Eastman Kodak Co. v. Ricoh Co.

• Decision Date: 09 August 2013
• Docket Number: 12 Civ. 3109 (DLC)
• Citation: Eastman Kodak Co. v. Ricoh Co., 12 Civ. 3109 (DLC) (S.D. N.Y. Aug 09, 2013)
• Parties: EASTMAN KODAK COMPANY, Plaintiff, v. RICOH COMPANY, LTD., Defendant.
• Court: U.S. District Court — Southern District of New York

EASTMAN KODAK COMPANY, Plaintiff,

v.RICOH COMPANY, LTD., Defendant.

12 Civ. 3109 (DLC)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Dated: August 9, 2013

OPINION AND ORDER

For the Plaintiff:

Robert J. Gunther

Wilmer Cutler Pickering Hale & Dorr LLP

7 World Trade Center

Michael J. Summersgill

Jordan L. Hirsch

Wilmer Cutler Pickering Hale & Dorr LLP

For the Defendant:

David Eiseman

Philip C. Sternhell

Quinn Emanuel Urquhart & Sullivan LLP

Ryan S. Goldstein

Quinn Emanuel Urquhart & Sullivan LLP

Melissa J. Bailey

Quinn Emanuel Urquhart & Sullivan LLP

DENISE COTE, District Judge:

In this action, plaintiff Eastman Kodak Company ("Kodak") seeks to recover royalty payments allegedly owed by defendant Ricoh Company, Ltd. ("Ricoh") under an after-acquired business clause of the parties' Patent License Agreement ("PLA"). Kodak has filed a motion for partial summary judgment with respect to whether Ricoh breached the PLA. For the following reasons, Kodak's motion is granted in part.

BACKGROUND

The following facts are undisputed or taken in the light most favorable to Ricoh, unless otherwise noted. Kodak is a picture and printing company with a patent portfolio encompassing over one thousand digital camera patents. Ricoh is a Japan-based imaging and electronics company. Kodak and Ricoh entered into the PLA on May 1, 2002. Pentax Corporation was a company selling digital cameras that was acquired by Ricoh in July of 2011. Although Kodak is suing Ricoh in this action for a breach of the PLA's royalty provision, the heart of the parties' dispute requires a description of Kodak's business relationship with Pentax from roughly 2002 through 2011.

2002-2011: Kodak and Pentax's Business Relationship

Around 2002, Kodak and Pentax began to explore thepossibility of developing a business relationship. On several occasions in 2002, Pentax's President Fumio Urano ("Urano") met with Kodak executives and exchanged ideas regarding a business alliance. On these occasions, patent licensing was never discussed.

In March of 2003, executives of Kodak and Pentax met at a conference of the Photo Marketing Association in Las Vegas, Nevada. Kodak's Chief Executive Officer Dan Carp, President Willy Shih, and Vice President of Digital Imaging Business Gregory Westbrook were in attendance, as were Pentax's President Urano, General Manager of the Imaging Systems Business Division Masataka Tsuruta ("Tsuruta"), and General Manager Haraguchi Nakano. Through their discussions at this event, the proposed business alliance began to take shape. In particular, the executives discussed three ideas: (1) Pentax would act as an agent or dealer for Kodak's digital cameras in Japan, and Kodak would, in return, sell Pentax's digital cameras in the United States; (2) Pentax would purchase printers that connect to digital cameras from Kodak and sell them as Pentax-branded printers; and (3) Pentax would purchase charge-coupled device ("CCD") sensors from Kodak for incorporation into Pentax's digital cameras. At the conclusion of the meeting, the top executives agreed to pursue a "comprehensive" business alliance.Once again, however, there was no discussion about patents. Nevertheless, Urano believed that there was a tacit agreement that the right to use Kodak's patents was included in the comprehensive alliance. He drew support for his conclusion from the fact that from the late 1990's to the early 2000's Kodak had asserted claims against a variety of digital camera manufacturers but had not asserted a claim against Pentax.

In April 2003, Yusuke Kojima ("Kojima") was hired by Kodak as Vice President and Chief of Digital Camera Business of the Digital and Applied Imaging Group. In October of 2003, Kojima attended a dinner with Tsuruta and Kiyoshi Kawano ("Kawano") of Pentax in Japan to present a number of business proposals. First, Kojima presented Kodak's proposal to have Pentax participate in Kodak's "ImageLink" consortium. The Kodak ImageLink program was geared toward producing printers with docks for digital cameras, and having program participants incorporate clips onto their digital cameras, so that the cameras could be connected to Kodak printers. The ImageLink program was intended to make it easier for consumers to print their photographs, and thereby drive the purchase of "media" including printing paper and toner. Second, Kojima proposed that Pentax purchase CCD sensors for incorporation into Pentax digital cameras.

