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Apple and RIM May Have to Pay the Kodak Piper

There was a time that Kodak's (EK) intellectual property was ultimately placed into little yellow boxes of film. Now it's placed into licensing agreements and, sometimes, legal complaints filed in New York. And now Kodak is going after both Apple (AAPL) and RIM (RIMM) over an imaging patent, which might ultimately send the two smartphone makers to their checkbooks. Because if the company is successful in its action before the International Trade Commission, it could get an injunction against iPhones and Blackberrys being imported into the U.S.

Back when those little yellow boxes were everywhere, Kodak had a fine revenue stream. As things have moved to digital imaging, its fortunes have suffered. And yet, Kodak has a lot of protected intellectual property, including a patent on previewing images that has proven significant legal clout to bring Sun Microsystems (JAVA) to a settlement a few years ago, and to get the ITC last December to rule in its favor over Samsung.

Kodak says that it has been negotiating with both of the companies for a number of years, but with no success. According to Peter Strand, partner at Shook, Hardy & Bacon, and vice-chair of the commercial litigation committee of DRI, a professional organization of lawyers who defend in civil litigation, filing the complaint with the ITC may be a negotiation tactic. "I imagine both Apple and RIM, as soon as they saw the Samsung result, knew this would be coming," he says.

That's not to say that Kodak couldn't lose, with either RIM or Apple getting the ITC to rule them non-infringing or even saying that the patent was invalid. But given that the previous ruling by the same body was in December, the defendants would have a large hurdle to clear. "There's huge weight behind a prior find of validity and enforceability," says Strand. "I think the odds-on likelihood would be settlement with the payment of a royalty. Unless Kodak is being piggish about it and either RIM or Apple feels it has some real good basis for invalidity or infringement. But the question is why are they smarter than the last 20 people who messed with this thing. And it's human nature for judges to look and say, 'Why are you putting me through this?'"

There's 30 days for the ITC to decide on whether to begin an investigation, a step that Strand says is likely. Given that both Apple and RIM have their products built outside the U.S., should Kodak prevail, it could literally keep new iPhones and Blackberrys from entering the country.

It appears that Kodak has been following a ladder-type legal strategy, going after smaller companies and building to larger ones. Given that Nokia and Kodak agreed to patent cross licensing in 2008, that would leave both RIM and Apple as two of the last companies standing, which is not a good position.

"It could be the classic situation where you're the first one in your industry, so you'll get it cheap, but if you're the last one, we're going to kill you," Strand says. "The last man standing usually gets hammered."

Gavel image via Flickr user Thomas Roche, CC 2.0.

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