Thursday, June 23, 2011

Eastman Kodak v. Apple and RIM: target date for ITC decision postponed by one week

[Update] The ITC has surprisingly given notice that the target date for the decision has been extended by one week. It's now June 30, 2011. This could either be due to a delay on the ITC's part or a way for the ITC to give the parties more time to negotiate a settlement. [/Update]

The ITC was slated to issue today its decision in the investigation it instituted last year at Eastman Kodak's request against Apple and BlackBerry maker Research In Motion (RIM). The investigation's official title is "Certain mobile telephones and wireless communication devices featuring digital cameras, and components thereof" (investigation no. 337-TA-703). As the title shows, this is about the cameras built into smartphones -- but in a software (not hardware) sense: Kodak is asserting an image preview patent.

In this blog post I'll now discuss certain aspects of this dispute ahead of the decision, on which I will comment in a separate post once it has been issued.

Among other things, I'll also take a look at the patent claim at issue.

Surprisingly, no settlement (yet)

Disputes of this kind usually get settled before the ITC issues its final decision because defendants don't want to get to the point at which the ITC orders an import ban -- which is what could happen today.

For example, Kodak previously (in November 2008) filed an ITC complaint against Samsung and LG over the patent now at issue in the case against Apple and RIM, as well as other patents. On December 17, 2009, the Administrative Law Judge (ALJ) in charge of the investigation issued a so-called final initial determination (FID) in Kodak's favor. The FID can still be overruled by the ITC's highest decision-making body, the six-member Commission, which may or may not be the outcome of today's decision. LG settled with Kodak the day before the FID for $414 million, and Samsung, three calendar weeks later (considering Christmas, this was more like settling two business weeks later) for $550 million.

More recently, Apple settled with Nokia at a point that was just a few weeks away from today's situation in Kodak's case: after a FID that found no infringement of valid patent claims, the Commission had decided to take another look, and a decision was approaching.

So why hasn't it happened in this camera (image preview) patent case?

Both Apple and RIM are experienced in such processes. If they take risks, those risks are usually calculated and well-considered. The fact that neither of them has paid up suggests they are optimistic that the Commission will reaffirm the FID and/or they may believe that even if an import ban was ordered today, they could appeal this case to the Court of Appeals for the Federal Circuit (CAFC) and have such a ban stayed pending the appeal. In the latter case, Kodak would have to wait several more years, but it needs the money in the foreseeable future, which could give Apple and RIM some leverage.

Or maybe they are still negotiating and a deal will still happen at some point before the decision is issued. If the parties agreed on a license deal, an import ban wouldn't take effect anymore in practical terms.

Kodak's situation

131-year-old Eastman Kodak is a victim of technological change. It's not yet a victim in terms of having gone completely down the tubes, but it's a shadow of its former self.

A large part of Kodak's problem is that more and more consumers don't buy a digital camera as a stand-alone device anymore: they get it as part of a smartphone. The most demanding photographers still have needs that only dedicated camera devices can meet, but the mass market is fine with the many megapixels provided by today's smartphones, especially the ones at the higher end (such as Apple's iPhone and RIM's higher-end BlackBerry devices). Those consumers avoid the extra cost, weight and space requirements of a separate digital camera.

Similar effects may already affect other product categories such as alarm clocks, but probably not to the same devastating degree that Kodak and other camera makers have experienced.

This AP story contains a paragraph that describes Kodak's current economic dire straits:

Since 2004, Kodak has reported only one full-year profit — in 2007 — and expects another annual loss this year before crossing back to profitability sometime in 2012. It has trimmed its work force to 18,800 from 70,000 in 2002.

The article also talks about "four growth businesses" in which Kodak "is investing heavily". So the company hopes to find a future in one or more of those areas (workflow software, packaging, home inkjet printers and high-speed inkjet presses). It doesn't want to become just a patent troll, though a portfolio of 11,000 patents would certainly be a basis for that kind of business. Kodak looks for patent royalties to finance its transition. Of course, should that transition fail, then the world may get another patent troll, or another huge patent auction comparable to the one of the patents belonging to Nortel's bankruptcy estate (that auction is scheduled for this coming Monday).

As a tidbit, I have uploaded to this Scribd folder letters recently sent to the ITC by influential politicians from Kodak's home state of New York: Governor Andrew Cuomo, Senator Charles Schumer, Congresswoman Louise Slaughter and Congressman Tom Reed. Those letters stress the need for Kodak to generate income from patents to avoid layoffs. (I'd like to underscore that I have confidence in the independence of the ITC, which I believe will take a decision based exclusively on the merits of the case.)

