were relying on this portfolio to bring in a large amount.
The ruling comes at a bad time. Earlier this month, Kodak won court approval to sell its patents while in bankruptcy, and said it plans to auction this portfolio early next month. Patents have become increasingly valuable as companies use them to insulate themselves from lawsuits, or to launch litigation against rivals — generally with the goal of securing licensing fees or, less often, to block a competitor's product from the market.
Last year, a group of technology companies paid $4.5 billion for collapsed Nortel Networks' patent portfolio, and speculation about how much Kodak's portfolio could fetch is all over the map. James Bessen, a lecturer at Boston University Law School, said the Commission's ruling is bad news. "Certainly, it makes it less attractive that they've lost," he said. "The fact that Kodak’s having difficulty reduces the value for that purpose."
Ulysses Yannas, a broker at Buckman, Buckman & Reid, said the concern about the Trade Commission's ruling is overblown and wouldn't have much of an effect on the final price. "The USITC is not the last word," he said. "They will appeal... This will eventually be decided by a court."
Kodak spokesman Christopher Veronda said via email that the company does intend to appeal. "We are confident that its validity will ultimately be upheld," he said.
Veronda pointed out that the dispute involves only a single patent in the portfolio, although he said the company believes there are other cases of infringement. "We believe Apple is infringing on a number of those patents... We have asserted that Apple is the biggest infringer of our patents."
If enough judges agree with this position, whoever buys the portfolio could be looking at a windfall. But even if Kodak's position is upheld in the end, the prospect of a protracted court battle, or a series of them, could turn off potential buyers, Bessen said. "Generally, International Trade Commission proceedings are very fast compared to trial court or at the appellate level, so things will go slower," he said.