Joff Wild

Kodak has just put out a press release announcing it has sold its portfolio of digital imaging patents to Intellectual Venures and defensive aggregator RPX. The meat of the statement reads like this:

Eastman Kodak Company has completed a series of agreements that successfully monetizes its digital imaging patents.

The proposed transaction, which achieves one of Kodak’s key restructuring objectives, follows other recent major accomplishments that include an agreement for interim and exit financing for the company’s emergence from its Chapter 11 restructuring, and resolution of U.S. retiree non-pension benefits liabilities. Kodak’s monetization of IP assets further 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 Corporation, with each licensee receiving 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.

“This monetization of patents is another major milestone toward successful emergence,” Antonio M. Perez, Chairman and Chief Executive Officer, said. “Our progress has accelerated over the past several weeks as we prepare to emerge as a strong, sustainable company. This proposed transaction enables Kodak to repay a substantial amount of our initial DIP loan, satisfy a key condition for our new financing facility, and position our Commercial Imaging business for further growth and success.”

The transaction enables the company to continue innovating in its core Commercial Imaging technologies that are fundamental to its future. Commercial Imaging is a business in which Kodak has significant competitive advantages and strong growth prospects.

“Kodak remains a major center of invention and innovation,” Perez said.

The transaction also 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. 

The sale amount agreed is significantly lower than the multi-billion dollar estimations of the patents' value that have been bandied around, but it is very close to the bottom line amount Kodak needed to raise in order to secure financing that would allow it to come out of bankruptcy.

Previously, it had been reported that a consortium led by Apple and Google was in active negotiations with Kodak to buy the portfolio, but it looks like the reality is that the two companies did their business through IV and RPX. That makes a lot of sense if all they were interested in was keeping their outlay as low as possible and securing defensive positions. That no doubt applies to all 12 of the licensees that are partly financing the deal and also explains why Kodak found it difficult to create conditions under which potential purchasers of the portfolio were bidding against each other and so pushing the final price up: the need for outright, unfettered ownership just was not there.

On top of all that, the transaction demonstrates just how closely operating companies and third party NPEs/PAEs/aggregators, or whatever you want to call them, now work together for mutual advantage. For their parts, IV has 12 companies which it cannot seek licensing fees from for the digital imaging rights, but undoubtedly plenty of others from which it can; while RPX has provided significant value-added for its members, and will probably have collected decent arrangement fees on top. It looks like everyone wins - except, perhaps, Kodak shareholders!

UPDATE - The identities of the 12 licensees who are part funding the deal have now been revealed. They are: Apple, Google, RIM, Microsoft, Facebook, Amazon, Samsung, Adobe Systems, Fujifilm, Huawei, HTC and Shutterfly.