Licensees of Kodak's digital imaging patents

In this recent press release Kodak listed the following licensees (not a complete list) of its imaging patents: LG, MEI/Panasonic, Motorola, Nokia, Olympus, Samsung, Sanyo, Sharp, Sony, and Sony Ericsson.

Those didn't all license those patents voluntarily. I mentioned Kodak's lawsuit against Samsung and LG before. Nokia was also sued and took a license to settle the case. (And possibly others, too.)

The image preview patent claim at issue

Kodak calls itself a pioneer of digital photography (which I think is true) and claims that 1,000 of its 11,000 patents relate to digital imaging technologies. But in this case, we're not talking about thousands of patents -- it's now all about just one patent, and even of that one everything depends on only one particular independent claim (Kodak also asserted in its original complaint several more claims dependent on that one): claim 15 of U.S. Patent No. 6,292,218 on an "electronic camera for initiating capture of still images while previewing motion images."

That title may sound like a hardware patent covering many technical aspects of digital cameras. But that's not the scope of the monopoly this patent represents (if valid) to Kodak. That scope is narrower.

In connection with yesterday's outrage over a broad multitouch-related patent granted to Apple I already emphasized (as quoted by PC Magazine's website) that a given patent claim is only infringed if the accused technology matches all of its characteristics at the same time. Let's look at what claim 15 of Kodak's patent-in-suit specifies -- and my in-line comments appear in italics:

An electronic still camera for initiating capture of a still image while previewing motion images on a display, comprising:

  • (a) an image sensor having a two-dimensional array of photosites covered by a mosaic pattern of color filters including at least three different colors for capturing images of a scene, each captured image having a first number of color pixel values provided in a first color pattern; [this is just one of the characteristics, so the patent doesn't cover all image sensors of this kind]

  • (b) a motion processor for generating from the captured images, a second number of color pixel values provided in a second color pattern having at least three different colors and representative of a series of motion images to be previewed, the second number of color pixel values being less than the first number of color pixel values, and the second color pattern being different from the first color pattern;

  • (c) a color display for presenting at least some of the motion images of the series of motion images corresponding to the captured images of the scene, the color display having an arrangement of color display pixels including at least three different colors in a pattern different from the first color pattern;

  • (d) a capture button for initiating capture of a still image while previewing the motion images presented on the color display; [all photo cameras have a capture button...]

  • (e) a still processor for generating a third number of color pixel values including at least three different colors representative of a captured still image; and

  • (f) a digital memory for storing the processed captured still image. [obviously any computer memory, such as the one found in smartphones, can store a "processed captured still image"]

So the key thing here is that Kodak obtained this patent on the idea of combining the usual elements of a digital camera with the concept of a preview image.

Out of 11,000 patents -- and 1,000 allegedly covering digital imaging -- this is the patent that Kodak hopes will give it leverage for what could be a billion-dollar deal with Apple and RIM.

There are also federal lawsuits in which Kodak asserts several additional patents. However, the ITC is Kodak's best bet for a quick but highly impactful decision.

The ALJ found in his FID that the patent claim was invalid because it was obvious as compared to existing prior art. In other words, the height of the claimed inventive step was insufficient. Digital camera technology may be inventive, but the idea of storing a preview image in memory was considered obvious.

The ALJ also doubted that the patent claim was infringed even if it was valid.

I have no position on the infringement question, but as a critic of software patents in general and trivial software patents in particular, I absolutely agree with the ALJ that this patent doesn't really add anything seriously inventive. It's a nice idea to have a still preview image, but technologically it's not really the kind of advance that I believe deserves the 20-year monopoly that a patent potentially is.

Unfortunately there are some important decision-makers who don't agree with me. The USPTO upheld this patent claim when the patent was reexamined. And in the aforementioned ITC investigation against Samsung and LG, that patent claim was deemed valid (and infringed by the two Korean vendors).

As patent reexamination expert and experienced patent attorney Scott Daniels points out on his WHDA Reexamination Alert blog (the one I recommend to anyone interested in U.S. patent reexaminations), it will be interesting to see how the ITC takes the USPTO's reexamination decision into consideration. I believe this is also somewhat interesting in light of a recent Supreme Court decision (Microsoft v. i4i) related to the evidence standard required to have a patent considered invalid in a lawsuit.

On June 30 we should finally know more about patent quality standards and evidence standards related to the alleged invalidity of a patent... and we'll know if a billion dollars (or maybe even more) changes hands or if the fight continues in the federal courts.

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