## Facts

- Eastman Kodak Company and affiliates filed Chapter 11 petitions in the Southern District of New York.
- Kodak sought to reorganize in part through a planned sale under 11 U.S.C. § 363 of a portfolio of digital imaging patents.
- Ownership of ten key patents was disputed, including a patent already involved in prepetition litigation between Kodak and Apple.
- Apple and FlashPoint asserted ownership or co-ownership interests based on alleged contributions and prior development or assignment arrangements.
- Kodak moved for relief under 11 U.S.C. § 105(a) “in aid of” the planned sale, aiming to remove the cloud of the asserted ownership interests so the patents could be sold on an expedited timetable.
- After argument, the bankruptcy court issued a prompt decision denying the requested relief.

## Issues

1. Whether 11 U.S.C. § 105(a) authorizes a bankruptcy court to grant relief that effectively adjudicates or neutralizes third-party patent ownership claims to facilitate a debtor’s proposed § 363 sale.
2. Whether asserted co-ownership of patents can be treated as a sale-clearing “interest” that may be displaced or channeled without a full adjudication of title.

## Decision

- The court denied Kodak’s motion for relief under § 105(a).
- The court held that § 105(a) is not an independent source of authority to confer substantive rights or to bypass the requirements and limits of the Bankruptcy Code.
- The court determined that Apple’s and FlashPoint’s assertions were ownership claims, not merely liens or payment claims that could be handled through sale mechanics.
- The court found that the expedited sale-support posture was not a procedurally adequate vehicle to decide complex patent ownership issues.
- The court left Kodak to pursue a sale of assets it could convey, and to address the ownership disputes through appropriate litigation or resolution mechanisms.

## Legal Principles

- Section 105(a) permits orders necessary or appropriate to carry out specific provisions of the Bankruptcy Code, but it cannot be used to create, expand, or restructure substantive rights.
- A debtor cannot convey property free of a genuine, disputed ownership interest merely by invoking bankruptcy equitable authority; ownership disputes require proper adjudication of title.
- Treating third-party ownership assertions as interests that automatically attach to proceeds is improper where the dispute concerns whether the debtor owns the asset at all.
- Procedural fairness limits the ability to resolve complex, fact-intensive intellectual property ownership questions through expedited sale-related motions.

## Conclusion

The bankruptcy court refused to use § 105(a) as a shortcut to clear contested patent ownership claims for a proposed § 363 sale, holding that equitable authority cannot substitute for a proper determination of title and that complex ownership disputes require adequate process before a debtor may sell assets as unencumbered.


In re Eastman Kodak Co., No. 12-10202 (ALG) (Bankr. S.D.N.Y. 2012)