October 5, 2004

Commentary: Kodak had its moment, but Sun not done yet in the courtroom

Author: Chris Preimesberger

Yesterday we noted that more and more companies are heading to the courts to sue other companies in intellectual property disputes involving software, because they believe they can get away with it -- whether they're in the right or not. Eastman-Kodak Co. is the latest corporate bully to test the legal waters. In the culmination of a three-week-long case, a federal jury in Kodak's hometown of Rochester, N.Y., ruled that Sun violated a patent that Kodak held. But hold on -- this case is far from over.

The court made its decision even after considering the fact that Kodak acquired the patents on which it based its case from Wang in 1997 -- two years after Java was released to the marketplace and six years after its initial development at Sun. What is wrong with this picture?

The patent concerns the ability of a program to "ask for help" from another application, which has always been a central talent of Java. The jury ruled that the method Java uses to process byte code utilizes the same techniques described in Kodak's patent. Used in a broad sense, this could also affect other similar technologies, including Microsoft's .Net.

"Kodak has made and continues to make substantial technology investments to ensure high-quality products," crowed Kodak spokesman James Blamphin in a statement. "We are pleased that the court has validated our intellectual property rights protecting these valuable innovations for the benefit of our customers and shareholders."

Naturally, Sun's legal team denied Kodak's patent infringement claims and argued that Java did not infringe on the Kodak-bought patents, and even if it did, the patents were invalid. Sun responded that 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 will return to court to ask for lump-sum damages of more than $1 billion in past royalties it says it is due.

This is a big-time federal case. I find it hard to believe Sun's legal team didn't already pursue a vigorous defense in this first round of litigation. Apparently it wasn't vigorous enough. This is not a case Sun should lose. If I'm Chairman Scott McNealy or CEO Jon Schwartz, I'm already in the Yellow Pages looking for new counsel -- and quick.

Sun must now wish it had never gone to bed with Kodak on several special projects back in the late '90s. Sun said it was an indication of Kodak's implied consent when the two companies partnered using the same technology at issue in the lawsuit.

Some partner, that Kodak. The camera company contends that Sun stabbed it in the back with a technology developed and marketed by Sun itself in the early '90s.

A 'function of modern computing' at issue

Critics say the patent should never have been issued since it describes an essential, and widespread, function of modern computing. Opponents of software patents claim that this verdict demonstrates that software patents can cause unforeseen problems and will lead to a chilling effect on technology innovation.

This lawsuit is the action of a desperate company. Although it has rebounded somewhat in the last 12 months, Kodak has been in trouble for a long while. As the biggest single employer in Rochester, it had been laying off workers slowly but surely for more than 10 years. The entire local economy was affected by this; thus, a sympathetic local jury wasn't hard to identify. Kodak needs the damages awarded in this case to bolster its shift from a chemical firm to a digital photography manufacturer.

Kodak has been successful overall for more than a century, but it has been slow in realigning its business model to embrace digital imaging. The Sonys, Canons, and Olympuses of the world have long since passed it. But having little or no corporate vision is no excuse for taking on a company that actually has stayed out in front of international competition in its own field for more than two decades.

The larger problem, though, is that of software patenting. Pamela Jones of Groklaw wrote Monday that "Kodak won Friday, thanks to a patent system spinning out of control, one that is destroying creativity and innovation in the software industry. Software has not always been covered by patent law, and it's not a statute that made it happen, but a case decision. That means it can change back. Case law is changed by someone bringing a case that makes it obvious to the court that change is needed. Somebody needs to do something about this problem, before it becomes impossible for anyone to write software unless they have a pile of billions on hand to pay out in case they get sued for patent infringement."

IP litigation is now out of control

There's no question that litigation involving intellectual property of all kinds is getting way out of hand, so much so that it looks inevitable that the highest courts in the world (are you listening, Supreme Court?) are going to have to produce judgments that bring some reality back into the picture. The Record Industry Association of America (RIAA) is another entity that is getting far too big for its britches and needs a good, solid, legal kick in the posterior. I can think of a few software companies that also need a swift boot in the same area.

However, I believe all is not lost in this case. Sun, with a change to more aggressive counsel, should be able to make an appeals court (not located in Rochester, N.Y., for crying out loud!) see that this indeed is a meritless case, bought on by a company desperate to stay alive.

Intellectual property attorney Dan Ravicher of New York told me in an email message he had no comment on the merits of this case, "However, due to the high reversal rate of patent cases upon appeal, this finding of liability does not provide much clarity to the true impact this patent will have on Sun, much less the industry as a whole -- especially when one considers that liability isn't as important as damages, which have yet to be determined, and that this is a Kodak victory on its home court.

"We'll have to wait and see if and what damages are awarded (they may likely be no more than a reasonable royalty) and whether the Federal Circuit agrees with the trial court's claim construction (an issue that the appellate court frequently reverses trial courts on). However, it is perhaps beneficial for Sun to see firsthand how harmful the patent system can be to innovation and technology, since they are generally pro-software patent."

All of us are learning a lesson as we go along. Right, Sun?

Category:

  • Legal
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