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Why did Nok choose to attack Idcc personally?
By choosing to attack in this way, Nok all but guaranteed that Idcc could not back down and give Nok a better deal. There are three reasons why Nok may have chosen to attack in the manner they did:
1. Nok was angry at the March CC claims made by Idcc.
2. Nok wanted to show their strength to the entire telecom world in their resolve to aggressively control royalty rates.
3. Nok wanted to make an example of Idcc, which did not bend to their will, by sinking them as a going concern.
Nok had been infringing for years when it signed its deal with Idcc in 1999. This deal was fraught with risk for both parties. The risk to Idcc was they would lose the Ericy case and never get a dime from Nok. The risk to Nok was that the settlement with Ericy might be one they would not like. The latter happened and as long as the 1999 deal allowed a settlement between the parties instead of by the court, Nok is bound by it. Obviously the Idcc attorneys looked at this issue and decided that a settlement between the parties fulfilled the terms of the agreement. If they were correct, I do not see that the amounts expected from Nok are unrealistic.
H.G.'s new honor presents a paradox and a challenge.
Temple University states, "Mr. Goldberg will be a lead mentor and advisor forthe Fox School's IEI graduate and undergraduate programs"
Loop, you mentioned and I agree,"CEO's typically do these things for their local talent houses as an honor and in furtherance of the business of IDCC."
This comes less than a month after Nok accused Idcc management of insider trading. This appointment of H.G. by Temple University indicates that they do not place any credence in Nok's attempt to sully the reputation of Idcc and its CEO.
3GDollars
Idcc is due to file court papers on August 25th. I am interested in seeing whether and how they respond then.
3G dollars; I disagree on 5.
You stated;"I have asked about 5. IR told me that is is in arb and can't discuss much. I think it is better that way; every communication goes through the arb and their lawyer. They opened their mouth on what they expect Nok and Samsung to pay, and see what happen."
Idcc management has been accused of illegal behavior and neither they nor the company can afford the luxury of waiting a year to respond to the charges.
L2V
I agree with your statement,"Nokia is a wireless manufacturer who makes their money charging a huge profit margin on the products it sells. IPR licensing is a cost they do not want to pay. They want higher profits for themselves, and no profits for the folks who invented and patented a lot of the technology they are using. They are in collusion with other manufacturers who want to do the same thing. Those guys are very big, and they are ganged up on our little InterDigital at this point.
I see Nok as the ringleader in an anticompetitive conspiracy to control royalty rates and they are not above using gangster tactics to achieve their goals. I wouldn't be surprised if some members of congress might see it that way too.
Helpful steps by Idcc
1. opening up the details of 1999 Nok deal to the public
2. discussion of continuing 3G payments from Nec
3. more discussion on the Tantivy aquisition
4. more details on the indemnification issue
5. a discussion about the recent accusations by Nok and what, if anything, it intends to do about it
6. more details on the insurance issue
The long term advantages of this type of openness and honesty will help the perception of this company by W.S. more than potential short term negative implications for the price IMO.
Marchma, I do agree that while selling by insiders was not in the best of form, it was legal. Now I question whether Nok's decision to make this an issue, an issue which has no pertinence to their business, as an important part of their negotiations is legal. If evidence exists of blackmail it should be addressed by Idcc. I do not think the public would be happy to hear about a large foreign company coming here and blackmailing a small American one.
Jim, if the insurance company presses its claims against Idcc, they will most likely be solved through negotiation and then, if necessary, through litigation. This assumes that no arbitration clause was written into the insurance policy, such a clause being rather unusual.
The insurance bill is not a serious problem IMO
Just like Nok may be trying to get some advantage through the interpretation of their contract with Idcc, the insurance company is doing likewise. When large amounts of money are involved, such disputes are the rule rather than the exception. This is especially true with insurance companies.
What I view as a more serious issue, which I think Idcc needs to deal with head on, is the attempt of Nok to blackmail Idcc into giving them a better deal through the release of not so thinly veiled accusations of insider trading. If I were counsel to Idcc, I would not take this lying down.
