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Polaroid Seeks Huge Damage Award From Kodak

May 2, 1989

BOSTON (AP) _ Polaroid Corp. took great pains to avoid competition with well-established Eastman Kodak Co., the Polaroid chairman testified today as a court tried to determine how much Kodak should pay for infringing on its rival’s instant- photography technology.

Chairman William J. McCune Jr., the opening witness of the trial, began outlining the corporate history of his company, beginning with founder Edwin Land’s quest for instant photography in the 1940s after his daughter asked why she could not immediately see a picture her father had taken.

McCune said throughout its history Polaroid had tried to avoid direct competition with Kodak, the leader in the photography field.

He said Kodak could have taken the ″bread and butter″ from the Polaroid plate and the firm took pains to avoid a marketing competition.

In opening arguments Monday before U.S. District Judge A. David Mazzone, Kodak argued that the $12 billion that Polaroid is seeking in its patent infringement lawsuit against Kodak is greater than all of Polaroid’s profits from 1947 to 1987.

The Kodak lawyers sought to portray Polaroid as a corporate opportunist looking for a windfall from the 13-year-old lawsuit.

Polaroid’s lawyers, on the other hand, pointed to a Kodak internal memo as evidence that the Rochester, N.Y.-based company knowingly violated seven of Polaroid’s patents when it began selling instant cameras in 1976.

They said Walter A. Fallon, who was then Kodak’s chairman and chief executive, personally reviewed the memo and jotted the words ″big block″ in the margin next to a paragraph about Polaroid’s patents.

Kodak’s lead counsel, Richard E. Carlton, did not discuss the memo in his opening statement. But he argued that Kodak’s foray into instant cameras and film was based on advice from a New York City law firm, Kenyon & Kenyon, that turned out to be faulty.

If Mazzone awards Polaroid anything close to $12 billion, it will be the largest patent infringement decision in history, far surpassing the record $207 million that Smith International Inc. was ordered to pay Hughes Tool Co. three years ago for copying drill bit technology.

Whether Kodak violated Polaroid’s patents is no longer in question. A judge ruled in 1985 that Kodak had done so, and the U.S. Supreme Court let that ruling stand Monday.

The only issue in the current trial is how much Kodak’s violations hurt Polaroid and whether they were deliberate, which would open the way to punitive damages.

Kodak argued in its pre-trial briefs that the most it should have to pay Cambridge-based Polaroid is $177 million, or 5 percent royalties on the instant cameras and film Kodak sold from 1976 until 1985.

Polaroid bases its huge damage claim on the grounds that Kodak deprived it of billions of dollars in sales and started a price war that forced it to sell some cameras below cost. In addition, Polaroid contends that Kodak caused long-term damaged to the market by portraying instant cameras as cheap toys rather than serious equipment.

Kodak contends, however, that its entry into the market actually benefited Polaroid, because the millions of dollars it spent on advertising and promotion increased demand for both brands of instant cameras.

The case was been divided into two portions, the first dealing with whether Kodak violated Polaroid’s patents, and the second with financial compensation.

The first portion went to trial in 1981 and resulted in an October 1985 ruling by U.S. District Judge Rya Zobel that Kodak had infringed some of Polaroid’s most essential patents. On her orders, Kodak quit the instant photography business in January 1986 after losing more than $600 million.

Kodak appealed Mrs. Zobel’s decision, arguing that she had a conflict of interest because her mother-in-law owned 1,000 shares of Kodak stock. But a federal appeals court affirmed the ruling, noting that Mrs. Zobel had told both companies in 1981 that her mother-in-law owned the shares, and neither company had objected.

The U.S. Supreme Court announced Monday it would not review the appeals court’s ruling, which means Mrs. Zobel’s decision is the final word.

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