Jack Ellis

It seems that Kodak has found out that the auctioning of its patents is not going to generate the kind of value it had hoped for. According to Reuters, the bankrupt company announced today that it may abandon the auction process altogether and explore new options – such as the creation of a licensing entity – to raise money from its portfolio to pay off creditors. Given the time that has elapsed since the auction process began in June, this news does not come as huge surprise.

Kodak put approximately 1,100 of its digital imaging patents up for sale, valuing the two portfolios involved at up to US$2.6 billion. However, Reuters reports that the bids that were received from companies including Apple and Google came in at under US$500 million.

The auction of Nortel’s patent assets in the summer of 2011 raised an impressive US$4.5 billion and certainly generated a great deal of hype around this particular method of sale. During the summer it was reported that a number of companies were aligning into two bidding consortia in order to participate in the auction, with Apple, Microsoft and Intellectual Ventures on one side, and Google, RPX and Android handset manufacturers on the other. Later the Wall Street Journal suggested that Apple, Google, IV and RPX would in fact be joining forces. But with today’s announcement, it appears that – unsurprisingly - Kodak was not prepared to entertain such a solution.

The Reuters piece claims that Kodak is considering other ways of creating a “source of recovery for creditors,” including setting up a licensing company to raise revenue from its digital imaging patents “and other intellectual property”. Should that come to pass Kodak will either keep the work in-house or set up a separate entity to do the heavy lifting on its behalf. Essentially that would mean the creation of an NPE. Either way, many of those companies that have been bidding for the company’s patents may soon be facing claims that they are infringing them.