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Friday, March 02, 2012, 06:36 am PT (09:36 am ET)

Kodak sells online business to Shutterfly, patent sale held up by Apple dispute

As bankrupt Kodak looks to sell off its assets and streamline the company, it has sold its online photo business to Shutterfly for $23.8 million, while the sale of about 1,100 digital patents remains on hold because of a patent dispute with Apple.

The Kodak Gallery service, which allows user to store and share their pictures online and create custom printouts, has more than 75 million users, according to Reuters. But the $23.8 million transaction is a minor deal compared to the $2 billion Kodak's patent sale could fetch.

That sale is scheduled to begin by June 30, but the matter has been complicated because of an ongoing dispute with Apple over one of its patents. Last month, Apple asked for approval to sue Kodak from U.S. Bankruptcy Court in New York.

Next week on March 8, a bankruptcy judge will hear Apple's motion to move forward. The iPhone maker has asked the court to lift an automatic stay that was placed on pending litigation after the company filed for Chapter 11 in January.

Apple has contended that it is the rightful owner of one of the patents Kodak is looking to sell. The dispute stems from a partnership between Apple and Kodak in the early 1990s, in which Apple says it disclosed "confidential digital camera technology to Kodak subject to various non-disclosure agreements." The terms of the agreement stated that "any improvements Kodak made to Apple's disclosures remain the property of Apple."



Apple released the $749 QuickTake 100 camera, which has been called the first consumer digital camera. The company also released the QuickTake 200 in 1997 before exiting the digital camera market following the return of co-founder Steve Jobs to the company.

In filings with the court, Apple has asserted that it "became aware in 2010 that Kodak had misappropriated Apple's technology and sought patents of its own claiming this technology. That year Apple "launched an extensive internal investigation into Apple's prior relationship with Kodak relating to the development of digital camera technology."