Kodak Patent Portfolio Value Likely Reduced by Invalidity Ruling at ITC

On Monday, the U.S. International Trade Commission (ITC) declared that Kodak’s U.S. Patent No. 6,292,218 was invalid.  The ‘218 patent has claims that apparently cover previewing low-resolution versions of a moving image while capturing static images at higher resolutions.  Kodak has claimed that most modern smartphones incorporating cameras use this technology.

The invalidity of the ‘218 patent may have a tremendous impact on the value of Kodak’s Digital Capture (DC) patent portfolio.  Kodak has already received more than $900 million in settlements from infringement suits against Samsung and LG over the ‘218 patent.

In March of this year, Envision IP reviewed Kodak’s DC and KISS patent portfolios to determine if the 284 Partners valuation was reasonable.  Our valuation estimate of $2.08 billion to $2.21 billion was based largely on the assumption that Kodak would be successful in its pending and future patent litigation cases against Apple and others.

Considering that Kodak was able to generate more than $900 million in revenue just from Samsung and LG due to the ‘218 patent, and that Kodak expected to garner similar payments from other potential infringers such as Apple and RIM, we have revised our valuation estimate of the DC and KISS patent portfolio. We factored a considerably higher discount rate to calculate the net present value of the portfolio, reducing the premium for any potential damage awards/settlements, or licensing revenue, from the ‘218 patent that we had previously applied.

As a result, if the ‘218 patent invalidity ruling is upheld by the ITC this coming September, we believe the value of the DC and KISS patent portfolio could be reduced to $818 million to $1.43 billion.

*Note: Kodak recently sold its online photo sharing business to Shutterfly for $23.8 million, and it is unclear how many, if any, of the KISS patents were included in that deal.  We have not applied any additional discounts for the potential loss of future revenue from these patents.

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