As an update to the story we posted on the 1st of March about Kodak suing several manufacturers over patent infringement, it looks as though they have come to an agreement with Sanyo and dropped the suit against the others. This involves a cross licensing pact whereby Sanyo will offer access to the Kodak Internet picture processing systems.

Kodak in Camera Pact with Sanyo, Drops Patent Suit

NEW YORK (Reuters) - Eastman Kodak Co. (NYSE:EK - news) on Thursday said it has reached a cross licensing pact for digital photography with Japanese camera maker Sanyo Electric Co. Ltd. (6764.T), a move that could strengthen Kodak's transition toward selling services related to digital cameras.

Financial terms were not disclosed.

Kodak, the world's No. 1 maker of photographic film, also withdrew a suit that charged Sanyo and several of its customers with infringing upon Kodak patents, in areas ranging from digital imaging to combating the "red-eye'' effect in pictures.

The pact fuels Kodak's drive to spur revenues from its cache of digital photography patents, even as it helps grow the industry, according to Willy Shih, Kodak's president of Digital and Applied Imaging.

"Cross licensing allows people to put their creativity into innovation rather than worrying about designing around patents,'' he told Reuters.

For Kodak, a key provision of the agreement is that Sanyo, the world's biggest maker of digital cameras, would offer its customers access to Kodak services, including Internet picture processing systems Print+Kodak and Kodak PhotoNet Online.

While ranked among the top four in global sales of digital cameras, Kodak lags behind industry leaders Sony Corp (news - web sites). (6758.T) and Olympus Optical Co. Ltd. (7733.T) which sells some cameras manufactured by Sanyo. As such, Kodak is targeting the services needed by consumers after they snap a picture.

"That's the vision of where we are headed -- our 'Infoimaging' plan is about devices connected by network infrastructure to services,'' Shih said, referring to Kodak's recently-launched campaign to define the digital imaging world, which it values at $225 billion.

Demand For Digital Cameras Grows

Spurred by improved picture quality and decreasing camera prices, demand for digital cameras has grown rapidly, with some 9.7 units expected to be sold this year, 55 percent more than in 2000, according to InfoTrends Research Group.

Through digital photography, images are recorded in memory bits and computer files, as opposed to silver halide film. Consumers can then print snapshots out at home, load the pictures onto e-mail or Web pages, or delete unwanted shots.

Although the market for film remains robust, with nearly a billion rolls developed each year, digital photography's rise presents a challenge for Kodak, which annually sells two of every three rolls in the United States and processes over 300 million rolls.

"In this case for a film company they are potentially losing their greatest cash cow, film,'' said Michelle Lampmann, digital photography analyst at InfoTrends. "So they have got to find a way to still drive photo printing.''

Along with its rivals, Kodak is racing to develop simple, yet lucrative, ways to deliver digital picture-takers' images. The Rochester, N.Y.-based company has said it hopes to expand its digital and online business to about 45 percent of its planned $24 billion revenues by 2005.

In some of its newest models, users can electronically mark a recently-taken shot, which, once connected to docing station, could be automatically sent via the Internet to a vendor, who then ships a hardcopy back via the mail.

Kodak Drops Lawsuit

Kodak said it has withdrawn a suit filed on Feb. 23 in Rochester, N.Y. against Sanyo, Seiko Epson Corp. of Japan, and Belgium's Agfa-Gevaert NV (AGEG.DE).

The suit had alleged infringement of patents it owns for image compression and digital storage, removable software-enhanced storage devices, and inventions in an apparatus for minimizing "red-eye,'' which occurs when a subject's eyes appear discolored after a flash is used.

In February, Kodak signed a similar cross-licensing agreement with Olympus. Like Kodak and Sanyo, Olympus claims to own more than 1,000 patents relating to digital cameras and digital photography technology.

Kodak has been trying to redefine itself as a major digital player, in what has become an increasingly competitive market. Recently, the company has been investing heavily in digital and online photo ventures in order to position itself as one of the leading digital photography companies.