Yesterday, bankrupt and beleaguered Kodak was told by an ITC judge that Apple and RIM do not infringe one of its key digital imaging patents. The commission issued a preliminary decision which found that Kodak’s US patent no 6,292,218 was invalid due to the obviousness of one of its claims. The Rochester-based company considers its patent assets to be a saving grace.

Kodak's already unhealthy share price slid by almost 27% overnight as news of the ITC decision emerged. Because of its Chapter 11 filing, the company is required to begin an auction process for its patents by the end of June. The patent-in-suit is seen as a key component of the company’s digital imaging portfolio, and the invalidity finding could frustrate efforts to put a stalking horse bidder in place. At the very least, valuations of the portfolio may have to be slashed considerably if Kodak wants a quick sale. But while the ITC ruling may dampen interest from potential purchasers, perhaps it actually presents an opportunity for a well-informed and adventurous buyer.

It may turn out that Kodak’s patents are not  worth what the company thought (and hoped) them to be. However, there are a few things to keep an eye on which might attract the type of buyer who is willing and able to take a gamble.

Most importantly, yesterday’s decision was an initial determination by the ITC’s Administrative Law Judge (ALJ) Thomas B Pender, meaning that Kodak has a window to appeal against his findings before the full ITC panel makes its final determination in September. This particular complaint has already been through the ITC once before. That time, too, the initial decision was that the patent was invalid. But the panel was unable to come to a final determination and decided to send the case back to the preliminary stage for review. Although Kodak’s patent has again been found to be invalid, the ALJ also made a point of saying that certain Apple and RIM products would infringe the patent if the claim found to be obvious was, in fact, valid (see page 3 of his notice here). That could indicate that ALJ Pender perceived a very fine line between invalid and infringed.

Furthermore, an ITC determination of invalidity does not have a preclusive effect on later court proceedings. Thus, the patent in question might still be found to be valid and infringed by a federal district court, even if the ITC’s final decision is one of non-infringement. So although Kodak may not be able to shut out imports, this patent could still have significant licensing and sale potential.

With all this in mind, the news may create an opportunity to pick up a good quality IP portfolio at a cut-price – especially if one of your goals is to ensure that others do not get their hands on it. That said, it would be a very bold and risky purchase – in addition to this complaint, Kodak has other litigations continuing in the federal courts and the ITC, and it remains to be seen how those turn out. Though a favourable decision in any of these cases may see a rally in share price, that won’t be particularly good news for Kodak. The company would clearly have wished for a favourable ITC decision by now so that it could whet appetites before the proposed auction. Instead, its best hope may be that it can sell its risk-ridden IP at a discount. That will not be pleasing to its stakeholders, many of whom will be wondering why all these issues were not sorted out a long time ago.

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Licensing, IP litigation, Patents, IP business, IP valuation