Ruling Forces Kodak to Quit Instant Camera Field; Recall Launched
Eastman Kodak said Wednesday that it will stop making instant cameras and film, effective today. The decision came after a Supreme Court justice declined to reverse a lower court’s order that it get out of the instant photography business because it had infringed on the patents of rival Polaroid.
The Rochester, N.Y.-based photography giant said it will replace or exchange for Kodak stock the 16.5 million instant cameras that it has sold since the product was introduced in April, 1976.
Kodak also said it is launching today a massive recall of all unsold instant cameras and film and would reassign the 800 full-time workers that produced the cameras at its Rochester plant.
Analysts speculated that, after all legal remedies in the nine-year dispute are exhausted, Kodak could be required to pay as much as $1 billion to Polaroid.
Wednesday’s decision gives Polaroid a virtual lock on the instant photography market, a position that it enjoyed for 30 years until Kodak introduced two instant camera models, the EK-4 and the EK-6. Analysts said Kodak now controls 25% of the instant camera market.
Accused of Copying
Polaroid sued Kodak in U.S. District Court in Boston six days after Kodak started selling its instant cameras. The smaller Cambridge, Mass.-based company, which invented instant photography, accused Kodak of copying Polaroid’s then-revolutionary SX-70 camera, which was first sold in 1972.
The SX-70 produced instant photographs that popped out of the camera and developed in the user’s hand. That was a dramatic improvement from the older technology, in which the print emerged from the camera unfinished and had to be peeled away from a wrapper and a negative and treated with chemicals.
Last September, U.S. District Judge Rya Zobel in Boston ruled that Kodak had infringed on seven Polaroid patents, six of which pertained to the process used to develop the SX-70 film. One patent concerned the camera itself.
Kodak’s lawyers argued that the case involved just a handful of the 150 patents held by Polaroid and that Kodak’s entry into the market didn’t violate any patent laws.
Last October, Judge Zobel issued an injunction requiring Kodak to stop making and selling instant cameras and film, effective today. The company sought to have the injunction lifted by the U.S. Court of Appeals, but its request was denied Tuesday. Kodak then turned to the Supreme Court.
In its appeal to Chief Justice Warren Burger, Kodak’s attorneys said: “At stake here is a court-ordered monopolization of a $1-billion domestic business on the unreviewed decision of a single federal judge,” adding that the “injunction threatens immediate, substantial and irreparable harm to the nation’s antitrust policy.” Burger passed the appeal to Powell.
Although Kodak lost its bid to set aside the injunction, it continues to appeal the case. The company said it is getting out of the instant photography business because it was too costly to mothball its operations until it received an appeal verdict.
Investment analysts said Kodak wouldn’t suffer much as a result of its decision to withdraw. Analysts said Kodak didn’t make very much money on instant photography, which provided less than 3% of Kodak’s 1984 sales of $10.7 billion. “From that point of view, it’s really no loss,” said Regina Wiedenski, an analyst with the Adams, Harkness & Hill investment firm in Boston.
The instant photography market is much more important to Polaroid, accounting for 90% of its 1984 revenue of $1.3 billion. Analysts said the instant photography market itself has fallen on difficult times as more and more consumers opt for easy-to-use 35-millimeter cameras, which cost about the same as instant cameras but produce better quality prints.
Instant camera sales have dropped to 3.1 million units in 1984 from 4.5 million in 1976, said Albert E. Turner, an analyst with the Duff & Phelps investment firm in Chicago. About 5.5 million 35-millimeter cameras were sold in 1984, Turner said. “Kodak’s entry into the market just cut a piece out of a shrinking pie,” Turner said.
Wiedenski said Polaroid is betting its future on a rebound in the instant camera market, which it expects to revive with the introduction of a new camera this year. Polaroid claims that the camera produces prints that rival the 35-millimeter in quality. “This comes at an opportune time for them,” Wiedenski said.
Analysts said one major question was the size of the award that Polaroid would receive. Polaroid hasn’t said how much it wants, and a ruling isn’t expected soon. Analysts said, however, that the amount could be as high as $1 billion. “That wouldn’t be the best of news for Kodak, but they can handle it,” Wiedenski said.
Kodak said that owners of its instant cameras had three options. They could replace it for a Kodak disc camera and two discs of film worth $50, for a rebate book worth $50 toward the purchase of any Kodak product or for one share of Kodak stock. (Kodak stock closed Wednesday on the New York Stock Exchange at $48.625 a share, off $1.375.) Polaroid film isn’t compatible with Kodak cameras.
The company established a toll-free telephone number for camera owners to use if they have questions about the replacement program: 1-800-792-3000. KODAK’S FORAY INTO INSTANT PHOTOGRAPHY November, 1972-- Polaroid introduces the SX-70 instant camera.
April, 1976-- Kodak introduces the EK-4 and EK-6 instant cameras.
April, 1976-- Polaroid sues Kodak in U.S. District Court in Massachusetts, charging Kodak with patent infringement.
September, 1985-- U.S. District Court Judge Rya Zobel rules that Kodak infringed on seven of Polaroid’s patents.
October, 1985-- Judge Zobel issues an injunction against Kodak, barring it from making or selling instant cameras after Jan. 9, 1986.
December, 1985-- Kodak appeals Judge Zobel’s decision to U.S. Court of Appeals in Washington and also asks the court to lift the injunction.
January, 1986-- U.S. Court of Appeals upholds injunction against Kodak, which is denied subsequent appeal by Supreme Court Justice Lewis F. Powell Jr. Kodak announces immediate withdrawal from instant camera market.