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Idcc has lost the skirmish with Nok over how the arbitrators should proceed. They have not lost the battle. The arbitrators have leaned towards Nok on the stalling issue. Perhaps they will agree with Idcc on the resolution of the dispute.
Marsala displayed his attitude towards Idcc by whispering his questions inaudibly and not speaking up even when repeatedly asked to. He seems to have something personal against Idcc and I don't take anything he says seriously.
I want to thank management for not rushing into bad deals to make Q4 look better and for not jerking around the books to enhance Q4 like so many companies have done in the past. I believe that most of the sellers knew too little about Idcc and failed to understand the relatively small significance of the Q4 earnings miss and thereby afforded a nice buying opportunity, which I used to add to my holdings.
The 8K might be interesting to Forbes Editors
Idcc needs to be aggressive and not wait for resolution of the Lu case but to use all avenues(including additional suits) to get 3G licensees. From 1999 to 2003, Nok pretended Idcc didn't exist and never mentioned us. We were very respectful and never called them on this. The Result : NOK did their level best to trash us in the end, even to the point of casting aspersions on our management.I should think we've had enough of that kind of treatment.
L2V If this is their business plan, I think its a good one. I would like it even more if they could find a way to get Nok, which signed a license back in 1999, to pay for 3G and then they could institute their plan for all new licensees from that point on. They could make an exception for Lu because of extenuating circumstances.
If Lu had been ready to pay for WCDMA, why wouldn't Idcc have run with this and triggered the setting of a royalty rate from Nok.
IDCC is a LONG term hold IMO. I do not expect the true value of IDCC to emerge for another five years. By this time I expect 3G to be king and IDCC IPR to be acknowledged, to be accepted, and to be paid for. By this time,IDCC truly has a chance to be a QCOM like success. Staying the course is vital.
I believe that Merritt was pretty sure of a deal with Lu for CDMA2000 that would close by the end of 2003. Then Lu decided that they wanted something in return, probably a very favorable deal for the rest of 3G. When Idcc refused, Lu reneged. The negotiations continued until recently when, with the CC coming soon, Idcc filed suit.
If idcc settles with Lu, they will have to arbitrate again with Nok about 3G. If they win in court, Nok will have to pay.
"Just a few months after it acquired the company, InterDigital Communications Corp.'s subsidiary Tantivy Communications Inc. said it filed a patent infringement lawsuit against Lucent Technologies Inc." This would imply that a suit has been in place for several months. If so, the Lucent was NOT the well known company referred to by Merritt in the last CC as one expected to license soon.
One of the named OEM's in the NOK contract may well be Lucent and when Lucent pays for 3G, might it not also trigger NOK payments?
An important advantage of arbitration as opposed to court proceedings is that it limits the time period necessary for resolution of a dispute. IMO Nok is trying its best to eliminate this advantage in its dispute with Idcc by stalling as much as possible and using time as a leveraging factor.
Idcc management read and reread the contract with Nok and if there was any doubt in their mind about Ericy being the trigger, they would not have spoken as they did after the settlement.IMO They are not stupid and I trust them in this matter.Nok does not want to pay and is digging deep to find ways to stall.
"When someone owes you a little money, he has a problem. When someone owes you a lot of money, you have a problem."(this is the situation with Nokia IMO) With 3G , let's not sit on our hands and let ourselves be owed a lot of money.
"Why has IDCC not initiated further litigation to bring 3G infringers to the table?"I believe this is because Idcc has had poor results from litigation in the past. We apparently had problems with our 2G IPR that no one wanted to discuss openly. The MOT case is one example. The Ericy case is another. This time I believe the quality and essentiality of our IPR is equal to the statements made by management.( If I did not believe this, I would not own the stock) If we can't license, then we need to litigate. No more licenses without royalties and no more upfront payments with nothing to follow. Its put up or shut up time for 3G. Let's roll.
Janet said that IDCC was still in a “number of active discussions”, involving substantive economic matters and “exchanging documents”. She mentioned that it usually takes a fairly long period of time to even get to the substantive economic phase of negotiations. Could it be that agreement to licence is more or less in place and now the parties can talk about royalty rates? This would seem to lend credence to what was discussed at the last CC. It seems that Idcc is willing to take its time and not be pressured into other than an equitable arrangement. Given the mistakes of the past, I would support this approach.
