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ams:"The company will have to enter long and expensive litigation to get paid for 3g, and will quickly use up all of the cash reserves."
This depends on how much the arb settlement adds to our cash reserves.
re Cramer: If Idcc loses the arbitration decision, he's a genius. If Idcc wins, he's an idiot. My bet is that he's more likely an idiot.
Jim: I have no issue with Corp posting his opinions on Idcc and its management even if I disagree. One of the things I disagree with him on is the share buyback, which he thinks is a positive. I think it is foolhardy at this point in time. I know there are benefits of a buyback today considering that the share price may rise right after the arb decision, but I don't feel we should be taking any unnecessary risks right now. I think we should wait until after the arb decision so that if it doesn't go the way we want and expect it to, we will still have more than enough cash to use in defending our 3G IPR. I intend to remain long no matter what happens in the arbitration.
Jim:re 5%
At that time, I believe QCOM was demanding and getting 5% from its licensees so its not so far fetched that IDCC might have asked it of ERICY.
Idcc is going to face huge challenges in the next few years after a win in the current arbitration process. They must now take a risk with their 3G IPR with faith that they will not experience another MOT setback as happened in 2G. IMO they will need a win in court before they establish themselves. They will need to license Ericy and Mot as well as Nok and Samsung by whatever means it takes. If necessary, they can "ladder" their court challenges of infringers and not depend on a universal cave in after one victory. They may also want to acquire some smaller entities along the way as they did with Tantivy.Management will require technical, legal, m and a, and media skills as well as social and political skills. It is one helluva job but if done well it could result in IDCC becoming one helluva company.
Dave: this would seem to rule out further negotiations AFTER the decision has been transmitted to NOK and IDCC. I take this as a positive since the best deal Nok would have offered would have been a reduction in the award in return for a 3G license contingent on certain events such as validation of idcc 3G IPR by the courts. This would have been a trap to use delay to hurt the company as they have been doing all along. We've had enough licenses with strings attached. It is appropriate at this time to harvest what's owed us and move to confront those who steal our IPR.
"Engine and transmission -- still a good read"...TWFG,It is interesting to read the Forbes article and see why it failed to accurately assess (at the time) the near and intermediate term future for Idcc.It says that Idcc had hundreds of CDMA and TDMA patents but did not state that Idcc had been paid for them. It talked about a joint development project with Nok but again nothing was said about royalties for patents having been paid. It also mentioned Idcc working with other OEM's but again no royalty payments. Even the famous "engine and transmission" statement was not linked to royalty payments. What we can learn from this article is that we should concentrate on royalty payments and not pay much attention to anything else in order to judge the future of Idcc. It looks as though, five years after this article was written, we are finally about to receive such payments from Nok.
The actual arbitration ended 1/27/05. The panel has had two months to make a decision and put it on paper. I don't believe the ICC needs two months to proof read it. One of the advantages of the arbitration process is its timeliness. This has gone on for two years and Nok has been making it into a circus with its related U.K. and Delaware lawsuits. I believe the ICC will announce the decision sooner than 5/31/05 and possibly a lot sooner.
j70k; with that kind of money in the bank and especially if we can get paid for 3G, we can start thinking seriously of manufacturing our own chips or acquiring a small manufacturer.We've got the IP. Why not put it to good use.
Nok is looking at a potential payout for 2G from a panel decision and a potential payout for 3G if they settle. They have decided to gamble. The payout for 2G may not be huge for Nok but hopefully it will be for Idcc. Now it will be up to Idcc to carry the fight for 3G if Ericy balks at paying. We've had enough of settling It's now or never for Idcc.
Nok has appointed itself the leader of a conspiracy of OEM's with the aim of disavowing royalty payments for all IPR(except their own)Not only will they not agree to pay for 3G but they will appeal the panel decision with the purpose of further delaying payment for 2G. I have been observing Nok for 5 years and a pattern of their behavior has clearly emerged. IMO
Corp: several factors contribute to my hunch that Ericy will pay for 3G after being confirmed as a trigger by the arb panel. First I recall the H.G. statement 2 years ago to the effect that Ericy was an ethical company. I felt then as I do now that there was an agreement that Ericy would pay for 3G as soon as it was established that their competitor, Nok would also pay. Then there is the fact that Idcc has held off for 2 years in suing Ericy or any of the other big infringers for 3G(except for Lucent)Then there is the mighty push by Nok to see all the documents in the Ericy case which may include an mou dealing with 3G. Then there is the understandable hesitancy of Idcc to to settle with Nok for anything not including a 3G rate or at least a confirmation that Ericy is a trigger.
