Kodak wins Java lawsuit

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Kodak wins Java lawsuit

It returns to court next week to seek $1.06 billion in damages from Sun


What's at stake
Kodak will be asking a federal jury to award more than $1 billion in damages
in connection with a patent lawsuit. Analysts say the money could help
provide a financial cushion as Kodak shifts from chemical to computerized
imaging. 


Ben  <mailto:brand@democratandchronicle.com> Rand
Staff writer


(October 2, 2004) - 


Eastman Kodak Co. will return to U.S. District Court next week to seek $1
billion in damages from Sun Microsystems Inc. now that a federal jury has
ruled in its favor in a dispute over the Java computer language.

The jury decided in Rochester on Friday that Sun infringed on technology
belonging to Kodak when it developed and introduced Java more than a decade
ago. The computer language is now used heavily by software developers, on
the Internet and in computer schools.

Kodak praised the verdict and said it was part of an aggressive push to
convert innovations - both homegrown and purchased - into real money. The
company over the past several years has been issuing licenses, filing
lawsuits, forming spinoff companies and finding other uses for its
technologies.

"Kodak has and continues to make substantial technology investments to
ensure high-quality products," said Kodak. "We are pleased that the court
has validated Kodak's intellectual property rights protecting these valuable
innovations."

Rochester's largest employer claimed during a three-week trial that portions
of Java infringed on patents Kodak purchased from Wang Laboratories Inc. in
late 1997.

The patents describe a method by which a program can "ask for help" from
another application to carry out certain computer-oriented functions. That's
generally similar to the way Java operates, according to Kodak and other
experts.

Ironically, the verdict came a day after Sun introduced a new version of
Java. The company and some analysts hailed it as one of the most significant
upgrades since Java's introduction a decade ago.

Sun denied Kodak's patent infringement claims. The company argued in court
that Java did not infringe on the Kodak patents, and even if it did, the
patents were invalid.

The Silicon Valley giant on Friday said it would "put on a vigorous defense"
in the next phase of the trial, in which the jury will hear testimony to
help it determine how much Kodak should be paid. That phase begins sometime
next week.

Kodak in pre-trial documents indicated it would ask for $1.06 billion in
lump-sum royalties - a figure that represents half of Sun's operating profit
from the sales of computer servers and storage equipment between January
1998 and June 2001. The argument: Java provides the engine for such computer
equipment. Sun executives have publicly estimated that Java is a "key factor
in 90 percent of Sun's sales," Kodak said.

The damages phase will likely be sharply litigated, according to a local
patent lawyer. "Kodak will (probably) be urging for a broad royalty base and
a reasonable royalty, and I'm sure Sun will argue that the use was small and
the royalty base should be lower," said Thomas Fitzgerald, a patent lawyer
for the past three decades.

He noted that the case is "a big deal" because patents covering software are
a relatively recent phenomenon.

"In general, software patents are just coming into vogue," Fitzgerald said.

He said an appeal was likely.

The potential of a sizable verdict doesn't change Kodak's strategic
challenges, a local investment professional said. Kodak must continue making
progress on its plan to offset declining film sales with new businesses
built around digital imaging.

"The money doesn't make you a better company," said Christopher Hayes, chief
investment officer of Hayes-Fischer Capital Management Co. in Rochester.
"You just hope that it doesn't make them think, 'OK, we can take a rest.'
They still have their work cut out for them."

Still, Hayes said, the verdict helps extend an upbeat period for the
company. Kodak has boosted profits in each of the last three quarters, is
moving faster than expected in integrating acquired companies and has seen
its stock price surge about 60 percent in the last 12 months.

"It's finally nice to see the ball rolling after everyone went through a sea
of negatives," Hayes said.

brand@democratandchronicle.com