Call sellers need a thinly traded stock for purposes of manipulation. With the buying volume that has shown up recently on Idcc,it is too inefficient to play this stock even if they are naked. They may have to eventually enter the market and buy stock to cover the calls they have sold. This could help the stock on Monday.
Oct. 2000 CNBC interview of M.G was taped by me at the time. I listened to it again yesterday. I was surprised to hear M.G. say that the IDCC business plan(at that time) included MANUFACTURING chips. This has undoubtedly changed since 2000, but, in addition to the Infineon deal, I'm sure IDCC would welcome others.
M3S: QCOM has an established business model which many large and small payers seem to have accepted. I now believe that IDCC's best chance to break in is as a kind of discount competitor to QCOM. Otherwise, potential licencees may take the same tack with 3G as they did with 2G. i.e. ignore us and let us take them to court. Furthermore, even with 1.5% royalties, the market cap for IDCC could grow to where the shares could still rise to the triple digits.
M3S: I assume HCT got a royalty rate of about 1.5% with the right to use as much IPR as needed, non exclusive, non transferable and with no MFL clause. I believe this is the only type of licence that Idcc should be negotiating from here on in.
Possible Ericy 3G licence
I have awaited announcement of this licence. I expected this to happen in March when Ericy agreed to pay for 2G. When H.G. referred to Ericy as a company with integrity, I figured their signing up for 3G, where we were stronger than in 2G, was just a matter of time. When it did not happen in March, I assumed the parties needed a few months to work out the details. When Merritt mentioned that a new licence would be with a name company, I saw Ericy as prime candidate. If Ericy does not sign, I would really like to know why.
Wall st. logic
D.D. thank you for that lucid and convincing letter, but Wall st. has a logic of its own. The price determines who is right. If we get the licensees that we have been lead to believe were about to make their entrance on the scene and the price goes up, then the article was dead wrong. To Wall st., this is the proof which will settle the dispute much better than even the best reasoned argument.
Idcc has always been the land of the wink and the nod. Merritt built up a lot of trust with the Sharp license prediction. The mention at the CC about new licensees in 2003 was undoubtedly done with the approval and probably the suggestion of top management. I still expect them to produce.
JeffreyHF
You mentioned "Often it has seemed curious that the IDCC boards have been festooned with ant-Qualcomm sentiment, evidenced by gleefully posted negative articles referencing Qualcomm. I still don`t understand how "bad for Qualcomm" is "good for Interdigital"
Qualcom has advertised to the wireless world that they are a one stop shop, impying that Idcc patents are irrelevant. We even thought that Qcom was the indemnifier until the Forbes article told us otherwise.(Can we believe anything that was in that article?) Unfortunately Qcom is part of the problem wherein the biggies would like to snuff us out. Thus the negative feelings.
In my view, the validity of the patents is not a propper subject for arbitration. Nok signed a license. In dispute are whether the Ericy license is a trigger and if so what the rate should be. It would be quite a burden for Nok to show that the Ericy license was a fraud designed to hurt Nok. In the absence of such evidence, Ericy is obviously a trigger and the panel has to look at the rate to see whether it is fair. While Nok tries to stall, asking for the sealed documents, which in their opinion show fraud, the panel can resolve the rate problem. Nok would like to go to court for repeated hearings as an end unto itself. The panel can and should put a reasonable limit on that. This could go faster than you think.
orientbull: good idea re Tantivity
If CDMA2000 licensing were not real close, would it make sense for Idcc to double the Tantivity staff from 10 to 20? This would be the kind of 3G licensing we have been waiting for.
Jim, regarding the show me mode:
You said "Talked to Marsala today and like Carpenter and us we are all in the show me mode." I personally am not in the show me mode, having put my money on the line. With so many in the show me mode, a 3G license, which would trigger Nok payments, would cause an explosion on the upside of the variety not seen here since 1999 IMO. I believe it will happen sooner or later and now would be just fine.
Nok Idcc dispute was backround for Forbes article
Forbes reporter spoke with Idcc CEO and a relatively low level Nok spokesman. She was evidently in awe of the goliath Nok and chose to buy their version of the dispute. I can understand that it might give one a feeling of more comfort to align onesself with goliath rather than with David. I notice she didn't attack another goliath, Qcom, who has a similiar business model and was a David less than a decade ago when they had to fight to get paid for their IPR.
