Saturday, July 21, 2012

Samsung paid Kodak $550 million for a patent license -- Apple only has legal fees thus far

There a major imponderabilities in patent litigation. Companies that face the threat of an injunction or its ITC equivalent, an exclusion order (i.e., import ban) have tough choices to make. As a general trend, defendants now tend to stand their ground for much longer. For a long time, the vast majority of patent lawsuits in the United States got settled ahead of trial. Now there are more companies than ever that defend themselves not only against nuisance lawsuits (litigation brought by trolls that have weak cases and will settle for less than the cost of a proper defense) but also against serious attacks by large and well-known businesses.

Late on Friday, the ITC announced its determination to dismiss Eastman Kodak's digital camera patent action against Apple and BlackBerry maker Research In Motion. The trade agency's top-level decisions makers agreed with the Administrative Law Judge (ALJ) in charge of the investigation that the accused RIM products and the iPhone 3G (an import ban on which would have had very limited impact on Apple's business at this stage) infringe claim 15 of U.S. Patent No. 6,292,218 on an "electronic camera for initiating capture of still images while previewing motion images", but they also agreed with the ALJ that this patent claim was invalid. Another ALJ had found that patent invalid before, but his decision was remanded and, after his resignation, assigned to another ALJ. The finding of invalidity has now been affirmed "on modified grounds".

The Kodak bankruptcy estate could appeal this decision to the Federal Circuit, and that may very well happen. But Apple is now in a strong position. So far it has only incurred legal fees, and if the Kodak bankruptcy estate wanted to settle now, Apple would probably pay only a very limited amount in order to avoid litigation over other patents and the uncertainties that come with an appeal.

It's a safe assumption that Apple's total bill for its "Kodak moment" is going to be a small fraction of the $550 million that its major rival in today's smartphone market, Samsung, coughed up for a patent license from Kodak in early 2010. But in all fairness, Samsung came under pressure that Apple never experienced in its dispute with Kodak.

On December 17, 2009, an ALJ made an initial determination that found Samsung to infringe two Kodak patents, the '218 patent that has now (but not back then) been held invalid and another one, U.S. Patent No. 5,493,335. Samsung's co-defendant was another Korean company, LG. And LG was so scared of the initial determination that it settled, for $414 million dollars, on the eve of that preliminary ruling. Two days after the ID, Samsung agreed to negotiate again, and a few weeks later, in January, the companies announced the conclusion of a royalty-bearing license agreement. This article, which was published much later, states the figure paid by LG as well as the $550 million that Samsung ended up paying.

Not only are companies now more willing to let cases go to trial but they're also ever less ready to back down because of initial determinations by ALJs. After an initial determination, there's a Commission review, and even the final ITC decision can be appealed to the Federal Circuit.

Kodak has claimed all along that it invented digital photography and therefore thinks it's entitled to substantial payments. I don't want to disparage or belittle what this once-great company did. It's sad enough how his business has gone down the tubes. But as far as that '218 patent is concerned, I can only say: good riddance!

If Apple, RIM, Samsung, LG and others had actually infringed some real technological creation by Kodak, such as some highly complex technology at the heart of the sensors that make cameras work, then I would accept, in principle, the notion that someone has to pay for it. But the '218 patent has nothing whatsoever to do with serious, hard-core technology.

For a point of reference, here's the wording of the relevant claim (claim 15), along with comments from me in brackets -- but if you have a hard time understanding it at first because of all the technical terminology, just skip to my explanation:

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"]

While that patent claim mentions a lot of real technology, especially sensors, none of that was novel at the time Kodak filed for this patent. All of this was simply prior art that Kodak combined in a novel way. So what's the benefit of this particular combination?

The basic idea is that on the one hand you can have a low-resolution preview on a screen of a small device (be it a dedicated digital camera or a multifunctional smartphone), which is a "motion" preview because it is constantly refreshed as you move the device, and on the other hand you can then press a button and capture a high-resolution still image. That's it. The "invention" is that you take existing sensors, an existing capture button, an existing screen, and you show on the screen, in a low resolution, what you can capture in a high resolution. And you store it in memory, which is also none of Kodak's inventions.

But unless you have some legalistic reason for arguing non-infringement (for example, one of Apple's defenses had to do with the mechanism of actually capturing, arguing that newer iPhones didn't really capture the image only when the button is pressed but already had the higher-resolution version available in memory anyway), there wouldn't be a practical way to steer clear of infringement. The image that the user will ultimately get is always going to have a far higher resolution than the preview screen -- at least for all of the foreseeable future and certainly well beyond the expiration date of this patent (December 2014).

Distilled to its essence, this patent really made no contribution whatsoever to imaging technology. If this is the best patent that Kodak has (I doubt it, but it's what Kodak's lawyers apparently thought after the favorable initial determination in 2009), its creditors shouldn't expect it to extract much value out of its patent portfolio.

Now that I've criticized a patent that was asserted against Apple, I also want to mention that on Friday, the day of that ITC decision, I also criticized the inventive height (in technological terms) of Apple's "overscroll bounce", or "rubber-banding", patent. But the overscroll bounce patent was a brilliant idea resulting from outside-the-box thinking, even if there isn't any serious technology involved in making it work. Kodak's '218 patent, however, is a combination of pre-existing components that anybody would have combined in the same way since the preview screens of small devices simply don't offer as high a resolutions as the images that today's cameras generate.

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