News

Sun's Kodak moment: Patent suit settled out of court

• By John K. Waters
• October 11, 2004

Sun Microsystems has agreed to pay Eastman Kodak $92 million to settle an intellectual property dispute between the two companies, Sun disclosed last week. The announcement came just days after a federal jury found that Sun had infringed on three of Kodak's object-oriented software patents when it created Java.

Both companies behaved like winners after the announcement. Sun admitted no guilt and emphasized the upside of getting out from under a cloud of potential fear, uncertainty and doubt.

"We are eager to put this punitive litigation behind us, to have reached a decision in the best interest of our stockholders, customers and employees, and to focus our future activities on the evolution of the Internet and Sun's place within it," Sun CEO Jonathan Schwartz says in a statement.

For its part, Kodak called the agreement "tentative" and played up the jury's finding. "We are pleased that the court has validated these fundamental Kodak patents, and we now look forward to building a more productive relationship and continued collaboration with Sun," says Willy Shih, a Kodak senior vice president.

The lawsuit involved patents Kodak acquired when it bought the software-imaging unit of Wang Laboratories in 1997. Kodak sold the Wang organization two years later, but claims to have kept the patent rights.

Kodak was seeking more than $1 billion in royalties in the suit, so the agreement to settle all pending litigation for less than $100 million seems like a bargain. The deal gives Sun a license under all Kodak patents for the benefit of its Java technology and under the patents in the lawsuit for any and all purposes.

"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," Sun says.

The industry impact of this settlement is still unfolding, but the outcome of the trial has heightened concerns about software patents. Industry watchers have criticized the verdict, saying Kodak's patents covered techniques that had been around since the 1960s. One of the patents in question describes a way for a piece of software to ask for help from another application.

"It seems ridiculous to me that you can patent this kind of concept," Gartner analyst Mark Driver tells eADT. "It's so vague."

Some critics have faulted Sun for "caving in" to Kodak's demands, but Driver sees it as a strategically sound move. "I'm surprised Sun paid, but it was probably a good move," he says. "Drawing out [the decision] would have been enough to create fear, uncertainty and doubt around Java and Sun's products, so it was in their best interests to clear things up as quickly and definitively as possible."

Kodak's claims against Sun may have been settled, but other vendors, including Microsoft, are still potentially vulnerable. One of Kodak's patents governs the means by which two cooperating processes in a data-interchange operation identify each other and the data formats they have in common. These processes are used in Java, but also in other object-oriented programming languages, such as Microsoft's C#, which is at the heart of the .NET platform.

However, when it comes to patents, the potential victims are often the potential perpetrators. Microsoft itself is known to have patented similarly vague processes. Bruce Perens, executive director of the Desktop Linux Consortium and an outspoken critic of software patents, points to Microsoft's practice of patenting "vague things," such as organizing photo albums by date and basic computer/user interactions, such as the double click, as potentially dangerous to the open-source movement.

"Patents are everywhere," notes Gartner's Driver. "What we have had is a kind of mutually assured destruction -- a software detente. But that's changing as more and more software is becoming commoditized. I think we can expect to see an awful lot of these kinds of suits as more and more people scramble to get their money while they can."