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Kodak patent sale to move forward in spite of Apple ownership claims

post #1 of 17
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A bankruptcy court judge has approved the sale of a collection of over 1,100 of Kodak's patents in spite of Apple's attempts to block the auction on the grounds that it has a claim on some of the intellectual property.

Kodak said in a statement that the auction is expected to take place in August,AFP reported on Tuesday. According to the companies, buyers will be able to purchase the patents "free and clear of all ownership allegations" from either Apple or Flashpoint Technology.

"The Apple and FlashPoint claims are baseless and Kodak will still seek dismissal on summary judgment in July," said Kodak Chief Intellectual Property Officer Timothy Lynch.

According to the report, the patent sale will include 700 patents for "image capture, processing and transmission technologies for digital cameras and other devices" and 400 over patents related to "tools for image analysis, manipulation, tagging, and network-based services."

The photography pioneer filed for bankruptcy protection in January, billing it as a necessary step toward completing its "transformation" into the digital era.

Kodak had hoped to drum up cash from Apple with patent litigation, but it failed to gain the upper hand against the iPhone maker, despite the fact that it had successfully asserted one of its digital imaging patents against other handset makers.

The company then desperately tried to sell off its patents, but it was unable to find a buyer. By its own admission, offloading the patents was one of Kodak's primary goals in filing for bankruptcy.

Apple has been active in its efforts to block the patent sale, claiming ownership of 10 of the patents from the two companies' collaboration on the QuickTake camera in the 1990s. Kodak had responded with its own legal actions to stop Apple.
post #2 of 17

Can somebody please tell me how a legal representative can give the go ahead for the sale of an item when the ownership of said item is still in contention?

 

And when was 'bankruptcy' considered part of a standard business advancement strategy?

 

Sheesh.

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post #3 of 17
Quote:
Originally Posted by GTR View Post

Can somebody please tell me how a legal representative can give the go ahead for the sale of an item when the ownership of said item is still in contention?

And when was 'bankruptcy' considered part of a standard business advancement strategy?

Sheesh.

Kodak currently has all the rights to sell whatever they please. On no grounds can anyone at the moment stop that procedure even if there is a 'contention' as you say.
post #4 of 17
Quote:
Originally Posted by GTR View Post

Can somebody please tell me how a legal representative can give the go ahead for the sale of an item when the ownership of said item is still in contention?

 

And when was 'bankruptcy' considered part of a standard business advancement strategy?

 

Sheesh.


Paradoxical as it may sound, bankruptcy can move a company forward. When a company is saddled with debt it cannot pay and with terms that it cannot honor, bankruptcy is a mechanism for resolving how the creditors will be compensated (or not) and how the ownership of the company will be redefined. Once this is done, then the company can move forward, and sometimes even thrive again. Without the legal sandbox of bankruptcy, it is difficult if not impossible to placate the creditors and shareholders (not that bankruptcy will necessarily placate them but it forces a resolution).

 

Case in point - If I am not mistaken, Kodak couldn't conduct this fire sale of patents if it had not declared bankruptcy.

post #5 of 17
Quote:
Originally Posted by ClemyNX View Post

Kodak currently has all the rights to sell whatever they please. On no grounds can anyone at the moment stop that procedure even if there is a 'contention' as you say.

That is very misleading. Apple can (and almost certainly will) appeal this decision.

Bankruptcy courts have a lot of leeway, but they can NOT sell something that is someone else's property. This article covers but one tiny skirmish in the battle. Apple still has time to put a stop to the sale.

Now, that's not to say whether Apple's claim has any validity or whether an appeals court will side with Apple. But if Apple really does own the patents, Apple should be able to convince the appeals court to stop the sale.

However, Apple claims to have 'an interest' in the patents - which suggests that they're not the sole owners. If they are co-owners, the bankruptcy court can easily sell Kodak's interest in the patents (unless Apple has an agreement with Kodak offering right of first refusal) without affecting Apple's interest. This article (as well as other articles on the subject) are not particularly clear on the matter - and I really don't care enough to look for the actual court filings.
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post #6 of 17
Quote:
Originally Posted by ankleskater View Post

Case in point - If I am not mistaken, Kodak couldn't conduct this fire sale of patents if it had not declared bankruptcy.

That's not true. If the patents are not owned by Kodak, then Kodak can't sell them even via bankruptcy court. The court can not allow Kodak to sell someone else's property (if it did, I'd file for bankruptcy and claim I own 10 acres of Manhattan and sell for a few billion dollars).

OTOH, anything that is Kodak's property can legitimately be sold with or without bankruptcy court. That includes partial interest. If Kodak and Apple each have part interest in the patents, Kodak can sell their interests. There are a couple of exceptions:

1. If they have a technology sharing agreement which gives Apple right of first refusal for the patents, then Apple has the right to buy them under the terms of the agreement, with or without bankruptcy.

