Eastman Kodak adopted a poison pill on Monday to preserve its tax assets, as it looks to sell its valuable intellectual property portfolio and reduce the tax hit from any gain on that sale.

A poison pill, or shareholder rights plan, is also used to protect the company from an unwanted takeover. Under the poison pill, if any person or group tried to acquire 4.9 percent or more of Kodak's outstanding shares, Kodak could issue more shares to dilute its ownership.

The American icon, which coined the once-ubiquitous it's a Kodak moment catchphrase, has labored for years to convince Wall Street it can turn a profit as it shifts toward digital technology and away from its ailing film business.

Many investors now see Kodak's value in its lucrative portfolio of intellectual property.

Kodak stock, which hovered in the $90 range in 1997, currently trades at $2.42, a 40 percent drop over the past 12 months after it consistently missed its own targets.

Kodak shares were up 0.4 percent at $2.41 on Monday, after rising as much as 3.8 percent earlier in the session.

The company said its tax assets were valued at about $2.9 billion as of December 31, 2010. Kodak's ability to pay lower taxes would be substantially limited if there were an ownership change, Kodak said in a statement.

An ownership change would occur if a Kodak shareholder who owns 5 percent of shares collectively increased ownership in Kodak by more than 50 percentage points over a three-year period.

The announcement comes about two weeks after Kodak said it was shopping around its patents for digital imaging, which represents about 10 percent of its U.S. patent portfolio.

A Kodak spokesman on Monday said the company has not made any progress with a patent sale yet.

As for the patents, we are early on in the process and there is nothing new to report at this time. When there is something to report we will update the market accordingly, Kodak spokesman Gerald Meuchner said.

Any money Kodak makes from the sale of its patents could be taxed if Kodak did not preserve its net operating loss through this plan, said Rafferty Capital analyst Mark Kaufman.

There's a big tax burden on the sale of these patents. One of the values of Kodak is that you can sell these assets and not have to pay taxes on gains, Kaufman said.

Kaufman added that the plan could be used as a poison pill against a hostile takeover or a party taking a large stake in the company becoming an activist investor. An ownership change would wipe out Kodak's ability to be taxed less.

What this does is deter activist shareholders from gaining a large stake in the company and it discourages a potential hostile takeover, Kaufman said.

Meuchner, the Kodak spokesman, told Reuters that we are not aware of any interest to acquire the company at this time.

Private equity firm Kohlberg Kravis Roberts has a $400 million investment in the company as well as two seats on Kodak's board.

Wachtell, Lipton, Rosen & Katz is acting as Kodak's legal counsel while Lazard Ltd , its adviser on its patent sale, will be its financial adviser, Kodak said.

(Reporting by Liana B. Baker, editing by Dave Zimmerman)