Update: Sun, Kodak Settle Java Patent Dispute

A federal jury in Kodak's hometown decided last Friday, after a three-week trial, that Java infringes on patents Kodak acquired when it bought Wang Laboratories Inc.'s imaging software business for $260 million in 1997.

The night before the trial's damages phase, which was to begin Thursday, the companies ended their two-year-old battle in an out-of-court settlement.

Without admitting or denying the allegations, Sun Microsystems said it will pay Kodak $92 million to settle all claims in the dispute. In exchange, Sun said it receives a license for Java under all Kodak patents.

"The settlement assures customers worldwide that Sun will stand behind its products and intellectual property, and eliminates any uncertainty that could result from a protracted lawsuit and appeal," the Santa Clara, Calif.-based company said.

"We are eager to put this punitive litigation behind us," added its president, Jonathan Schwartz.

Describing the settlement as tentative, Kodak's senior vice president, Willy Shih, said the photography company was "pleased that the court has validated these fundamental Kodak patents."

Kodak had been prepared to request $1.06 billion in lump-sum royalties - equal to half Sun Microsystems' operating profit from sales of computer servers and storage equipment from January 1998 to June 2001.

"I'm a bit skeptical that Sun's true exposure was $1 billion dollars or more," said Glenn W. Peterson, an intellectual property lawyer with McDonough Holland and Allen in Sacramento, Calif. "If I have no other reason to be skeptical, the settlement amount is reason enough."

Sun Microsystems made its name selling servers that tie desktop computers together and host Web sites. Java, which it developed and first introduced in 1995, allows software to run on a variety of computing platforms, regardless of the operating system, including cell phones and other portable devices.

Sun Microsystems not only denied that any portions of Java infringe on Kodak's patents but argued that the patents were invalid.

Kodak's patents describe a method by which a program can "ask for help" from another application to carry out certain computer functions - which is similar, it argued, to the way Java operates.

Peterson said he worries that software patents are headed in "a somewhat anticompetitive direction."

"Some regard software patents as, if you will, trespassing into the realm of protecting thoughts and abstractions and ideas rather than inventions, machinery and processes," he said.

Kodak has in recent years been more assertive about protecting its intellectual property as it endeavors to turn hundreds of patents to its advantage in accelerating its transition from film photography into digital imaging.

Sun has been struggling since the dot-com collapse to bolster sales as systems based on inexpensive microprocessors and the Linux operating system become more powerful and more viable. The company has earned little from Java.

Kodak shares rose 1 cent to close at $34.26 on the New York Stock Exchange. Sun shares fell 8 cents to close at $4.23 on the Nasdaq Stock Market.

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