2. If the technology sharing agreement says that Kodak can not sell the patents without Apple's permission, then Kodak could not do so in the normal course of business, but a bankruptcy court could order the sale. This is one of the few cases where a bankruptcy court could do something that Kodak couldn't do normally.

3. If some of the debt is secured by the patents, then Kodak would not be able to sell them in the normal course of business without approval from the creditor and a lien waiver. In bankruptcy, they could be sold, but it's not that simple. Secured debt takes precedence over unsecured debt, so if the creditors crafted their debt agreements properly, the creditors who have a lien on the patents should have priority - just as they would if Kodak hadn't filed for bankruptcy.

Of course, if Kodak wanted to have a fire sale of patents without going through bankruptcy, they'd have a few hurdles to clear. Such a major sale would have to be cleared by the board, and possibly by the shareholders. Any creditors with significant debt could object, although unsecured creditors would be unlikely to be able to block it.
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post #7 of 17
Even with the approval of the patent auction, whoever might be in the market to bid will certainly be spooked by the specter of Apple suing them if they win; poor Kodak might not be getting the kind of money they're hoping for. If Kodak hadn't played the patent troll card against Apple to begin with, I'd feel sorry that Apple was kicking them while they were down.
Edited by markbyrn - 7/3/12 at 6:08am
post #8 of 17
Quote:
Originally Posted by GTR View Post

Can somebody please tell me how a legal representative can give the go ahead for the sale of an item when the ownership of said item is still in contention?

 

And when was 'bankruptcy' considered part of a standard business advancement strategy?

 

Sheesh.

 

 

A judge gave the "go ahead".  Reorganizations under Chapter 7 (11?) of the bankruptcy code are very common.  It is a procedure designed to allow a company to continue in business by revising its debt structure, short of liquidation.

post #9 of 17
Quote:
Originally Posted by jragosta View Post


 If they are co-owners, the bankruptcy court can easily sell Kodak's interest in the patents (unless Apple has an agreement with Kodak offering right of first refusal) without affecting Apple's interest.
 
 

 

 

 

 

Quote:
buyers will be able to purchase the patents "free and clear of all ownership allegations" from either Apple or Flashpoint Technology.
post #10 of 17
Quote:
Originally Posted by JerrySwitched26 View Post


buyers will be able to purchase the patents "free and clear of all ownership allegations" from either Apple or Flashpoint Technology.

As soon as you show me a validated court decision that says that, it might be meaningful. You're quoting Kodak, not a court decision. Furthermore, Kodak's position is that Apple has no rights in the patents, so they clearly think they're providing the patents free and clear.

Furthermore, as I pointed out, Apple can appeal if the court is attempting to strip it of its legal rights.

One of the main premises of US law (and common law, for that matter) is that you can't take rights away from someone without their getting a chance to present their case. A bankruptcy court can not simply strip Apple's rights without Apple getting a hearing on whether they own some or all of the patents in question. If they could, I could file for bankruptcy and claim ownership of Google's headquarters and ask the court to order it sold to settle my debts. Obviously, that makes no sense - just as stripping Apple of its property in a Kodak bankruptcy doesn't make sense.
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post #11 of 17
I think some of what Apple is claiming is that they already beat these in court... So Kodak shouldn't be able to sell them. Causing a legal battle where the new buyer accuses Kodaks lawyers of malpractice to reopen the cases.

Something similar happened with the mp3 patents. After the suing was done and money paid, companies then sold the patents to new parties that had the patents retroactively removed from the previous suits... Then sued everybody that had already paid again. Apple sees it happening again.
post #12 of 17
Quote:
Originally Posted by ClemyNX View Post


Kodak currently has all the rights to sell whatever they please. On no grounds can anyone at the moment stop that procedure even if there is a 'contention' as you say.

 

Unfortunately that is true. HOWEVER I think the judge should have mandated that Kodak has to very clearly inform all potential buyers of said claims and exactly who is making the claim and what patents it involves. Because anyone that buys those patents just also bought a very likely law suit and if they are buying just for those patents they are going to be pissed if they weren't warned in advance. 

 

So let them sell but require full and detailed disclosure of the risks. if someone wants to go ahead, let them. 

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post #13 of 17
Quote:
Originally Posted by mabhatter View Post

I think some of what Apple is claiming is that they already beat these in court

 

They haven't beaten them in court because their defense is that they own them and that hasn't been heard in court yet. Which is part of the issue. Kodak is being given permission to sell these patents before the ownership is addressed by the courts. 

