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Kodak agrees to sell digital imaging patents for $525 million

By MIKE DICKINSON - 12/19/2012 8:46:43 AM

Eastman Kodak Co. has agreed to sell and license its digital imaging patents for some $525 million, the company said Wednesday morning. The long-awaited move is key to its efforts to emerge from Chapter 11 bankruptcy in the first half of 2013.

A consortium organized by Intellectual Ventures Management LLC and RPX Corp. are the proposed buyers. The series of agreements, involving sales and licenses, successfully monetizes its digital imaging patents, Kodak officials said.

The proposed transaction is subject to the approval of the Bankruptcy Court and other conditions. Kodak filed for bankruptcy on Jan. 19.

The deal achieves one of Kodak’s key restructuring goals. It follows agreements for interim and exit financing for its emergence from Chapter 11 restructuring, and resolution of U.S. retiree non-pension benefits liabilities, the company said.

Kodak said the sale builds on its momentum toward a successful emergence in the first half of 2013.

Under the agreements, Kodak will receive approximately $525 million, a portion of which will be paid by 12 intellectual property licensees organized by Intellectual Ventures and RPX. Each licensee will receive rights with respect to the digital imaging patent portfolio and certain other Kodak patents.

Another portion will be paid by Intellectual Ventures, which is acquiring the digital imaging patent portfolio subject to these new licenses, as well as previously existing licenses.

Kodak did not disclose the members of the consortium. Published reports in recent weeks had indicated Apple Inc. and Google Inc. were among the group of expected buyers.

“This monetization of patents is another major milestone toward successful emergence,” said Antonio Perez, Kodak chairman and CEO, in a statement. “Our progress has accelerated over the past several weeks as we prepare to emerge as a strong, sustainable company."

The proposed transaction enables Kodak to repay a substantial amount of its initial debtor-in-possession loan, satisfy a key condition for its new financing facility and position its commercial imaging business for growth and success, Perez added.

The deal includes an agreement to settle current patent-related litigation between the participants and Kodak, which avoids additional litigation costs and helps to ensure that management and the company’s resources focus on enhancing the operations of its core future businesses, Kodak said.

The sale of the 1,100 patents initially was projected to fetch as much as $2.6 billion in a Bankruptcy Court auction, which was slated to take place this past summer. Kodak had begun the effort to sell the patents last year in hope of finding a buyer in 2011.

Kodak previously has said the digital capture portfolio includes more than 700 patents covering aspects of image capture, processing and transmission technologies related to the design and operation of digital cameras and multifunction devices, including camera-enabled smartphones and tablets.

The Kodak imaging systems and services, or KISS, portfolio includes more than 400 patents that cover technologies including image analysis, manipulation and tagging, and network-based services, including image storage, access and fulfillment, the company has said.

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