updated 3/30/2006 7:07:41 PM ET 2006-03-31T00:07:41

An Eastman Kodak Co. manager claims she was fired for protesting a cost-saving proposal that would have quietly compressed millions of digital images stored by customers on the world's leading online photography site.

While acknowledging it has discussed ways to cut back on the rising cost of online storage, Kodak insisted Thursday it would never condense images in a lower-resolution format — and thereby potentially diminish their quality — "without our customers' knowledge."

"It's an issue I'm sure all online photo services are discussing" as the image capacity of newer digital cameras expands, said David Rich, vice president of marketing at the Kodak EasyShare Gallery. "However, we have not made any plans nor any decisions about any compression of existing images within our service."

Maya Raber, former director of software development at the online unit in Emeryville, Calif., claimed in a lawsuit that her job was eliminated in August because she opposed a plan to shrink disc space and save Kodak money by compressing more than 800 million photo files owned by about 13 million active members.

Raber, 41, said she warned her bosses that doubling the compression of image files already in storage could "irreversibly alter and damage" them. Although the proposal was not carried out, Raber said she was fired for raising a ruckus.

Kodak's EasyShare service, which formerly went by Ofoto, is free, though customers must make at least one purchase — a 15-cent print counts — to store images beyond a year. Sites such as these make their money primarily by selling prints, mugs imprinted with photos and other items.

In October, the photo-storage and printing business began offering its members an option of uploading images 50 percent faster. But that upload program would "still result in the same high-quality image they would expect" for prints as large as 8-by-10 inches, Rich said.

The lawsuit, filed Tuesday in Oakland, Calif., maintained that employees who complained about the compression proposal were told that "this is not a democracy" and that "objection to the project will be noticed."

Raber, who is seeking unspecified monetary damages, alleges she was wrongfully terminated and claims Kodak disguised her firing as a restructuring move.

Kodak declined to comment on the reasons she left the company. "This is a personnel issue, so we cannot discuss specifics," Kodak said in a statement.

Ed Lee, a digital photography analyst at InfoTrends Inc. in Weymouth, Mass., said online sites "should be just one other way of storing your photos. It shouldn't be your only way (because) every time you edit your photo and re-save it, there generally is some re-compression and you are actually losing some quality.

"If consumers have the original on their computers, then it's never really a problem," Lee said. "If they want a poster-size print, they could just upload that same image again at the higher resolution."

Midway through a four-year makeover, Kodak is struggling to turn profits from its digital businesses. It lost $1.4 billion in 2005 even as digital sales exceeded sales from film and other chemical-based businesses for the first time.

Kodak, however, has climbed to No. 1 in sales of digital cameras and digital X-ray systems in the United States and leads the world in sales of photo kiosks, thermal home printers and online photo services. Along with the most online customers, Kodak also leads Shutterfly.com and Hewlett-Packard Co.'s Snapfish.com in online revenues, Lee said.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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