Kodak files a preliminary injunction in Federal Court, to compel Collins to abide by the existing contract

By George Linkletter, OutputLinks

The gloves are off in the dispute between Kodak and Collins Ink.

Two weeks ago, following the “sudden” termination of its ink supply agreement with Collins Ink, Kodak took clear steps to reassure its customers that the firm was committed to providing an uninterrupted supply of ink. 

Such a promise would seem unnecessary in normal times. However, these are not normal times for either Kodak or Collins Ink, its long-time and principal supply partner of ink for its Versamark line of printers.

According to Kodak, Collins Ink precipitously terminated a 10-year supply agreement between the two firms without adequate advance notice. Kodak alleges in its Federal Court filing that the termination appears to be a strong-arm tactic intended to extract concessions from the firm using existing customers as leverage.

As a result, Kodak filed a 20-page complaint in United States District Court for the Western District of New York seeking to compel Collins Ink to abide by the existing contract and to resume supply of ink without interruption to Kodak’s customers.

Customer Focus

In a telephone interview, Mr. Michael Marsh, general manager of Digital Imaging Systems and Customer Growth for Kodak, was clearly dismayed over the unfortunate turn of events – yet fully determined to protect the welfare of Kodak’s customers. 

“We intend to force Collins Ink to abide by the terms of the contract,” he said, adding that integrity and concern for the welfare of customers is paramount to Kodak.

Specifically, Kodak alleges a deliberate breach of contract, principally because Collins Ink did not adhere to the requirement to provide 180-days notice of termination. Advance notice would allow Kodak sufficient time to prepare substitute ink products to customers relying on Collins inks. 

Kodak also alleges the sudden termination was triggered by Collins Ink when Kodak rebuffed efforts by the firm to secure additional business supplying Kodak’s next generation Prosper Press line of business. Collins Ink currently supplies approximately 90 percent of the ink for customers of Kodak’s Versamark printing systems.

Other conditions of the contract allowed for a more timely termination, but apparently were not met. Additionally, the existing contract, a three-year agreement, was effective through Dec. 15, 2011, with automatic renewals. Lastly, the agreement prohibited either party from issuing a press release or similar publicity without the written consent of the other. At a minimum, it seems this condition went out the window when Collins Ink posted the termination notice on its website.

Concern Over Financial Condition

Collins Ink has a much different view of the recent sequence of events. In a detailed e-mail message, Mr. Lawrence Gamblin, president of Collins Ink, said “Collins terminated our relationship with Kodak because of their deteriorating financial situation and their refusal to address the situation with Collins. Our termination was not a sudden arbitrary event. Collins gave Kodak plenty of warning. Kodak never did address those concerns.”

He went on to say, “The termination is not because of their Prosper inks.  We have been developing our own Prosper inks for many months and have tested a number of promising formulas. We will make more money competing with Kodak in the Prosper market than we would by working with them. I did offer to buy some fluid stations as a way for Kodak to reduce their receivable with us. We were willing to partner with them if it made sense for Kodak, Collins and our customers. My offer was intended to help a partner that is in a bad financial situation. Kodak has decided to try to bludgeon us in return.”

He added, “The situation with Kodak wastes energy and time. In terminating our agreement, Collins Ink makes less money. Kodak makes more.  Collins offered to help Kodak manufacture inks as they transitioned manufacturing back into Kodak. In that sense, we are helping them become a more capable competitor. All Kodak has to do is to pay us in advance for the ink we sell them. If customers want to buy ink from Kodak, they can supply it. If they want to buy ink from Collins, we can also supply it. If giving Kodak such a favorable deal gets Collins out from under our huge receivable then it is a good deal.”

Mr. Marsh disputed that view. “Kodak has fulfilled every financial condition of the contract,” he said.  “We have not missed a payment and we are fully current on what we owe.” He also said there was no condition in the contract allowing for early termination due to concerns on the part of Collins Ink over a deteriorating financial condition or a refusal to discuss it.

“Kodak has a solid strategy in place to achieve ongoing success in the future,” he emphasized. “The Prosper Press line is a key part of that strategy, as are some anticipated asset sales and near-term restructuring.” 

“A transformation such as the type we are undertaking takes time,” he continued, “but in the interim we are fully committed to the business success of our customers and are anxious to work cooperatively with our partners and suppliers.”