Apple, Google, Microsoft join forces to buy Kodak patents
December 9, 2012 12:38 pm
Apple Inc. (AAPL) and Google Inc. have joined forces to
offer more than $500 million to buy Eastman Kodak Co. (EKDKQ)’s patents out of
bankruptcy, said people familiar with the situation.
The two companies, competing for dominance of the smartphone market, have partnered after leading two separate groups this summer to buy some of Kodak’s 1,100 imaging patents, said the people, who asked not to be identified because the process is private.
Unlikely partnerships are typical in patent sales because
they allow competitors to neutralize potential infringement litigation. A group
including Apple, Microsoft Corp. (MSFT) and Research in Motion Ltd. bought
Nortel Networks Corp.’s more than 6,000 patents for $4.5 billion out of
bankruptcy last year. Google lost the auction for those patents after making an
initial offer of $900 million.
“Apple and Google learned a lesson from the Nortel’s
auction,” said Richard Ehrlickman, former vice president of Intellectual
Property at International Business Machines Corp. and president of IP
Offerings, a patent brokerage and consulting company in Boca Raton, Florida. “They
have decided to come together in this process to reduce the cost of purchasing
the Kodak patents, while meeting their business needs.”
Digital Patents
The Apple-led group pursuing Kodak’s patents included
Microsoft and Intellectual Ventures Management LLC as of July, the people said,
while Google’s partners included patent- aggregation company RPX Corp. and
Asian makers of Google’s Android phones. The two groups had separately offered
less than $500 million for Kodak’s portfolio. They now teamed up to offer more
together, said two of the people.
Niki Fenwick, a spokeswoman for Mountain View, California-
based Google, said the company doesn’t comment on rumor or speculation.
Christopher Veronda, a spokesman for Rochester, New York-based Kodak, declined
to comment on the patent sale, citing a court-ordered confidentiality
agreement. Kristin Huguet, a spokeswoman for Cupertino, California-based Apple,
declined to comment.
The Wall Street Journal previously reported that a
consortium offered more than $500 million for Kodak’s digital patents.
Kodak obtained commitments for $830 million exit financing
last month, contingent on its sale of the digital-imaging patents for at least
$500 million.
Fund Turnaround
The patents for sale relate to the capture, manipulation and
sharing of digital images. Kodak is selling them to fund a turnaround after
seeking Chapter 11 protection in January. At the same time, it’s pursuing a
plan to shrink the company and focus less on photography and more on
commercial, packaging and functional printing and enterprise services.
In court documents, Kodak has said the patents may be worth
$2.21 billion to $2.57 billion, based on an estimate by patent advisory firm
284 Partners LLC. Kodak said it has generated more than $3 billion in revenue
by licensing some of the digital- imaging patents to users, including Samsung
Electronics Co., LG Electronics Inc., Google Inc. (GOOG)’s Motorola Mobility
unit and Nokia Oyj.
“The portfolio is actually worth much less because it has
been widely licensed,” Ehrlickman of IPofferings said.
The 132-year-old photography company listed $5.1 billion in
assets and $6.75 billion in debt in its bankruptcy filing. It plans to exit
bankruptcy in the first half of 2013.
The case is In re Eastman Kodak Co., 12-10202, U.S.
Bankruptcy Court, Southern District of New York (Manhattan). (Bloomberg)
