UPDATED. A ruling today on whether or not Apple (s aapl) and Research in Motion (s rimm) violated a patent held by Kodak (s ek) could add more than $1 billion in revenue to the camera company’s bottom line, according to Kodak CEO, Antonio Perez (via Bloomberg), but only if a court overturns an existing ruling against Kodak.
Update: The ITC has ruled that it will review the judge’s findings from January that say RIM and Apple don’t violate Kodak’s patent. The ITC will deliver a final decision by May 23.
The U.S. International Trade Commission (ITC) will be the ultimate arbiter of Kodak’s fate in this matter. Judge Paul Luckern already ruled in January that Apple and RIM weren’t in violation of Kodak’s patents, which describe a system for image-previews on camera phones. However, Kodak settled with Samsung and LG for allegedly infringing on the same patent, netting a total of nearly $1 billion from the two companies in combined royalty payments after those companies were faced with the possibility of being shut out of the U.S. cellphone market.
While the ITC can’t assign punitive monetary measures in cases like this, it can block the imports of products it finds infringe on U.S. patents, which means the iPhone and BlackBerry devices could be blocked from sale in the U.S. if the ITC finds in Kodak’s favor. Because that would mean an immense amount of lost revenue, companies often opt instead to settle in advance of a ruling and avoid an injunction. The decision today will determine whether or not the ITC will review the judge’s January findings, and if it does, a final decision on the matter would be forthcoming by May 23.
The stakes are high in this case, but much more so for Kodak than for the companies it’s claiming infringed on its patents. A win for Kodak means significant boost to its overall revenue picture, since the resulting royalties would be pure profit without any overhead outside of legal fees for the case. Jim Kelleher, an analyst with Argus Research points out that “most of Kodak’s operating businesses lose money,” so an IP income stream this significant would add considerably to the $838 million it made from patents last year. Income from patent royalties continues to eclipse the revenue Kodak takes in from its other lines of business, including cameras, printers and software. We reached out to Kodak for comment on what a loss would mean for the company’s business, but have yet to hear back. We’ll update as necessary.
If the ruling goes against Kodak, it could potentially cut off the company’s ability to lay claim to any other patent revenues related to the use of camera phone previews. In 1989, for example, Kodak lost a patent battle with Polaroid regarding instant photography, and essentially had to cede the then-lucrative market entirely to Polaroid. Digital images eventually steamrolled the instant camera space, but Kodak still missed out on billions in potential revenue.
Apple and RIM have countersued Kodak in federal court, and Apple filed a complaint against Kodak with the ITC, too, following Kodak’s original complaint submission. Apple and RIM stand to take a hit on their gross margins if Kodak succeeds, but if the photography company fails, it stands to lose much, much more.