By Laurie Sullivan<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Kodak said Wednesday that it has ended a long-standing patent dispute with Sony over digital camera technology.

The photography company also said it has signed a cross-licensing deal with Sony, the second-largest digital camera maker, and a similar agreement with Sony Ericsson Mobile Communications was not disclosed. Without elaborating on the deal, Kodak said it will gain royalties.

The announcement is good news for Kodak, which has struggled with the shift away from film-based photography to digital imaging. While Kodak pioneered digital imaging technology—it has more than a thousand digital imaging patents—it had long been reluctant to jeopardize its lucrative film business. As a result the shift to digital has been a difficult one for Kodak, thanks to the popularity of digital cameras.

For the third quarter of 2006, however, profits from digital imaging surged $98 million even as its net loss narrowed to $37 million from $914 million during the same quarter a year ago.

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The settlement with Sony could help Kodak continue to narrow those losses. In a note to investors, Lehman Brothers Analyst Caroline Sabbagha wrote that she believed Kodak concluded the deal with Sony in December, and as a result it could provide an immediate boost to Kodak's bottom line.

The settlement resolves a federal lawsuit filed in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New York, filed March 2004, where Kodak alleged Sony infringed on 10 patents for digital camera inventions issued from 1987 to 2003. The dispute involved digital and video technologies, for example, image compression and digital storage.

Sony countersued shortly after, alleging Kodak violated about 10 patents covering digital camera features from an indicator that displays the number of pictures taken by an electronic shutter with adjustable speeds.

Analysts tried to put a dollar amount on the deal. “The cross-license agreements alone are probably not material to either company in terms of monetary gain,” said Soleil Securities Cross Research Analyst Shannon Cross. “The agreements are far more valuable to each company in terms of allowing them to use the IP to develop products.”

Both Kodak and Sony make digital cameras used by a range of customers, from consumers to Hollywood moviemakers. Sony has been successful, but Kodak continues to undergo a lengthy transition.

As the world’s third-largest camera maker, Kodak has tried to compete with digital technology from rivals Sony, Olympus, Nikon, and others.

Shares of Kodak rose $0.11 cents to $26.91 in late-day trading on the New York Stock Exchange. U.S. traded shares of Sony rose $0.08 cents to $42.91.