In the latest round of patent frenzy, Eastman Kodak has finally begun the auction of 1,100 digital patents or 10 percent of its entire portfolio. That could be a reason why shares jumped as much as 26 percent while the overall market plunged Thursday.

Kodak, founded by George Eastman in 1878, is no longer seen as the growth company of yesterday, when every family had a Kodak camera and film, and the Rochester, N.Y. -based company reaped in a steady stream of profits, almost like an annuity stream.

The company has been under shareholder scrutiny for years to unlock value. It even poached the CEO of Motorola, George Fisher, to turn it around. When he failed, Kodak went to Hewlett-Packard and in 2005 brought in printer czar Antonio Perez to save it.

Trouble is, Kodak has tallied up losses exceeding $2.5 billion as Kodak has lost its lead in cameras to Japanese vendors like Canon and Nikon; it's competing in printers vs. HP and Lexmark, Epson and others.

The patents could be valued as high as $3 billion, estimates MDB Capital, an intellectual property investment bank. Kodak's banker, Lazard, has not discussed their value. At stake are patents for digital imaging that are part of the smartphone craze that created the wireless patent boom, in which Apple and its partners laid out $4.5 billion for IP from Nortel Networks and Google said it would acquire Motorola Mobility.

Here's why this auction matters:

Old-line companies are sitting on a gold mine. That's the claim made by James Malackowski, chairman of Ocean Tomo, the Chicago IP investment bank that was involved in the Nortel auction. A drug maker like Pfizer, founded in 1849, which owns patents for Viagra and Lipitor, has thousands of them.

So do companies like Dow Chemical, founded in 1897, and Boeing, founded 1916, which has long been No. 1 in aerospace and defense patents.

Ocean Tomo's Malackowski said in an interview this week more and more boards of directors who've watched the situation are clamoring for maximizing IP.

It's a benefit for shareholders: long-term investors in Kodak have had to be extremely patient. The stock once traded above $94, compared to around $3 now. Selling some of the patents will bring in cash but Kodak can keep licensing others to smartphone makers and others. The royalties can assure new income.

Auctions should stimulate more research: the U.S. economy needs to grow faster, so one way should be through research and innovation. Employees at Kodak, Dow, and HP have patented products for decades. Maximizing their value should be a boon to their employers today.

Two of the greatest inventions of the 20th century were the transistor, patented in 1947 by AT&T and the microprocessor, patented in 1959 by both Texas Instruments and Fairchild Instruments. The Fairchild inventor was Robert Noyce, a co-founder of Intel.

New companies may be more dynamic than the patent sellers: some of the corporate bidders are still young companies. Apple was founded only in 1976, Google in 1996 and Microsoft in 1975.

Apple had licensed technology from Kodak for its iPhone, a product that Kodak itself could have invented had it had been more innovative under ex-Motorola chief Fisher. But it didn't.

Nortel Networks, the last vehicle of Northern Telecom, had once been one of the stars of the telecommunications sector, tapping its Bell Northern Research much like AT&T depended upon Bell Laboratories. But the Canadian company collapsed due to poor management.

Whoever buys the Kodak IP will surely use it in products George Eastman might have invented if he were still around.

Auctions may lessen lawsuits: rather than sue each other, in patent litigation cases that cost an average of $3 million, estimates New York patent lawyer S. Gregory Boyd, companies can sell technology or license it.

Rather than sue or lodge complaints to the U.S. International Trade Commission, as Apple has about Samsung Electronics, a sale and potential license deal is faster, cleaner and cheaper than litigation.

Some tech companies, like memory designer Rambus, have relied upon litigation when their engineers found competing products that had stolen their technology. But the usual manner is for companies to either strike a royalty arrangement or cross-license deal that keeps everyone happy.

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