Kodak opposes Apple's bid to restart patent litigation

Kodak received an automatic stay on the litigation after it filed for bankruptcy

Eastman Kodak has asked a bankruptcy court to decide on its patent dispute with Apple, thus opposing a motion by Apple for permission to resume the patent litigation in another court.

Kodak, which filed for bankruptcy in January, said in a filing that the bankruptcy court for the Southern District of New York and not a separate court should decide on the ownership of the disputed U.S. Patent No. 6,292,218.

The chapter 11 cases would quickly become unmanageable, if ownership claims relating to the estate were litigated on a piecemeal basis in courts around the country, it said.

The '218 patent is concerned with an electronic camera capable of capturing still images while previewing motion images on a LCD (liquid crystal display).

Apple filed on Feb. 14 for relief from the court on the automatic stay on litigation during bankruptcy, and sought to transfer the case to the U.S. District Court for the Southern District of New York from the district court for the Western District of New York where the case is currently pending.

The patent dispute should be decided in a court with expertise in federal patent law, in the same district where the bankruptcy case is being adjudicated, and in a time-frame that will not unnecessarily delay the bankruptcy proceedings, Apple said.

Ailing Kodak entered into a US$950 million financing facility secured by its assets, including some of its digital imaging patents, which it is required to put up for sale by June. Last week it said that Shutterfly had agreed to pay $23.8 million, as an initial "stalking horse" bid in a court-supervised auction for the customer accounts of Kodak's online photo services business.

Apple said that unless the ownership dispute is decided, Kodak's proposed sale of its digital imaging portfolio, that includes the '218 patent, would be inappropriate and harmful to Apple. If the relief is granted by the court, Apple will also move the District Court for the Western District of New York court to lift a stay arising from concurrent proceedings before the U.S. International Trade Commission, and transfer the case to the District Court for the Southern District of New York.

In addition to the '218 patent, Apple holds it is the owner of other Kodak patents as well.

"The Debtors agree that Apple's claim that it owns the '218 patent (and potentially other undisclosed Kodak patents)--a claim plainly designed to interfere with the Debtors' efforts to sell valuable property of the estate--should be resolved promptly," Kodak said in its filing.

But Apple's ownership claims, along with any other claims by third parties that they own patents included in Kodak's digital imaging portfolio, are claims that can and should be resolved by the bankruptcy court, it added.

"Apple's preferred course of action--to ask another court to decide the critical issue of what constitutes property of the estate and how that property is to be used to maximize value for creditors--should be rejected," Kodak said.

The company, which earlier consented to lift the automatic stay to allow patent litigation against Research In Motion to proceed in Texas, said that decision had no bearing on Apple's motion. The litigation against RIM is on the eve of trial, and RIM owes Kodak "hundreds of millions of dollars in damages" for infringement, and the decision was seen to be in the best interests of the estate, it said.

Kodak said its digital imaging patents, including the '218 patent, is property of the estate that has been valued at between $2.2 billion and $2.6 billion by a company interested in licensing the patents. A strategic bidder may place a higher value on the portfolio, it added.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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