During the meeting, Kojima allegedly told Tsuruta that if Pentax agreed to participate in the ImageLink program and purchase Kodak's CCD sensors, Kodak would give Pentax "favorable" or "preferential" patent treatment "in the event that Kodak were ever to assert its digital camera patents against Pentax." In his deposition, Tsuruta conceded that Kojima told him "that Kodak might assert its patents against Pentax, but if that happened, [Kojima] would work to get Pentax favorable treatment."

In February of 2004, Kodak and Pentax executives attended another trade show of the Photo Marketing Association. Shortly after the trade show, the executives once again held a dinner meeting in Japan. This time Kunio Kimeda ("Kimeda"), Kodak Japan's Business Manager of Image Sensor Solution Components Business Group attended the meeting on behalf of Kodak, and Tsuruta attended on behalf of Pentax. During the dinner, Kimeda allegedly told Tsuruta that "if Pentax would adopt and buy Kodak's CCD sensors for Pentax's medium format cameras then Kodak would grant favorable treatment to Pentax regarding patent royalties in the event that Kodak were ever to assert its digital camera patents against Pentax." Once again, Tsuruta concedes that Kimeda told him "there was a possibility that Kodak would assert its digital camera patents against Pentax"but "in the event that that happened, [Kimeda] would work to get Pentax favorable treatment."

During both the October 2003 and February 2004 meetings, there was no discussion of specific patents, of specific products that would be covered by a patent license, of the duration of any patent license, and no agreement on a royalty rate. At least one Pentax representative, however, testified that he believed the royalty rate would be in the vicinity of 1%. Other Pentax representatives have testified that they believed the license would be royalty-free.

At the Photokina conference in 2004, Kodak announced its ImageLink consortium. In a presentation created by Kodak for the conference, Kodak listed Konica Minolta, Nikon, Olympus, Pentax, Ricoh and Sanyo as participants in the consortium.

Subsequently, in September of 2005, Kodak and Pentax executed an ImageLink Agreement which confirmed Pentax's participation in the ImageLink program. In the ImageLink Agreement, Pentax agreed to design, market, and sell digital cameras that could be connected to a Printer Dock. It was also given the option to sell Printer Docks. The ImageLink Agreement contained a section entitled "Intellectual Property." In this section, Kodak and Pentax agreed not to assert their patent rights against each other with respect to the production ofcertain ImageLink products. Specifically, Pentax agreed

[n]ot to assert any patent rights that it owns and/or has the right to sublicense against Kodak or another ImageLink licensee for Kodak or licensee's authorized implementation of the ImageLink Specifications and/or its manufacture, use, or sale, or distribution of ImageLink Products.

In return, Kodak agreed

[n]ot to assert any patent rights that it owns and/or has the right to sublicense against Company for Company's authorized implementation of the ImageLink Specifications with respect to its manufacture, use, sale, or distribution of Compliant Printer Dock products.

The ImageLink Agreement expressly disclaimed any broad grant of patent licensing rights by Kodak to Pentax. The ImageLink Agreement warned that

[e]xcept as expressly granted herein, nothing is [sic] this Agreement shall be construed to grant or imply to grant any rights under any other Kodak patents including but not limited to those covering Consumer Digital Cameras or other digital camera products.

In a subsequent section entitled "No Implied Right" the ImageLink Agreement stated that

[n]o right or license under any patent, copyright, trademark, or trade name of either party is granted to the other party by, or is to be inferred from, any provision in this Agreement except as expressly provided herein.

Finally, the ImageLink Agreement provided that it reflected the companies' "entire agreement:"

This Agreement sets forth the entire agreement andunderstanding between Kodak and Company regarding the subject matter hereof and supersedes any prior representations, advertisements, statements, proposals, negotiations, discussions, understandings, or agreements regarding the same subject matter. [Pentax] acknowledges that it has not been induced to enter into this Agreement by any representations or statements, oral or written, not expressly contained in this Agreement.

The ImageLink Agreement was signed by Kojima and Pentax's Senior Executive Officer Ko Torigoe ("Torigoe"). Although Torigoe has no recollection of discussing patent issues with Kojima, he believed there was a "mutual understanding that [he] was doing Kojima a big favor by signing the ImageLink Agreement" and it "was clear . . . that Kodak would not seek any patent royalties from Pentax so long as Pentax kept up its good business relationship with Kodak." Pentax ultimately produced four ImageLink-compliant digital cameras, which it began to sell in roughly 2006.

Meanwhile, Kodak and Pentax's plans with respect to CCD sensors were also proceeding. In 2004, Pentax was deciding between purchasing Kodak's CCD sensors and the CCD sensors of a Kodak-competitor. Tsuruta indicates that Pentax ultimately chose to purchase CCD sensors from Kodak, rather than Kodak's competitor, because Pentax "had to consider patent issues." In October 2004, the companies executed a...