Another patent auction coming?

Rumors are flying that Kodak is getting ready to file for bankruptcy. And, according to the Wall Street Journal, the focus of the bankruptcy proceedings will be a court-supervised auction of Kodak’s patent portfolio. Kodak has been trying to sell enough of its patent portfolio to stay out of bankruptcy. But, according the Journal story, “Efforts to sell the portfolio have been slowed by bidders’ concerns that Kodak might seek bankruptcy protection.” With the new rumors, bankruptcy might just have become a self-fulfilling prophesy: the company needs the sell the patents to stay out of bankruptcy but buyers are not buying because they are afraid the company will go into bankruptcy.
There may be another dynamic at work as well. As the Journal story also points out, “Advisers told Kodak a filing would make its patent sale easier and likely allow the company to command a higher price, people familiar with the matter have said.” As I noted in an earlier posting, Kodak is under pressure from creditors to make sure they maximize the value of the patent sale. With visions of the Nortel court-supervised $4.5 billion auction, these creditors may think that a bankruptcy auction is the way to go. But, as experts have noted (see IAM Blog, M-CAM report and WSJ article), the Kodak portfolio is nowhere near as valuable as the Nortel patents. Should the bankruptcy move ahead and the court-supervised auction not live up to expectations, there may be some nasty second-guessing.

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