Eastman Kodak Co. (EK) won the latest round in its patent dispute with Apple Inc. (AAPL) and Research In Motion Ltd. (RIMM), a victory with the potential to generate more than $1 billion in new licensing revenue for the camera company.
Kodak rose as much as 25 percent in late trading after the U.S. International Trade Commission said it will review a judge’s findings from January that Apple’s iPhone and RIM’s BlackBerry don’t violate Kodak’s patent on a way to preview digital images using less processing power and storage space. The ITC, which can block imports of products that violate U.S. patents, plans to make a final determination by May 23.
Kodak, the 131-year-old company that popularized photography with the Brownie and Instamatic cameras, may be able to extract $1 billion from Apple and RIM should it win the case, Chairman and Chief Executive Officer Antonio Perez said in an interview yesterday. His figure was based on the combined $964 million received from settlements reached with Samsung Electronics Co. and LG Electronics Inc. (066570) over the same patent.
The patent covers a feature that previews low-resolution versions of a moving image while recording still images at a high resolution. Higher resolution requires more processing power and storage space. Kodak, which generated $838 million from patents last year, contends the image-preview feature is used in every digital camera and phone with a camera.
Apple and RIM denied infringing the patent and argued it was invalid. ITC Judge Paul Luckern on Jan. 24 agreed with the companies on both issues. Kodak, based in Rochester, New York, challenged that finding.
The six-member commission in Washington told the companies today to present arguments on five issues, including whether Luckern should have considered a judge’s interpretation of the patent in the Samsung and LG case, and the result of a review by the U.S. Patent and Trademark Office upholding the patent.
Gerard Meuchner, a spokesman for Kodak, said the company was pleased with the decision “and we look forward to the next step in the process.”
Kodak, which had lost almost half its market value in the past year, rose to $4.06 at 5:58 p.m. New York time and reached $4.24 after closing at $3.40 in regular New York Stock Exchange composite trading.
Kristin Huguet, a spokeswoman for Cupertino, California- based Apple, said the company doesn’t comment on pending litigation. Officials with Waterloo, Ontario-based RIM couldn’t be reached to comment.
The ITC is a quasi-judicial arbiter of trade disputes. While the agency can’t order monetary damages, the threat of being shut out of the U.S. market often provides the incentive for settlements.
Kodak used the ITC to gain $550 million from Samsung and $414 million from LG. In that case, a different ITC judge sided with Kodak, and the phonemakers settled before the full six- member commission ruled on the case.
Kodak has told investors it expects to average $250 million to $350 million in annual revenue from intellectual property licensing through 2013. That figure doesn’t include potential Apple and RIM royalties.
The company in January reported 2010 revenue of $7.2 billion, about half the total from 2005, and said two of its three main businesses had losses from continuing operations before interest expense, taxes and other charges.
Perez, CEO since 2005, has said he is using proceeds from intellectual property licensing to invest in the company’s inkjet printing, packaging and software units to blunt falling revenue from camera film.
A related civil lawsuit is pending against Apple in a federal court in New York. Both Apple and RIM have filed lawsuits against Kodak.
The case is In the Matter of Certain Mobile Telephones and Wireless Communication Devices Featuring Digital Cameras, and Components Thereof, 337-703, U.S. International Trade Commission (Washington).