IP Licensees and the Kodak Bankruptcy, II

Kodak’s recent bankruptcy filing raises a host of issues relating to intellectual property. Foremost among these is the need for any Kodak patent licensees to diligently monitor the on-going proceedings to ensure their rights are preserved in the thousands of patents in Kodak’s portfolio. Among these are some 1,150 digital imaging patents slated to be auctioned later this year.

U.S. bankruptcy laws provide the framework for dealing with patents owned by a debtor. In particular, section 365 of the Bankruptcy Code provides that Kodak, as the “debtor-in-possession,” has the right to assume or reject its “executory” contracts, contracts where the parties owe each other ongoing material obligations. Nearly all the patent licenses at issue likely will qualify as executory contracts. If Kodak rejects such an executory contract, the licensee may seek to collect damages for breach of contract, but any relief would be as an unsecured creditor, which typically is the lowest priority among other creditors.

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