Marchma:my thots on recent adverse events
* Insider sales by CEO and COO--regrettable but not crucial
*Delayed 4Q report;--not significant
* Nok 3G litigation launched;--we were going to have to test our 3G patents in court at some point anyway
* UK 2G litigation came to light;--win or lose, our future is in 3G
* SEC accounting review;--not significant
* 10K delay filed;--not significant
* Still no new licenses;--after arb decision we should get new licensees or initiate suits
* Extraordinary RSU bonuses handed out to CoB and others;--regrettable but not crucial
* Analyst downgrades;-- not crucial
Guidance:
* 4Q expenses increased more than guided;--we have the cash on hand but have to conserve it for legal expenses
* 4Q loss reported;--really a break even
* Guided another significant ~15% Q-Q expense increase;with an arb win we will have more than enough cash to cover our expenses
* 1Q05 Revenue guidance weak, despite strong industry results--guidance does not include revenue from an arb win
* Insider sales by CEO and COO--regrettable but not crucial
*Delayed 4Q report;--not significant
* Nok 3G litigation launched;--we were going to have to test our 3G patents in court at some point anyway
* UK 2G litigation came to light;--win or lose, our future is in 3G
* SEC accounting review;--not significant
* 10K delay filed;--not significant
* Still no new licenses;--after arb decision we should get new licensees or initiate suits
* Extraordinary RSU bonuses handed out to CoB and others;--regrettable but not crucial
* Analyst downgrades;-- not crucial
Guidance:
* 4Q expenses increased more than guided;--we have the cash on hand but have to conserve it for legal expenses
* 4Q loss reported;--really a break even
* Guided another significant ~15% Q-Q expense increase;with an arb win we will have more than enough cash to cover our expenses
* 1Q05 Revenue guidance weak, despite strong industry results--guidance does not include revenue from an arb win
Two years ago Idcc was awaiting a jury trial in the Ericy dispute. The share price was in the 14's. Fast forward two years. Ericy decided to pay for 2G. Our IPR for 3G was increasingly accepted by standards committees. 3G in the form of WCDMA, began to arrive despite doubts 2 years ago. We are awaiting a panel decision in the Nok case by professional arbitrators, not laymen jurors. We are closer to a decision by the JPO on our 3G patents, which has a good chance of triggering payments by Panasonic. We have reason to believe that a positive arb result may induce Ericy to pay for 3G and perhaps Nok as well. We have more cash on hand than 2 years ago. Is anyone else wondering why the share price should not be more than a point more than it was 2 years ago?
Why do we Idcc have to wait until May 31 to have the panel decision made public? The decision will be put to paper by March 31 and should not take 2 months for a revue. The chances of a settlement are now slim to none.
Corp: This is not your father's idccmobile. In the past, management was afraid of Idcc being snuffed out and went for the quick buck. Now, they have much more to gain by staying the course with all their stock and waiting for the real pay off. I would be surprised to see substantial selling from here on in until they're very rich and want to diversify like Bill Gates did. The first test will come after the arb decision, which will probably be followed by a pop in the price. With Ericy and 3G waiting in the wings and with Idcc having enough cash to make it happen, why would they want to sell. Incidentally Nok was never going to include any kind of a reasonable rate for 3G in a settlement anyway and, without 3G, it never would have made sense for Idcc to settle . IMO
VG_future: Idcc can not setttle without a 3G agreement because it would look like the Ericy settlement all over again and there would not be the same initial positive reaction as was the case with the Ericy settlement. Also Idcc is looking for affirmation that Ericy is a trigger for 2G and, by extension, for 3G, which a positive panel decision would give it. Nok has shown no indication that it is willing to pay for 3G despite their contract with Idcc. Unless Nok feels they will have to pay anyway for 3G because of later developments following the panel decision, they will not settle. In this case you have an immovable object(Idcc) up against a stone wall(Nok) IMO
It now seems probable that the Nok-Idcc dispute is going to a panel decision rather than a settlement. The Idcc stock price should move up as we approach May since we will be only a few weeks away from a decision in which the odds favor Idcc. The 4Q earnings report and upbeat comments at the CC may also move the price along some.
