Kodak Retains Valuable Patents That Were Supposed to Be Sold to its Pension Plan

In September, Kodak emerged from bankruptcy as a company focused on its commercial imaging business.  As part of the restructuring, Kodak sold its personalized imaging and document imaging businesses to the U.K. Kodak Pension Plan. The new company operated by the Pension Plan is called Kodak Alaris.

During the bankruptcy proceedings, Envision IP was retained by an ad-hoc equity committee of Kodak shareholders to determine the size of Kodak’s patent portfolio, and to understand its value based on potential future licensing and royalty earnings.  The Kodak shareholders were hoping to prove to the bankruptcy court that Kodak indeed had significant value in its patents, in hopes of receiving some relief for their investment losses.

In June of this year, Envision IP identified more than 8,500 in-force US patents owned by Eastman Kodak Co.  The Creditors’ Committee’s patent expert testified by declaration during the bankruptcy proceedings that after the sale of Kodak’s personalized imaging and document imaging businesses to the Pension Plan, Kodak would have approximately 4,400 US patents (July 31, 2013 Declaration of David Berten, Docket No. 4508, at Para. 13, p. 7, n. 9).

Based on the figures provided by the Creditors’ Committee’s retained expert, approximately 4,100 US patents should have been transferred to Kodak Alaris as part of this sale.  This fact is important as Kodak stated that the majority of its valuable patents were not related to commercial imaging, and as such, these patents would be transferred to the Pension Plan.  However, technically speaking, there is likely not a clear distinction in the actual underlying technology between commercial and consumer printing.

As of today, November 26, 2013, Envision IP has identified only 376 US patents transferred by Kodak to Kodak Alaris. Perhaps the patent transfer and assignment process is still pending for the remaining 3,700 patents which the bankruptcy court believed would be transferred to the Pension Plan.

The ad-hoc equity shareholder committee argued to the bankruptcy court that Kodak had never presented a complete list of patents it planned to retain, and patents it planned to transfer to the Pension Plan.   Without identifying which patents Kodak planned to retain, the bankruptcy court blindly sided with Kodak’s attorneys, who stated that Kodak projected to earn only $35 million in IP related revenue in 2013, versus Kodak’s $250 to $350 million estimate provided in its Public Lender Presentation dated January 2012.

As of today, Envision IP has identified approximately 8,000 US patents currently assigned to Kodak, much greater than the 4,400 number that the court was led to believe.  In our opinion, going forward, Kodak will generate significantly more than just “$35 million” in future yearly licensing revenue, especially if it retains the majority of the patents purportedly earmarked to have been transferred to the Pension Plan.

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