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post #14 of 17
Quote:
Originally Posted by mabhatter View Post

I think some of what Apple is claiming is that they already beat these in court... So Kodak shouldn't be able to sell them. Causing a legal battle where the new buyer accuses Kodaks lawyers of malpractice to reopen the cases..

Several problems with your statement:

1. Apple isn't making any such claim. There hasn't even been a hearing on who owns the patents, so no one has won.

2. Even if Kodak goes ahead with the sale, it's not clear that there are any grounds for a malpractice case against Kodak's lawyers. They are going on the basis of what they're told and Kodak clearly believes that they own the patents.

3. The current decision says that Kodak will be able to sell the patents, but that would leave them open to liability to Apple if a court later determines that Apple owns the patents. It would also make the new owner's rights questionable. However, that's not likely to happen. Apple will almost certainly get an injunction on the sale of the patents while waiting for a determination of ownership.
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post #15 of 17
Quote:
Originally Posted by jragosta View Post


That is very misleading. Apple can (and almost certainly will) appeal this decision.
Bankruptcy courts have a lot of leeway, but they can NOT sell something that is someone else's property. This article covers but one tiny skirmish in the battle. Apple still has time to put a stop to the sale.
Now, that's not to say whether Apple's claim has any validity or whether an appeals court will side with Apple. But if Apple really does own the patents, Apple should be able to convince the appeals court to stop the sale.
However, Apple claims to have 'an interest' in the patents - which suggests that they're not the sole owners. If they are co-owners, the bankruptcy court can easily sell Kodak's interest in the patents (unless Apple has an agreement with Kodak offering right of first refusal) without affecting Apple's interest. This article (as well as other articles on the subject) are not particularly clear on the matter - and I really don't care enough to look for the actual court filings.

 

And then there's ProView getting 60m from Apple in a settlement for IP that they clearly bought and paid for. The moral to this story is hoping to win in court is not always the best way to go because courts can do or say anything they like with shaky legal interpretation to back them up. Look at what the US Supreme Court did with healthcare. Sometimes the courts like to find a way out of something they personally don't like. You never can be sure what a judge or jury will do. The Italian warranty case also seems to screw Apple like this. Kodak and the bankruptcy court will eventually screw Apple too not because it is legal but because Apple has the money to pay and there is enough gray area in ambiguously written laws.

post #16 of 17
Quote:
Originally Posted by mabhatter View Post

I think some of what Apple is claiming is that they already beat these in court... So Kodak shouldn't be able to sell them. Causing a legal battle where the new buyer accuses Kodaks lawyers of malpractice to reopen the cases.
Something similar happened with the mp3 patents. After the suing was done and money paid, companies then sold the patents to new parties that had the patents retroactively removed from the previous suits... Then sued everybody that had already paid again. Apple sees it happening again.

 

 

Quote:
Originally Posted by jragosta View Post


Several problems with your statement:
1. Apple isn't making any such claim. There hasn't even been a hearing on who owns the patents, so no one has won.
2. Even if Kodak goes ahead with the sale, it's not clear that there are any grounds for a malpractice case against Kodak's lawyers. They are going on the basis of what they're told and Kodak clearly believes that they own the patents.
3. The current decision says that Kodak will be able to sell the patents, but that would leave them open to liability to Apple if a court later determines that Apple owns the patents. It would also make the new owner's rights questionable. However, that's not likely to happen. Apple will almost certainly get an injunction on the sale of the patents while waiting for a determination of ownership.

There are two different issues here. Apple did beat Kodak in court over some patents that Kodak was using to sue Apple. This particular ruling is over something else, as you all point out - that Apple may own some of the patents Kodak is trying to sell.

 

As I understand it, Apple and Kodak worked together developing those early digital cameras. Apple forgot about it for years, but when Kodak filed suit against Apple and also tried to put the patents up for sale, Apple found documents that explicitly gave Apple the future rights to the patents on the technology they worked on with Kodak. I don't know if the documents are totally clear, or if Kodak will argue that Apple lost its rights because it didn't defend the patents over the years, or if Kodak is just blowing smoke - they're obviously trying to get the sale approved without Apple having a chance to argue its case. Kodak seems to be doing everything it can to prevent a court hearing on the ownership question - it looks like an act of desperation, crying "bankruptcy" to avoid revealing the truth.

post #17 of 17

Apple hasn't dropped this one yet. In a court hearing today Apple has 

"argued a federal judge should transfer a Kodak lawsuit against the iPhone-maker out of bankruptcy court.

Apple told U.S. District Judge George Daniels at a court hearing today in Manhattan that Kodak’s complaint over patent ownership should be considered in federal district court."

http://www.businessweek.com/news/2012-07-26/apple-seeks-to-move-kodak-patent-case-out-of-bankruptcy-court

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