Eastman Kodak will license about 50 patents to Imax to allow the entertainment provider to expand projections in its specialized giant-screen. The news may have sent Kodak shares up 7 percent in Monday trading.

To start, Kodak will receive $10 million upfront from Imax, then tap into a royalty stream that could reach another $50 million, reports said.

The deal with Imax, based in Mississauga, Ontario, came as Kodak's auction of as many as 1,100 old patents continues. That auction, managed by Lazard, had been tabbed to bring in at least $2 billion, bolstering the ailing photography giant which has not reported a profitable quarter since 2008.

Last month, Wall Street speculation had Rochester, New York-based Kodak filing for bankruptcy, a move it denied contemplating after hiring Jones Day for legal advice on Sept. 30. Subsequently, Kodak has continued to make regular bond payments and meet other obligations. The 131-year-old company is scheduled to report third quarter results Nov. 3.

In late morning trading, Kodak shares were at $1.33, up more than 7 percent. Still, the former blue-chip stock has lost 75 percent this year. Its market capitalization has fallen to only $355 million.

CEO Antonio Perez has repeatedly said the company can turn around. After watching high values for patents from Nortel Networks and IBM in auctions earlier this year, the company decided to test whether old patents might be more valuable to companies in the smartphone, camera and imaging sector.

By contrast, the patents licensed to Imax are current and are intended to permit the giant-screen operator to display digital images on screens larger than 80 feet, perhaps reaching 100 feet, said Imax CEO Richard Gelfond.

Currently, most Imax theatres depend on 70 mm film.

Rivals including chip giant Texas Instruments, also have similar technology for digital movie projection.

Meanwhile, longtime Japanese rival Fujifilm sued Kodak in U.S. District Court in New York, alleging infringement of four patents, including one related to digital imaging and another that can compress color images. Trial date has not been set.

Imax shares Monday fell 3 percent to $16.86. They have lost 40 percent since Jan. 3.