Battle set for Kodak’s patent portfolio

Eastman Kodak’s bankruptcy is set to trigger a battle between some of the largest smartphone makers and other technology groups for control of a patent portfolio that is considered core to digital photography, according to US patent experts.

In an indication of the jockeying ahead of the expected auction, Kodak has alleged patent infringement against Apple, HTC, Fujifilm and Samsung in separate lawsuits over the past 10 days. Those lawsuits followed cases brought before the US International Trade Commission against Apple and Research In Motion and were seen as a sign of the company flexing its intellectual property muscles as it prepares to negotiate over the value of the patents – with potential buyers including some of the very companies is it suing.

However, several patent experts said that Kodak may struggle to attract the sort of frenzied bidding that was seen after the bankruptcy of Nortel Networks which eventually pushed the price for the Canadian networking equipment group’s assets to more than $4bn.

Though it has a “large and rich portfolio” of intellectual property rights, Kodak has already been squeezing cash from its interests by issuing licences to other companies, said Alexander Poltorak, head of General Patent Corporation, a US patent licensing group. That will both eat into the value of the patents and increase the complexity for potential buyers trying to assess their value, Mr Poltorak and other experts said.

Another hindrance may be the questionable quality of some of Kodak’s IP. In a report in September, the intangible-asset management firm M.Cam suggested that 31 per cent of the patents were impaired by carelessness in patent filing and other breakdowns in quality, making them unlikely to be of commercial value.

Much of the value in IP portfolios often comes from a small number of key patents. However, here, too, Kodak may be at risk, according to M.Cam, which argued that there were weaknesses even in the small number of patents around which the company had based its lawsuits.

Kodak’s hopes of selling the patents, which include more than 1,000 related to digital imaging, has been stalled in recent weeks by the uncertainty surrounding its slide towards bankruptcy.

Potential buyers held back out of concern about what would have happened had Kodak filed for bankruptcy after completing a patent sale, according to bankruptcy lawyers. In those circumstances, the company’s creditors might have been able to get court support for undoing the sale or forcing the buyers to pay more.

Though bankruptcy should clear the way, some experts said that the auction that will follow is unlikely to reach the fever-pitch seen in the Nortel case. That was a “perfect storm” caused by Google’s need to boost its patent holdings to withstand a barrage of lawsuits against its Android operating system, which pushed the final price paid by the winning consortium above expectations, said Mr Poltorak.