Corp; if the insurer is looking at settlements with companies other than Ericy, I think they are on thin grounds. If you carry that idea to its logical conclusion, then any company that pays Idcc as a direct or indirect result of the Ericy settlement should ceate an additional Idcc liability to the insurer.
Each of the two Idcc boards is suffering IMO
The combination of feistiness and seriousness which we had up until the split made for a better situation than what we have at present. I for one would like to see TeeCee and the group at RB return and recreate what was a really great board. I think the mechanics are better here and that is the only reason I would prefer IHUB over RB.
No strategies barred in Nok-Idcc war.
I wonder whether the significance of what is going on between the two companies is fully understood. Wars between corporations happen all the time and they usually negotiate an amicable settlement. This is different. Nok has chosen not to attack just Idcc. They have attacked the individual persons who constitute management. They have said: "You settle with us on our terms or we will blow the whistle and YOU MAY GO TO JAIL". This is the equivalent of using a weapon of mass destruction in a war. Unless this is settled real soon, Idcc must respond with the most severe weapons they can muster. I expect Idcc to disavow their contract with Nok over Nok's free use of mutually developed IPR and to point to some misdeeds that Nok management is guilty of. This has gone beyond business. It is getting personal!
The buy back is an announcement to Nok that we're in this to the end. No more backing down!
Data Rox: My take on Tantivy:
You stated:" think some of their patent posistions are interesting, and in some cases commercially relevant. As I stated the day of the IDCC deal, we could possibly see a return on investment by 2006 or so." IMO Idcc didn't buy Tantivy to wait until 2006. They have a specific reason for shelling out 10 additional million dollars. I suspect they are bulking up their own IPR portfolio with those of Tantivy, which is now EXCLUSIVE to them, in preparation for imminent legal proceedings against an infringer. Any idea who that would be? We probably won't find out at the CC but in the months ahead.
If Idcc were 50 would we be leaving Ihub? I don't think so. There's a lot of anger out there. The recent fall in price is not Matt's fault. The anger would be better directed at Nok or even Idcc not at Matt.
Matt I understand your reasoning and that of those who are in disagreement with you. The issues are really pretty clear and don't need to be repeated. You can't please everyone. You've worked hard to make this board as good as you can. Sometimes you have to stand up for your principles and while I have great respect for those on the other side of the issues, I personally think you're right.
Matt you have constructed a great board:
GE JIM
First of all I want to thank you for your sensible and cerebral bearish tilt on Idcc. You have cleared up a lot of questions for me including why W.S. valued Idcc as less than I did until its recent run up and since the arbitration announcement. I now more fully understand that its not the essential patents you say you hold or even those you really hold but your ability to collect on them. However we're not talking about just patents at this point. We're talking about Ericy paying(even if less than we expected) and a signed contract with Nok that, if we have the guts to stick to our guns we have a very good chance to collect on. I'm not saying there's no risk but I think this is a "businessman's risk". And if you insist on using a Las Vegas analogy, Nok is trying to roll a ten as their point and Idcc is sitting on "don't pass".
Looking at arbitration from Idcc point of view
Nok, in crafting the 1999 deal, essentially dared Idcc to get paid by another EOM. They said, "We don't think you can do it but, if you do, we'll pay you". To Nok's surprise, Idcc did it. They got Ericy to pay. Now Nok wants to reneg on the deal. The 1/2 % royalty rate is small enough but Nok is looking for an angle to get out of their signed commitment and to return to square one where they were saying "We'll pay you nothing". Idcc really has no choice here. If they back down now, they suffer repercussions with other OEM's due to their MFL (Much Future Litigation) agreements. How much can you split 1/2 % before it becomes trivial. If Idcc gives in on this, what happens to the rates for 3G. Either these patents are worth something or they're worth nothing. Nok has already declared that they will lead the fight to cap aggregate patent royalties at 5 %. If they were to succeed in this they would probably lower the cap to 1 %. Rather than pick on QCOM, they have "zeroed" in on a smaller opponent like Idcc as a first victim in their fight, just as any bully would.
