Shutterfly sues to shut down Kodak photo app

A general view of the now mostly unused Kodak factory in Rochester, New York, January 1, 2013.

REUTERS - Photo service Shutterfly Inc (SFLY.O) has sued to shut down an Eastman Kodak Co (EKDKQ.PK) app that lets users purchase photo albums made from pictures stored on Facebook Inc's (FB.O) social media network, according to court documents.

Shutterfly bought the Kodak Gallery online photo business for $23.8 million last year, and as part of the deal Kodak agreed not to set up a duplicate business, according to court documents.

Shutterfly said in a complaint filed on Friday with the U.S. Bankruptcy Court in Manhattan that the "My Kodak Moments App" violates the sale agreement by setting up a competing business.

The app allows users to choose photos on Facebook to create an album which is then printed and sent to the consumer.

The complaint also alleged it is powered by the same technology that powered the business that Shutterfly purchased.

A Kodak spokesman did not immediately respond to a request for comment.

Kodak filed for bankruptcy early last year.

It said on Friday it had closed on its $848 million finance package that helps prepare it to exit bankruptcy in the middle of this year. The company plans to focus on its commercial imaging business after it reorganizes.

The case is In re: Eastman Kodak Co et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-10202.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Carol Bishopric)