Apple to Kodak: Punch Me One More Time. I Dare You!

It's a pretty typical reaction if someone punches you to punch them back. I didn't even grow up with any brothers or sisters, but I still know that's an unwritten rule that might as well be set in stone.

The same goes for the business world. There's only so much pushing and shoving you can do with some of the biggest names on Wall Street before they begin to fight back. That's exactly the way Apple (Nasdaq: AAPL  ) felt when it asked for permission yesterday from the New York City bankruptcy court to file a countersuit against Eastman Kodak (OTC: EKDKQ) for copyright infringement. Although Apple doesn't need a judge's approval to file the lawsuit, it is asking nonetheless "out of an abundance of caution."

Specifically, Apple is targeting alleged violations of its technology used in Kodak's printers, digital cameras, and digital picture frames. Does this sound familiar at all? Well it should, because Kodak filed a similar lawsuit against Apple and Research In Motion (Nasdaq: RIMM  ) in January 2010 alleging that its preview-imaging patents were being infringed upon. Just last month, Kodak also filed a lawsuit against Apple, HTC, Fujifilm, and Samsung over image-transmitting patents that it feels are being infringed upon by these companies' smartphones and tablets.

This isn't Kodak's first time with patent infringement lawsuits. CEO Antonio Perez has made suing rivals a core business strategy for the past few years. It successfully reached a settlement with LG Electronics in 2009 and Samsung in 2010 (regarding a different patent than in the lawsuit filed last month), but has not had the same success with the strategy against Apple and RIM.

In an even odder twist, despite the ongoing patent dispute with Apple and RIM, as part of Kodak's restructuring effort, it plans to completely abandon the digital camera market and instead go toe-to-toe with Hewlett-Packard (NYSE: HPQ  ) in making printers. It's not surprising that the company is ultimately headed in that direction given that Perez surrounded himself with many former HP officers.

With roughly 1,100 patents currently in its portfolio, and only one small deal recently struck with IMAX (Nasdaq: IMAX  ) to license some of its cinematic patent technology, Kodak is going to have no choice but to begin unloading some (or all) of its digital-imaging patents at some point. The IMAX deal isn't big enough to move the needle and shouldn't be seen as a boon for the future. A victory over RIM, Apple, or both would definitely strengthen the price it receives for its patent portfolio -- but I wouldn't count on that happening.

Kodak decided to play with the industry bull, and now it's getting the horns. Needless to say, it's going to be interesting to see how this shoving match plays out.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He still believes in the "you punch me, I punch back" philosophy. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and IMAX, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that believes in pacifism.


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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.

  • Report this Comment On February 16, 2012, at 7:27 PM, trysson wrote:

    How dirty does Apple play? Apple kicks Kodak when it is down.

    Apple has decided to crush an iconic American company rather than pay struggling Kodak for intellectual property.

    One thing that every American hates is to kick a person when he is down. Another thing that can be said about Americans is that they tend to favor the underdog.

    Apple, the company with 100 billion dollars in cash, refuses to negotiate in good faith regarding certain Kodak claims that were settled with Kodak by other companies. Apple filed meaningless litigation against Kodak earlier, only to see that litigation dismissed by the court. Rather than negotiate, Apple again kicks Kodak, and files additional litigation.

    No doubt Apple is going to attempt to run Chapter Eleven Kodak out of business. Is this the new American way of doing business, or is it just the We-Are-Too-Big-To- Sue way?

  • Report this Comment On February 16, 2012, at 7:51 PM, sharpx2 wrote:

    re: Apple kicking Kodak - - I would have to know a lot more about the specific merits of the claims on both sides. There is so much trolling going on in the world of patents; just because other companies have settled does not mean that the claims are inherently meritorious. Sometimes it is just easier to settle than to fight. Apple does have an army of lawyers (they need them,) and may or may not have a point in countersuing. Without more specifics the above comment just seems to side with Kodak (poor Kodak) against the perceived big bully. Maybe what is said is true, but there is nothing to substantiate the allegations presented.

  • Report this Comment On February 16, 2012, at 8:12 PM, lowmaple wrote:

    As the article states when you play that game against a behemoth you may get stepped on. Also Kodak can go out of business through it's own actions.

  • Report this Comment On February 16, 2012, at 10:27 PM, hiddenflem wrote:

    are corporations people? the comment above makes it sound like they are. so funny seeing apple being cast as the evil empire after years of being the whipping boy.

  • Report this Comment On February 17, 2012, at 12:58 PM, eastmankodick wrote:

    Like most corporations, Apple has evil aspects. Greed has pushed them to manufacture at the lowest cost regardless of the human costs.

    With regards to the lawsuits, Kodak invented the digital camera. I don't see how any device that captures a digital image can do so without stepping on one of Kodak's patents. These corporations need to pay-up. Pirates!

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