Loop:I remember reading about this and I have often thought about it. I hope someone asks a direct question on this issue at the CC next week to clear the matter up.
"IDCC warranted that it would continue to prosecute its defense of its patent claims and infringement claims against Ericy.
My confusion remains regarding the warranty to prosecute its Ericy action and whether notice was required if a settlement was suddenly on the table."
The most important statement to come from Nok during the court and arbitration proceedings was that they never intended to pay Idcc anything. This, to my way of looking at it, is an open admission that they entered the licensing contract with Idcc as a sham to throw a fraudulant bone to Idcc. In the contract, there are descriptions of ways for the royalty rate to be determined. If Nok had told the truth at that time; i.e. that they had no intention of ever having to pay, I'm sure that Idcc would have declined to sign such a sham contract. This bad faith should be a critical factor in the deliberations of a court or arbitration panel in reaching a decision in the Idcc-Nok dispute IMO
Idcc, for whatever the reason, is in no rush to schedule a CC and answer a bunch of questions at this time. This IMO, is why they are scheduling the earnings report, which is usually followed by a CC, as late as possible.
I don't see how Nok can bellyache about the rate that Idcc got from Ericy and now wants Nok to pay when Qcom is charging 10 times as much. Idcc accepted a very low rate from Ericy because they were desperate to sign a large European OEM. Whatever rate NOK pays based on the Ericy settlement, they will be getting a bargain.
Ed: yes and no
The current arbitration involves only 2G but since the 1999 Nok license does have similiar language with respect to 3G and if Ericy was commited in their 2003 agreement with Idcc to license for 3G in the aftermath of Idcc being successful in getting Nok to pay for 2G(which we hope will happen when the panel announces its decision),then if Nok still refused to pay for 3G, they would have to request a new and totally separate arbitration, which would have very little likelihood of success.
Interesting idea Eneerg:
"One of the reasons for demanding to see all the E S/E docs was to make a determination whether S/E contractually agreed via MOU or other doc, whether a 2G settlement with NOK would effectively trigger S/E and E's 3G obligation."
Since Nok's license with Idcc in 1999 mentioned that an Idcc licensing of a named trigger would establish Nok 2G rates, why wouldn't it make sense for the Ericy 2G license agreement with Idcc to have a clause which triggers Ericy for 3G once it is established that Ericy is a legitimate trigger for Nok 2G and (by inference) for Nok 3G as well.
Quartzman: Nok has publicly urged OEM's to put a cap on paying companies like Idcc. To pay Idcc for 3G now as part of an arbitration settlement might seem to Nok as though they were double crossing these other EOM's they've been conspiring with.
If there is a settlement involving a payment for 2G plus a license for 3G, the stock price can go to the high 20's or the 30's or beyond. Short of a 3G license, an expeditious 3G signing by Ericy could produce a similiar result. Short of that, an announcement of a suit against Ericy or another named trigger for 3G handset infringemnent will help support the price in the 20's until we can get a sorely needed resolution of the 3G issue, which IMO is really the main issue right now.
I have to admire the management of Idcc for having the guts to stand up to Nok at this juncture. Nok tried to take advantage of the situation they were in. Management knows that if they lose this arbitration, they will probably be replaced. Yet they refused to knuckle under. They had enough confidence in their position to withstand Nok's onslought not only against Idcc but also against them personally. In past crises, they have not been so courageous but I think they have learned from these experiences and with a successful conclusion to this episode, they can move ahead and demonstrate real leadership in moving Idcc towards its full potential.
