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.

It did a little more. It removed a coud that was hanging over the process;i.e. that the evidentiary hearing would be delayed as it was in the past.
"People here repeatedly asked that the company speak when the hearing is over...it did. And, it did nothing else"

MFL applies only when an OEM signs on later for less.

the NEC and Sharp royalty rate is the bench mark. pay this rate OR HIGHER or see you in court. Nec and Sharp signed on earlier and should get consideration for that.

Now that the arb is over, the real poker game starts, namely 3G. This is where Idcc holds the high cards. Nok has to decide whether they want to ante up the 2G monies awarded by the arb panel in order to enter the 3G game, which they may very well lose or to put the 2G award in their pocket and settle 3G on more favorable terms than they may eventually get as the game plays out. Ollia is a good poker player but he knows he is not going to bluff Idcc out of this game and might just decide to settle this thing honorably. In any event, its a relief to see the arbitration over.

Once Idcc has successfully defended the validity of its IPR, perhaps it can ask for higher royalty rates from tardy licensees.

Wealth is only important in how you use it . I feel certain that Bill will use it in a way that makes us all proud of him.

Since NEC and Sharp are already paying Idcc for 3G, would a merger of either one with Siemans be a cause for anxiety on the part of Nok? "JV 'likely option' for Siemens mobile
Sharp, NEC could help create rival to Sony Ericsson"

By Madeleine Acey, CBS MarketWatch
Last Update: 11:51 AM ET Jan. 17, 2005
E-mail it / Print / Alert / Reprint / RSS

LONDON (CBS.MW) -- Siemens is most likely to seek a joint venture partner to keep its mobile phone business afloat, analysts and fund managers are saying.Business, regulators set for tug of war in 2005
JV 'most likely.
The German turbines-to-rail lines conglomerate said last month it would have to fix, sell, close or find a partner for its ailing cell phone unit.

Since then speculation has been rife on buyers for the company but NEC Corp (NIPNY: news, chart, profile) joined China's Ningbo Bird (NGBOF: news, chart, profile) on Monday in denying it was in the running to takeover the business which has made a loss for the last two quarters despite being the fourth largest wireless handset maker in the world.

The Sunday Telegraph newspaper in London said that Siemens (SI: news, chart, profile) (DE:723610: news, chart, profile), lacking a buyer, was set to close the business. But analysts and fund managers who follow Siemens told CBS MarketWatch the company's past behavior pointed to a joint venture as its most likely path.

A Siemens spokesman declined to comment.

Fund manager Trudbert Merkel at Deka Group in Frankfurt also said this was most likely to be welcomed by shareholders.

"Understanding the tradition of Siemens, it seems very unlikely that there will be a closing of the segment," Merkel said.

"From my standpoint it would be best if Siemens looks for a joint venture partner," he said, adding that he thought shareholders in general would prefer with that option given Siemens' investment.

James Stettler, an analyst at Dresdner Kleinwort Wasserstein, also said he felt the "cooperate" or joint venture option was the one Siemens was looking at most closely.

He predicted the German conglomerate, which also makes everything from medical equipment to airport runway lighting, would find a partner for the business and establish a company comparable to Sony Ericsson, the 50-50 joint venture between the Japanese consumer products giant and Swedish telecom equipment maker.

The group had done the same with its PC business, hooking up with Fujitsu (FJTSF: news, chart, profile) to turn its fortunes around, Stettler said. In household appliances, such as refrigerators and washing machines, it now manufactures in conjunction with Bosch.

"Siemens needs help with the technology like 3G. We think a partner, like NEC who they already work, with would make sense." Sharp (SHCPFM: news, chart, profile) is another such contender, he added.

Plus, no buyer would want to buy the Siemens plants without also getting the valuable Siemens name.

"Handsets without the brand means [getting] three manufacturing plants - a lot of overhead when there is enough capacity in the world," Stettler said.

Based in China?

A hint that Siemens may want to keep its mobile phone business -- and perhaps keep it routed in China where it manufactures around 14 million cell phones a year -- came on Saturday, when the company announced it would build a research and development centre in eastern China focusing on 3G (third generation) technology.

Siemens said earlier this month that group sales in China grew 28 percent to $4.6 billion in the year to Sept. 30, representing about 5 per cent of its global sales.

The conglomerate employs around 30,000 people there in 45 companies. It says it enjoys strong demand for gas turbines and has announced plans to invest 1 billion euros there over the next few years.

In November, von Pierer said one option for his mobile phone unit could involve moving more of the manufacturing to China.

Costs of closure

Deka's Merkel said job cuts in Germany could not be ruled out if Siemens secured a joint venture partner, although some jobs appeared to be protected for a few years. He expected the company to take a charge but could not estimate the level of the charge.

Bear Stearns estimated Monday that any closure of the unit would cost 250 million to 300 million euros in severance payments and charges.

For the three months to Sept. 30, Siemens said it lost 141 million euros in its cell phone division. In the same period a year earlier it made a 14 million euro profit.

To add insult to injury, Nokia (NOK: news, chart, profile) took the lion's share of crucial holiday season sales for low-end phones, according to London-based Mobile Magazine. Nokia has aggressively cut prices to claw-back market share.

Samsung (SSNGY: news, chart, profile) last week reported a sharp drop in margins but Sony Ericsson (SNE: news, chart, profile) (ERICY: news, chart, profile) is expected to report a tripling in fourth-quarter profit Tuesday.

Siemens was also hit last year when it had to recall many of its 65-series phones because of a fault that it said could damage users' hearing.

Sjratty,in subtle ways, Nok is redefining what arbitration is all about. As an example, they have validated the use of delay as an effective strategy in arbitration. Win or lose, they have made their point. Come what may, the arbitation has already seriously weakened and damaged a potential competitor and helped themselves by holding on to a large amout of cash, which has grown in value with the appreciation of the euro and by the likely absence of having to pay interest, even in the event of a negative panel decision. Although you state:

"Arbitration rulings can be applied in VERY limited circumstances (such as clear abuse of discretion). The standard for overturning an arbitration ruling are very strict, and thus challenges are rarely made.",I still expect Nok to appeal an adverse decision

There has been speculation since the Ericy agreement that if it could be established that Ericy were a trigger for Nok to pay for 2G, then Ericy would agree to pay for 3G, thereby triggering Nok for 3G. Whether or not this is in the language of the settlement between Idcc and Ericy it's eventual occurance is a distinct possibility and this upsets Nok, which wishes to get away without paying anything for both 2G and 3G under the license they signed with Idcc.