By Joseph Checkler
A judge on Thursday denied Apple Inc.'s (AAPL) bid to move a
patent dispute with Eastman Kodak Co. (EKDKQ) out of bankruptcy
court.
Kodak said after an eight-hour hearing Thursday that Judge
George B. Daniels ruled against Apple and former subsidiary
Flashpoint Technologies Inc., which argued that bankruptcy court
"does not have the authority or necessary expertise to decide" who
owns 10 patents in dispute, which are considered very valuable in
Kodak's coming auction of its digital-patent portfolio.
"We are pleased the District Court has denied Apple and
Flashpoint's motion at this time and that the Court believes an
undisrupted, efficient auction process under the supervision of the
Bankruptcy Court is appropriate," Kodak said in a statement. "Our
work continues toward a successful auction next month."
The decision means the case filed by Kodak against Apple in
front of U.S. Bankruptcy Court Judge Allan L. Gropper will
continue.
Apple didn't immediately respond to a request for comment.
The two sides have for years been wrangling over the patents,
but the fight has now taken on especially high stakes. A Monday
deadline looms for bidders looking to buy Kodak's portfolio of more
than 1,000 digital patents, the sale of which will determine
whether the company can successfully restructure. Any buyer must
factor in the uncertainty of the valuable patents Apple is fighting
for and the litigation surrounding them.
According to Kodak, its digital-camera technologies have been an
important factor in the success of Apple's iPhone, iPad and iPod
Touch products. Its portfolio of digital patents, worth between
$2.2 billion and $2.6 billion, according to Kodak, includes one
patent for a digital camera that can capture an image while a
preview appears on an LCD screen.
That is one of the patents to which Apple now claims ownership,
a move Kodak says comes nine years after the patent was issued and
almost 20 years after the companies' joint work on digital-camera
technology. Courts' preliminary decisions have been mixed.
Last week, the International Trade Commission ruled against
Kodak in a complaint that Apple and Research in Motion Ltd. (RIM.T,
RIMM) infringed on a patent, a ruling Kodak is appealing to a
Federal Circuit Court. But Kodak was successful on another ruling a
few days later, when a federal appeals court upheld a previous ITC
decision that an Apple patent wasn't infringed upon by Kodak.
Kodak, based in Rochester, N.Y., filed for Chapter 11 protection
in January after failing to sell its patents outside of a
bankruptcy. The company's once-central photography-driven business
became marginalized by increased digital competition, and it
struggled with high labor and pension costs.
The way Kodak sees it, getting out of bankruptcy hinges on the
sale of the patents, for which the company hopes to hold an auction
in August after the qualifying bids are sorted out. Kodak is
counting on the sale of those patents to pay its creditors.
In February, Kodak said it will close its camera business, which
makes digital cameras, pocket video cameras and digital picture
frames, in a move that could save it $100 million annually. Kodak
envisions a reorganized iteration of the company as one that
focuses on retail and desktop-inkjet printing rather than
photography.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Joseph Checkler at joseph.checkler@dowjones.com.
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