Loop: I feel that the panel will decide that Ericy is a trigger and that this is more important than the amount of money awarded. I see the following scenario: The Nok 2G validity challenge in the U.K. is not a serious impediment because the future of Idcc lies in 3G in any event We should be able to defend our 3G patents in the Nok 3G validity challenge in court. After Ericy is determined to be a trigger, they will either sign relatively quickly for 3G or Idcc will need to initiate court proceedings against them, which hopefully will trigger Nok for 3G. Since we are stronger in 3G than in 2G, I would anticipate a positive result. This would then open the doors for Idcc to achieve its potential. IMO
Ghors: Would it make a difference if it could be shown that Nok conspired to discourage a named trigger from licensing 2G or 3G with Idcc?
"Your second question is one I have debated with my partner for the last year. He believes that if there is never a trigger, Nok will owe us nothing for 2g forever. His rationale is that a contract is a contract and we received consideration for entering into it no matter how stupid that might seem to us on this board."
Every contract has a language and spirit involved in the agreement. The Nok-Idcc contract repeatedly violated the spirit and probably the language of their agreement. They agreed to work together as partners in the creation of 3G IPR and the marketing of it. Nok then reneged on the funding of the agreement, ignored Idcc in all their public presentations, and finally not only withheld payment for the royalties they had agreed to but at the last minute challenged the validity of the IPR they had signed up for. If this isn't violation of a contract, I'd like to know what would be.
Judge Brown speaks of a dispute which arose about the calculation of royalties owed Idcc by Nok. He did not include language describing a dispute as to whether Ericy is a trigger.
Jeff: "they need to convince the industry majors to sign sound licenses, or thump them in court." Since MOT, Idcc is suffering from post traumatic stress syndrome and is very hesitant, perhaps too hesitant, to engage infringers right up to the finish line in a court decision. However the reality is that until they prevail over a major EOM in a court decision, they will be unable to achieve their full potential. Perhaps a positive arbitration decision will increase their confidence as well as their cash. Nok, by challenging Idcc in court, may be, paradoxically, doing them a favor.IMO
Nok is guilty of industrial espionage in studying Idcc IPR as our "partner" and then using this knowledge to attempt an end run around our IPR. They are guilty of antitrust activities in declaring a cap to IPR payments and then publicly urging other OEM's to follow suit. They are guilty of gangster like activities in urging other OEM's to to build around our IPR and shun Idcc. IMO
Idcc believes their chances in the current arbitration with Nok are excellent. Otherwise they would have settled with Lu for a really small royalty rate. After the panel decision and verification of Ericy as a trigger,they will expect a 3G license signing from Ericy. If this does not happen, they will finally press for validation of their 3G patents in an American court via a suit against Ericy(rather than wait for validation in the U.K) IMO
A risk arbitrager might look at Idcc in the following ways:THIS YEAR;
1. chances of a favorable Nok outcome(either through panel decision or settlement);better than 60%
2. chances of a favorable LU outcome; 50%
3. chances of a favorable decision from the JPO;50%
4. chances of a major 3G licensee;50%
If #2,3,or 4 don't happen this year, they can still happen next year.(#1 will almost definitely happen this year)
-- the chances of all 4 turning out badly; less than 40%
Disclosure: I am strongly biased towards IDCC in which I have invested far more heavily than any other stock ever.
As a practical matter, a Nok challenge to an arb award would not be significant because the market and potential licensees would ignore it. IMO
The time for Nok to have challenged Idcc's 3G patents was in 1999 before they signed a convenience license including these patents. Instead they waited 5 years and filed towards the end of arbitration over the license. Are we to believe that the timing had nothing to due with the arbitration and was a mere coincidence? IMO this was the use of raw financial power to attempt to affect the course of the arbitration process and negotiations during it. Nok has conspired with other OEM's to keep royalty rates down and this was a display to others as to how they intend to enforce this policy through any means they can muster.
osoesq: While it is true that the panel will consider 2G only, a settlement between the parties prior to the panel decision on 2G could include other considerations such as 3G. IMO
The battle for 3G is going to go on even if we should lose the current arbitration. The ideal conclusion to the arbitration would IMO be a settlement which includes Nok signing a non challengable agreement to carry out their obligations under the 1999 license and pay for 3G(even if we have to swallow a smaller than anticipated award for 2G). If we do not achieve this now, the fight for 3G goes on. Whether it happens now or later, I intend to stay on to see the conclusion of that fight. We are in a much better position now than we were previously with stronger IPR, more licensees, and lots more cash.