Kodak preparing for bankruptcy ahead of possible patent sale

Eastman Kodak could seek bankruptcy protection and is considering selling a large number of its patents in an effort to raise money to avoid this fate, according to reports.

Citing sources familiar with Kodak's bankruptcy plans, The Wall Street Journal said Kodak is speaking to banks about borrowing $1bn to keep the company going if the initial patent sale fails to raise enough money to avoid bankruptcy proceedings.

Kodak first spoke about selling some of its patents in October last year after revealing its third quarter sales had fallen 17 per cent to $1.46bn, while its fourth quarter sales are expected to be revealed at the end of January.

However, The Wall Street Journal said Kodak may have to sell up to 1,100 patents under a court-supervised auction if bankruptcy proceedings go ahead.

V3 attempted to reach Kodak for comment, but the company did not respond.

The firm has been embroiled in legal battles with both Apple and Research and Motion (RIM) over the use of some of its patents in the cameras used in the firm's smartphone devices.

As such, a patent sale could be of particularl interest to mobile firms seeking to gain an advantage over their rivals and protect themselves from threats of litigation.

Kodak has suffered ongoing financial decline since 2004 and in 2005 it shifted its focus from film sales to printers and the ink business. The strategy shift required a large amount of investment and caused the business to burn through its cash reserves.

The company also cut its workforce to 19,000 employees from 70,000 in 2002. The biggest loss of employees came in 2004 when Kodak announced it would stop selling traditional film cameras in Europe and the US and axed 15,000 jobs.

Furthermore, in October 2011, Kodak was forced to deny it was going to file for bankruptcy, despite confirming it had hired lawyers who specialise in bankruptcy protection cases.