By AppleInsider Staff

Published: 06:35 PM EST (03:35 PM PST)

In a mixed decision Thursday, the U.S. International Trade Commission ruled that smart phones from Apple and Research in Motion do not violate digital photography patents owned by Eastman Kodak Co., denying the beleaguered photographic company its bread and butter claim.

The decision reversed parts of an earlier ruling in the high-profile case, sending Kodak's shares into a 20% free-fall late Thursday afternoon. Other parts of the earlier ruling were sent to be reviewed by an administrative law judge. A final decision is expected by Aug 30th.

Kodak, which had previously had the same patents claims upheld in suits against LG and Samsung, was hoping to score another lucrative win to strengthen its patent portfolio that has increasingly become one of its prime sources of income.

The commission did however rule that Apple and RIM were guilty of infringing on a Kodak patent related to "initiating capture of a still image while previewing a motion image," and another under the commission's revised definition of "at least three different colors." The comission also reportedly revised definitions for "motion processor" and "still processor" and asked the administrative judge to make a final decision on whether Kodak's patent was infringed with those changes.

Two of Kodak's three main businesses lost money last year as revenues fell to $7.2 billion, or roughly half the amount it made in 2005. Over the past twelve months, the company's stock has responded by bleeding nearly half of its market value.

Faced with the decline of the camera film market, Kodak has turned to its extensive patent portfolio as a source of income while it struggles to transition into a digital imaging company. It successfully licenses its digital imaging technology to about 30 companies, including handset makers such as LG, Motorola, Nokia and Sony Ericsson.

Though the six-member ITC commission that ruled Thursday is unable to order monetary damages, it has the authority to block imports of products that are found to infringe upon U.S. patents. As such, the threat of an import ban often motivates companies to settle.

Chief Executive Antonio Perez had previously stated that he believed Kodak could receive more than $1 billion in such settlement royalty revenue if it could achieve a victory in the latest litigation, which covers methods of preview digital images similar to ones used on the iPhone and BlackBerry.