The good news from the Forbes article.
The article was written by a reporter not an analyst.
The reporter has obviously done a sketchy rather than an in depth analysis.
Idcc is attracting attention, sufficient to merit a story in Forbes. We're playing with the big boys now.
Some of the statements in the article such as the one about the consortium of EOM's wanting to cap royalty rates are so one sided and obviously self serving that even a casual observer can see through them.
Summary: If we have to have a negative review, it is good to have one as poorly done as this.
The Forbes article has many errors:
This would seem to be an ideal opportunity to refute these errors, announce our new licensee(s) and unveil the mysterious indemnifier(s)and how we plan to deal with them. I hope that Idcc is heard from on Monday or Tuesday.
Danny: I suspect that Howard Goldberg did say something close to what was quoted. What was probably meant was that if OEM's want to go out of their way to design around Idcc patents with some Rube Goldberg (no relative I'm sure) contraptions, they would wind up with products that would not pass muster, and definitely not conform to 3G standards. The reporter took this out of context and made it look as though our 3G patents were not essential. I agree that Idcc needs to explain this ASAP.
Monday morning would be an excellent time for Merritt to release the news of the new licensee(s) to counteract the slanted information in the Forbes article.
Forbes article was a hatchet job
Just look at the loaded language.
"Howard Goldberg wants every cell phone to use InterDigital's chip technology. He's got a BIZARRE way of wooing customers."
"Virtually all of its $33 million profit for the first nine months has come from DRAGGING customers like Ericsson and NEC Corp. through legal disputes over patents."
"insiders started DUMPING shares"
"Given that a mystery company--Qualcomm says it's not the one--will now protect companies from InterDigital's LITIGIOUSNESS, that eliminates much of the FEAR OF SHUNNING Goldberg.
" InterDigital needed a LAWSUIT SAVANT, and Goldberg fit the bill."
" Four handset manufacturers--Nokia, Siemens, NTT Docomo and Ericsson--are SICK of patent disputes.
Future interviews with reporters bent on a hatchet job should be conducted by the public relations department IMO.
The Forbes article neglects to mention that Nok signed a license with Idcc in 1999. It also does not mention that Nok paid millions to Idcc to help develop TDD. It does not mention the Infineon chip deal. It does say that Qualcomm is not the indemnifier, which is interesting.
Nok arbitration may hold up dual mode licenses
Prospective licensees for dual mode products may be OK on paying the 3G part but hesitant on the 2G part until Nok agrees to pay for 2G. I would anticipate that after resolution of arbitration, Idcc would have success in signing up licensees for dual mode. This arbitration is not just about cash for 2G. Its about lots more including Idcc's image with the OEM's. Idcc can't afford to back down in a mediocre settlement. This dispute will probably be decided by the panel.
Merritt asserted that a licensee, who was well known, would be announced by the end of the year. This kind of assertion is dangerous if negotiations are still going on because it gives leverage to the potential licensee. Therefore I think that the contract had been signed at the time of the CC and only a technicality such as the receipt of a check remained before the final press release. Otherwise the credibility of Merritt takes a significant hit.
GE Jim: you signed off "IMO"
I am sure this is your opinion at the current time but I believe it will change when you get back in as a long. A win over NOK in a reasonable time frame, which seems to be a likely event, and one or two more major licensees, which now also seem likely might make you rethink your position as a trader rather than an investor.
Meritt's predictions in the CC have got to have been planned and were not spontaneous. The last time he predicted that Sharp would sign, it happened within a month. I believe that he has a new licensee just about signed and ready to go. He was able to delay announcement since the Q3 earnings report was good enough to stand on its own and the CC was not in dire need of more good news at that time. The final licensee announcement will occur soon and will counter possible disappointment if Judge Lynn decides not to make her decision at the time of the hearing on Monday.
Htlnd,
Nok wants to look at the documents to see if they can find something they can use in an MFL argument to delay royalty payments. They have no intention of negotiating in good faith but want to gain whatever leverage they can in 2G and especially in 3G. They know that time works for them. Letting them have the documents simply opens up other potential avenues where they might be able to delay.