Kodak's Digital Struggle

Today is my son's birthday. Like millions of other proud parents, I'll be snapping digital photos throughout the day. Now, Eastman Kodak (NYSE: EK  ) says it wants to crash our party.

This week, the photo pioneer took Sony (NYSE: SNE  ) to court on infringement claims over 10 patents related to digital photography and video camera technologies. Published reports say Kodak has been negotiating with Sony about licensing its intellectual property since 2001. Sony says it has not violated any patents and will defend itself.

It's easy to understand Kodak's rationale for the suit. After all, millions in revenue could be at stake. Kodak says it has license agreements with more than 10 camera makers, including Olympus and Sanyo. Sony, however, is the big dog on the block. Market researcher IDC says Sony was the top seller of point-and-shoot digital cameras in the U.S. last year, shipping 3.6 million units.

Digital photography is also a fast-growing business. The Photo Marketing Association International says 42% of U.S. consumers will own a digital camera by the end of 2004, up dramatically from 31% during 2003. Indeed, a check of Amazon's (Nasdaq: AMZN  ) electronics store this morning shows two of the top five sellers overall are digital cameras from Canon (NYSE: CAJ  ) .

So far, investors don't seem pleased with the news. Shares of Kodak were down nearly 2% by yesterday's closing bell. That's understandable. So far, 2004 has been the year of patent lawsuit as business strategy. But there are some key differences here, and Fools shouldn't be too quick to criticize Kodak management.

First, the suit is targeted, unlike SCO Group's (Nasdaq: SCOX  ) scorched earth approach. Second, it comes after three years of talks. Lastly, the upside could be huge, especially if Kodak were to get a cut from every digital camera sold.

Want a cut of the action in your investments? GiveMotley Fool Income Investora try risk-free for 30 days.

Motley Fool contributor Tim Beyers is contemplating a patent for his unique Italian macaroni and cheese recipe. He doesn't own shares in any of the companies mentioned here.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 506194, ~/Articles/ArticleHandler.aspx, 4/24/2014 12:44:29 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement