Kodak Wins Approval to Auction Digital Imaging Patents

Today, Eastman Kodak Company ("Kodak") obtained approval from the Bankruptcy Court to conduct an auction to sell its Digital Capture and Kodak Imaging Systems and Services (KISS) patent portfolios.

Kodak’s motion was contested by Apple, Inc. ("Apple") and FlashPoint Technologies, Inc. ("FlashPoint") which have asserted “ownership” interests in a small number of the 1,100 patents in the portfolios. The Bankruptcy Court, over Apple and Flashpoint’s objections, found that all of the patents in the Digital Capture and KISS patent portfolios are property of Kodak’s estate. Accordingly, the Court granted Kodak the right to sell these patents free and clear of Apple and FlashPoint’s claims at the auction, subject to the applicable provisions of the U.S. Bankruptcy Code.

“We are gratified that the Court has enabled us to move ahead with our patent auction in a timely manner and with clarity on ownership for the winning buyer,” said Timothy Lynch, Kodak Vice President and Chief Intellectual Property Officer. As previously announced, interested buyers will be able to submit bids on a confidential basis, subject to review by Kodak, certain of its creditors and the Bankruptcy Court. The auction is expected to be held in early August.

Kodak is selling the patents under section 363 of the U.S. Bankruptcy Code which permits a sale free and clear of any adverse claim or interest. The patents will be sold in a fair, competitive process overseen by the Bankruptcy Court. At closing, the winning bidder can obtain an order of the Bankruptcy Court that protects it against any third-party ownership claims.

The Bankruptcy Court’s ruling provides a path to separate the auction process from continuing litigation about the Apple and Flashpoint claims. Kodak believes these claims are without merit, and is also seeking a determination on summary judgment, expected to be heard in July, that the claims are time-barred.

Lynch said: “The Apple and FlashPoint claims are baseless and Kodak will still seek dismissal on summary judgment in July. However, today’s ruling provides a Court-approved process allowing buyers to acquire the patents free and clear of all ownership allegations, regardless of the status of the dispute with Apple and Flashpoint at the time of closing.”

Even if the dispute with Apple and FlashPoint has not been fully resolved by the time of closing of the patent sale, Kodak may still sell the patents free and clear of Apple and FlashPoint’s claims by establishing “adequate protection” under the Bankruptcy Code for Apple and Flashpoint at the time of sale. Kodak’s adequate protection could take many forms depending on the value of any remaining alleged interests, the amount of the sale proceeds, and other factors. Alternatively, the Bankruptcy Court also authorized Kodak to sell the patents subject to Apple and FlashPoint’s claims, if mutually agreed between Kodak and the winning bidder.

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This document includes "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning the Company's plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, liquidity, financing needs, business trends, and other information that is not historical information. When used in this document, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," “predicts,” "forecasts," or future or conditional verbs, such as "will," "should," "could," or "may," and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management's examination of historical operating trends and data are based upon the Company's expectations and various assumptions. Future events or results may differ from those anticipated or expressed in these forward-looking statements. Important factors that could cause actual events or results to differ materially from these forward-looking statements include, among others, the risks and uncertainties described in more detail in the Company's most recent annual report on Form 10-K for the year ended December 31, 2011, and quarterly report on Form 10-Q for the quarter ended March 31, 2012, under the headings "Business," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" and those described in filings made by the Company with the U.S. Bankruptcy Court for the Southern District of New York and in other filings the Company makes with the SEC from time to time, as well as the following: the outcome of our digital imaging patent portfolio auction; the outcome of our intellectual property patent litigation matters; our ability to raise sufficient proceeds from the sale of non-core assets and the potential sale of our digital imaging patent portfolios within our plan; the ability of the Company to continue as a going concern; the Company’s ability to comply with the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) covenants in its Debtor-in-Possession Credit Agreement; the ability of the Company and its subsidiaries to develop, secure approval of and consummate one or more plans of reorganization with respect to the chapter 11 cases; the Company’s ability to improve its operating structure, balance sheet, and profitability following emergence from chapter 11; the potential adverse effects of the chapter 11 proceedings on the Company's liquidity, results of operations, brand or business prospects; the Company's ability to generate or raise cash and maintain a cash balance sufficient to comply with the minimum liquidity covenants in its Debtor-in-Possession Credit Agreement and to fund continued investments, capital needs, restructuring payments and service its debt; our ability to maintain product reliability and quality; our ability to effectively anticipate technology trends and develop and market new products; and the impact of the global economic environment on the Company. There may be other factors that may cause the Company's actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to the Company or persons acting on its behalf apply only as of the date of this document, and are expressly qualified in their entirety by the cautionary statements included in this document. The Company undertakes no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.