Kodak Climbs After Favorable Patent Dispute Recommendations

Eastman Kodak Co. soared 15 percent after favorable recommendations by the staff of the U.S. International Trade Commission in a patent dispute with Research In Motion Ltd. and Apple Inc.

The staff sided with Kodak’s arguments that RIM and Apple infringed a patent on a way to preview digital images using less processing power and storage space. The recommendations, filed last month, were made public yesterday. The six-member commission, scheduled to release a decision June 23, doesn’t always follow the rulings of the office within the agency that acts as a third party in its cases.

Kodak, the 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 March 24.

Kodak, based in Rochester, New York, is “looking forward to the full ITC’s decision,” David Lanzillo, a company spokesman, said by e-mail. Steve Dowling, a spokesman for Cupertino, California-based Apple, declined to comment. Marisa Conway, a spokeswoman for Waterloo, Ontario-based RIM, didn’t reply to messages seeking comment.

Interpreting Wording

ITC Judge Paul Luckern found in January that neither Apple nor RIM infringed the patent. A key part of the review by the commission is considering whether the judge’s interpretation of wording in the patent claim was correct. In the April 15 filing, the staff sided with Kodak on three of five disputed phrases and said in conclusion that “these claim terms no longer provide bases for non-infringement.”

Earlier in the document, the staff disagreed with Kodak on two other phrases, and said they “would still provide a basis for a finding of non-infringement as to Apple’s iPhone 3GS and iPhone 4.”

Kodak climbed 48 cents to $3.60, the biggest jump since April 8. The shares have tumbled 33 percent this year.

The staff said that, should a violation be found, the ITC could bar imports of Apple’s iPhone and RIM’s Blackberry without harming the public interest or competition in the smartphone marketplace.

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.

Printing Investments

Perez, Kodak’s 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.

The patent in dispute 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.

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).

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