Apple and Google Join Forces for $500 Million Kodak Patent Bid

Yeah, we know. Neither of these companies is a lamb. But it's that time of year when Biblical parables seem appropriate.

The notion of those whose interests do not appear aligned combining to mutual advantage in the intellectual property and patent world is not uncommon. Apple, Microsoft and RIM bought Nortel's patents last year.

The strategic question is what the mutual advantage might be that would encourage ostensibly fierce competitors to align. The benefit here is that it reduces the chance of potentially distracting and expensive infringement litigation in the future.

The reality is that as graphics become more important, particularly in mobile, having access to some of the seminal technology patents is an advantage both operationally and legally. Kodak's exit from bankruptcy has been predicated on this sale, though the price has dropped since it was first announced earlier in the year.

The sale, assuming it goes through, marks the passage of initiative from Twentieth Century tech dominance to that of the Twenty-First. It is fitting that these companies, leaders in their own right, assume this mantle. But beyond the soapy symbolism, this also suggests that fight for future success will be rooted in some of the powers of the past. From a financial perspective, this implies that the residual value of current innovations may also have longer life and greater value than our fascination with the new and the next might have led one to believe. JL

Serena Saito, Beth Jinks and Brian Womack report in Bloomberg:

Apple Inc. (AAPL) and Google Inc. (GOOG) have joined forces to offer more than $500 million to buy Eastman Kodak Co. (EKDKQ)’s patents out of bankruptcy, said two people with knowledge of the situation.

The two companies, competing for dominance of the smartphone market, have partnered after leading two separate consortia this summer to buy Kodak’s 1,100 imaging patents, said the people, who asked not to be identified because the process is private. Unlikely partnerships are typical in patent sales because they allow competitors to neutralize potential infringement litigation. A group including Apple, Microsoft Corp. (MSFT) and Research in Motion Ltd. bought Nortel Networks Corp.’s more than 6,000 patents for $4.5 billion out of bankruptcy last year. Google lost the auction for those patents after making an initial offer of $900 million.

The Apple-led group pursuing Kodak’s patents included Microsoft and Intellectual Ventures Management LLC as of this summer, the people said, while Google’s consortium included patent aggregation firm RPX Corp. and Asian manufacturers of Google’s Android phones.

Niki Fenwick, a spokeswoman for Mountain View, California- based Google, said the company doesn’t comment on rumor or speculation. Christopher Veronda, a spokesman for Rochester, New York-based Kodak, declined to comment on the patent sale, citing a court-ordered confidentiality agreement. Kristin Huguet, a spokeswoman for Cupertino, California-based Apple, declined to comment.

Debtor Financing
The Wall Street Journal previously reported that a consortium offered more than $500 million for Kodak’s digital patents.

Kodak obtained commitments for $830 million exit financing last month, contingent on its sale of the digital imaging patents for at least $500 million.

The 132-year-old photography pioneer filed for bankruptcy protection in January, listing $5.1 billion in assets and $6.75 billion in debt. The company plans to exit bankruptcy in the first half of 2013.