Just looked at the Idcc Yahoo message board. That's not a board. Its a garbage can, probably because it has no rules. I hope TC and Matt can negotiate their differences better than Nok and Idcc.
If Matt changes the rules, he needs to change them for everyone. I have no doubt that this would attract idiots who would visit the board just to destroy it with profanity. Jail is just a small measure to keep things running smoothly for the board. We all welcome the return of a valued poster. Incidentally I also have Once on ignore.
Legal question
Samsung was awaiting establishment of a royalty rate in the Nok-Idcc negotiations to determine what its own royalty rate would be. Reportedly Samsung met with Nok and consulted with them shortly before Nok declared for arbitration. Is this type of consultation legal or is it an illegal interference by these two companies to join their interests instead of each negotiating independently with Idcc? It certaily gives the appearance of two large companies ganging up on a smaller company.
Broken 80
Ameritrade analysis is technical and if you are a short term trader, it is probably worthwhile to look at it just as were the bullish analyses when the stock was rising recently. However just one item of hard good news and the short covering could push this stock right back up.
Loop:
Thanks for your really clear discussion of the two main arguments of Nok.They are:
1. Ericy/Sony does not qualify as a mentioned OEM under option three. This will be decided by the arbitration panel and not a court.
2.If Nok loses argument 1 in arbitration, then they will challenge the circumstances by which the rate was set via the Ericy/Sony deal.This would need to be settled with the help of the court in opening the documents which would then be reviewed by the arbitrators.
It seems probable that the panel would begin to look at argument 1 soon. This could occur simultaneously with Nok petitioning the courts for the documents. Idcc must prevail in Argument 1 or it it all over and argument 2 becomes moot. I think their chances of winning argument 1 are excellent. Assuming they win in 1 and win in Judge Lynn's decision, then I doubt that the arbirators would delay for years while Nok exhausts its appeals. I believe the panel would not take more than a year to decide. I feel that it is likely that in the end Idcc would be paid a substantial amount if not everything they are requesting. Idcc is not asking for 5% but .5% royalties. Nok signed a contract. What did they think they were going to have to pay? I'm sure arbitators have a sense of fairness.
Loop
Ericy/Sony is the successor to Ericy. One could argue that as the successor to Ericy their rate agreements with Idcc would have the same affect as Ericy in filling in the blanks in the Idcc-Nok agreement. Some might consider this a stretch for Idcc to ask the arbitrators to accept but is it more of a stretch than Nok asking the arbitrators to delve below the agreed Idcc-Ericy royalty rates in order to read documents of the negotiations that arrived at those rates?
Nokia's goals
I believe that one of Nokia's goals in this dispute is to destroy Idcc and nip it in the bud before it becomes another QCOM. While Ericy was an enemy of Idcc, Nok is a MORTAL enemy.
Sjratty:
Isn't it quite likely that Idcc alleged infingement by Ericy not only on many claims that were central to their case but also on some peripheral claims that might be less sustainable . If this were the case then it would follow that the rejected claims were likely to have been in the more questionable group to begin with. This would be in line with Idcc's assertion that they were in good shape after the partial summary judgements.
Sjratty:
My take on the issue of the claims that were eliminated by Judge Sanders is this:
Unless and until these claims are thrown out in a final court decree in some future litigation, Nok is on the hook for them. Do you disagree with this?
Apparently some patent claims were disallowed by judge Sanders in PSJ while others were allowed. If Idcc never had occasion to appeal these PSJ due to the settlement, how could this be used against Idcc? If Nok wanted to challenge these claims it could have gone the litigation route with Idcc but it elected instead to sign a license agreement with them with just the royalty rate to be decided.
Don't blame Marsala. He has taken a hit and is doing the best he can to recover. The important point that may be being missed in all of this is that Marsala doesn't know anymore about this stock than we do. In fact I have a hunch that many of us who have been around Idcc lots longer than he has may have a better feel for this stock than he does. If his bailing out causes the stock to crash, then we can buy more at a cheaper price. His downgrade is what I would categorize as soft bad news rather than hard bad news, which has a direct effect on earnings. Unfortunately the Nok decision not to pay promptly did qualify as hard bad news, but we have already paid the price and perhaps more than we should have for that.
