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Kodak, Apple patent fight to remain in bankruptcy court

Fri, 07/27/2012 - 9:07am
Basil Katz, Reuters

Apple Inc lost on Thursday a bid to transfer its patent dispute with Eastman Kodak Co out of bankruptcy court, a move that could have complicated the photography company's plan to sell the technology.

U.S. District Judge George Daniels in Manhattan quashed Apple's bid to have him take up the patent dispute instead of the bankruptcy judge to whom the lawsuit was assigned.

In a lawsuit last month in U.S. bankruptcy court in Manhattan, Kodak said Apple, the largest U.S. company by market value, wrongly claimed to own 10 patents arising from work that the companies did together in the early 1990s.

Privately held FlashPoint Technology Inc also claimed ownership through an assignment from Apple, which spun it off in 1996, and is also a defendant, Kodak said.

The patents include technology that helps camera owners preview photographs on LCD screens.

They are part of Kodak's digital-capture portfolio, which the company said includes more than 700 patents for devices such as digital cameras, smartphones and tablets, and has generated more than $3 billion in revenues since 2001.

In the case before bankruptcy judge Allan Gropper, Kodak has argued that Apple's claims to the patents are time-barred and are designed to cloud an expected auction of the patents in early August. Gropper has yet to rule on the matter.

"These issues are teed up before judge Gropper," Kodak lawyer Brian Glueckstein said at Thursday's hearing. "The claims were barred years ago."

District Judge George Daniels, at the end of Thursday's day-long hearing, said he agreed with Kodak that the dispute should remain in bankruptcy court, at least until the judge there rules on some of the key issues.

Gropper should have "an opportunity to render a decision on the motion and to have an opportunity to control and move forward the process," Daniels ruled.

Apple lawyer Gregory Arovas argued that the dispute involves substantive patent law, which would be best addressed by a federal district judge and required "mandatory withdrawal to district court."

Kodak owns about 10,700 patents overall and has hired Lazard to help market the digital-capture portfolio and a digital-imaging portfolio, which includes more than 400 patents. It said more than 20 possible buyers have signed confidentiality agreements.

Patent sales are needed under terms of a $950 million loan that Kodak obtained to keep operating while in bankruptcy.

Rochester, New York-based Kodak filed for Chapter 11 bankruptcy protection on January 19.

Apple is based in Cupertino, California, and FlashPoint is headquartered in Peterborough, New Hampshire.

The cases are Eastman Kodak Co v. Apple Inc et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-ap-01720 and Eastman Kodak Co v. Apple Inc et al, U.S. District Court for the Southern District of New York, No. 12-cv-4881.

The main bankruptcy case is In re: Eastman Kodak Co et al in the same court, No. 12-10202.

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