Idcc has already priced in a long delay due to the arbitration. Another few points down and we'll have priced in a loss in arbitration. If you believe that Idcc will lose in arbitration, it makes sense to sell. Since I don't believe that, I will be buying still more.
Ge Jim:
It is my understanding that Nok was asking not only for the court documents in the Ericy case but for arbitration notes as well as notes from previos litigations and arbitrations. I doubt that Ericy would have agreed regardless of what Idcc wanted. It really sounded like a fishing expedition and a stall to me. I doubt that releasing these documents would have induced Nok to pay voluntarily anyway. Idcc had only one choice; to go to arbitration. This is a classic case IMO where arbitration can bring a dispute to a timely close.
GE Jim: Could you be more specific about what you mean by:
"Lawsuit city if they been playing" I assume you're talking about collusion between Idcc and Ericy. I suppose I'm naive but I just don't see how Nok could produce any evidence of collusion even if the court documents they are seeking were opened for them. `
Nok decided to arbitrate for 3 reasons:
1. It wanted to demonstrate that it was just as tough as Ericy and Mot and back up their publicly announced bid to be a leader in keeping telecom royalty rates down.
2. It was genuinely upset, and perhaps with some reason, about how Idcc handled the announcement of the "trigger" being in effect.
3. It figured it could ring some kind of concession from Idcc.
They've shown how tough they are and IMO have made themself look a little assanine in doing so. They've let out their anger which I think had more to do with disrespect for Idcc than anything else. They hardly ever in the over 3 years their agreement was in place said anything kind about Idcc or even mentioned their name. The concession they're going to get is the 20% discount for prompt payment.
In the Nok filing to the district court in Dallas, they state:"it is in Ericsson,s interest to acquiesce in Interdigital's attempt to impose high costs on a competitor." This statement should put to rest the question as to whether Ericy is an important enough oem to trigger the rate setting. Either Ericy is or is not an important oem and Nok clearly states that it is.
Marchma:
" have heard that Nokia had essentially agreed to the rate settlement and had sent IDCC draft papers to that affect. Allegedly, there was a problem with one aspect of the draft that IDCC did not agree with and sent it back to Nokia for revision. Nokia’s top leadership then met with Samsung’s top leader and suddenly had an about change of face. All of a sudden in apparent collusion with Samsung, Nokia decided to fight the contract with everything that they could muster. Nokia sent back the draft with so many changes and alterations from the original draft that IDCC could not possibly accept it, and then all hell broke loose"
If what you have heard is true, then this sequence of events would certainly be introduced during arbitration discussions. The question would have to be asked of Nok,"why did you do such a sudden about face?' The answer would be interesting.
Nok will probably see this through at least until judge Lynn rules on the opening of the documents. If this goes against Nok, I would not be surprised to see a three way meeting betweeen Nok, Samsung, and Idcc to put an end to the arbitration in return for a 20% discount on the rate. This would help the reputation of Nok and Samsung and reconstruct their working relationship.
sjratty:
"The second argument COULD be very strong, depending on what the contract says. I understand that it lists ERICY as a trigger company, but one example of how that may not mean much is if the contract says the MFL clause is tied to the license of another major manufacturer, which CURRENTLY includes ERICY, etc..... Interestingly, this second issue does NOT require any docs from the IDCC/ERICY case to resolve"
Although the 1999 Nok-Idcc agreement did not refer exclusively to Ericy, it is clear that the determination of the Idcc-Ericy suit is what both parties had in mind primarily. It would seem most likely that Idcc would not allow a clause in the Nok agreement to nullify the affect of a win over Ericy if Ericy dropped out of the category of a major manufacturer.
Spencer
As a ball park estimate, figure judge Lynn will rule on whether Nok can access the documents from IDCC-Ericy by end of September. Arbitration usually takes a year. I don't believe the Tantivy aquisition had anything to do with recent market action.