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Question on CAFC proceeding. Are either of the patents at issue before the CAFC considered essential patents within the 3G standards? In other words, if Nokia loses on claim construction and the case is remanded back to the ITC, can the ITC revisit the issue of FRAND between the parties? I don't remember how the issue of FRAND was addressed by Luckern or whether it was addressed at all.
I am not a basher, I am only trying to determine if there is any possibility for Nokia to drag this out any further if an Order is rendered by the CAFC that is beneficial to IDCC.
Wavey, not necessarily. You could get a couple of hedge firms to just sell stock back and forth continually reducing the bid and ask until they achieve a desired price. All the while, they are banking on other shareholders releasing their shares at a lower price and they will pick these shares up as soon as they hit the market. It's definitely collusion and it is illegal but it happens all the time. The risk is that if they set a target price that is too low, buyers will come in and foil their plot and they will have to short more shares.
The reason Nokia didn't settle during the ITC investigation is thay they had a pretty good idea what the opinion was going to say. Nokia's law firm has some pretty deep ties within the ITC and I'm sure kept pretty good tabs on the drection of the case within the ITC. The CAFC is a different matter all together. I believe IDCC's counsel has had better recognition at the CAFC than Nokia's.
Even though a loss at the CAFC will put Nokia's back against the wall, I believe they will take it to the end out of sheer arrogance. Maybe they are just willing to take IDCC's standing offer if they lose but they feel its worth a try to win it all. It doesn't make good business sense but then again, when is the last time Nokia showed good business sense?
Don't you just lover reporters who do advance research on the topics they write about? I guess being from San Diego, this wanna be reporter feels like he needs to protect his beloved QCOM. What a farce!
I think you are correct. If Nokia loses at the CAFC, I believe it goes back to Luckern to issue the cease and desist. I do not know what that timeframe is. Nokia will probably file for a presidential review but it would be highly unlikely for them to get one unless they have close ties to the Whitehouse. Nevertheless, the C&D process would continue at the ITC. IMO, Nokia won't start to negotiate until they suffer a loss at the CAFC. Due to their arrogance, they believe IDCC needs them more than they need IDCC.
And to think Apple completely trashed the Symbian Foundation that according to Nokia was "undisputedly the most attractive platform for mobile innovation", in less than eighteen months after the introduction of the I-Phone. I guess this really is a lightening fast industry and totally revolutionary to boot. Gee, what other surprises are coming to Nokia that they didn't plan for?
I can't decipher all of their products but most seem to center on dongles, smart cards and card readers. I didn't see anything that referenced a TPM although they say they operate on all platforms. Did you notice their financials and how it dropped off a little in 2009 and 2010? On one of the slides it appears to list GM as 70% of their business, at least that is the way I interpreted it. If GM is the global auto manufacturer that Wave is dealing with, VASCO may be in for a rough ride going forward.
Olddog, you're right. The initial agreement was signed in 1999 and then Nokia reneged. A settlement was reached in 2006 whereby IDCC received $250 million for a paid up 2G license and the initial 3G technology agreement was cancelled. That's what we are fighting for today. Anyway, I believe Nokia had a significantly higher accrual recorded than the amount in the settlement. When they reversed the excess accrual, it made a big difference to their quarterly earnings and they made sure to take credit for a favorable settlement.
As to my earlier notation for a split the baby decision, I mean a decision affirming in part and reversing and remanding in part. Depending on the claims interpretation, we could still wind up with a finding of no infringement. I believe Newman and Bryson understood the concept behind IDCC's short codes used for power ramp up but who knows what claims interpretation we will get when its all said and done.
I don't think any meaningful change in positions would have occurred until after the CAFC hearing so there wouldn't have been much time to come to an agreement that might affect Nokia's prior reporting of infringement accruals but it is worth a look anyway. I just don't want to get anyone's hopes up only to see a slide in stock price if there are no changes to the prior accruals. It's a long shot at best at this stage to see any changes to prior accruals in Nokia's upcoming earnings release.
I believe they are scheduled for release on Thursday morning according to an article I read under Nokia related news items.
Joel, you just triggered my memory on something. The last time Nokia and IDCC settled (1999), I believe the announcement came out in close proximity to Nokia's earnings release and Nokia spun the announcement into an enormous win for themselves by settling for less that their accruals for past infringement on 2G and for wrapping a 3G technology agreement around it that purported to give Nokia everything it needed for 3G. It seemed like a good deal for IDCC too until Nokia later pulled the plug on it after getting what they needed to design and build their 3G devices.
In support of your high/low arguments, I suppose if there were a framework for a settlement amount based on the outcome of a CAFC ruling, they could adjust their past infringement accruals accordingly even for amounts accrued and reported through December 31 assuming the adjustment is fixed, known and measurable (GAAP standard assumes worst case but it could still be less that what they accrued for previously). We could get an inkling of this when they release fourth quarter earnings if we see any adjustments to their past infringement accruals. It is something I will be sure to look for anyway. If we see an adjustment, it may signal that a framework for settlement is in place. If not, then we're back to where we are now waiting for the CAFC ruling.
M3S, write that up on official letterhead and we can all sign it. Case closed.
Joel, I think IDCC would be willing to take any reasonable settlement offer from Nokia but I truly don't believe any reasonable settlement offers are on the table right now or it would already be settled. What the CAFC hearing did was give IDCC the ability to refuse a crappy settlement offer from Nokia and by crappy I'm thinking about $0.05 per phone.
We've heard rumors of "substantial progress" relating to settlement negotiations in days past but I don't know what that means in relation to royalty amounts or covered equipment. I do not believe IDCC has ever felt it was in the position to refuse a reasonable settlement offer from Nokia. I just don't believe a reasonable offer has been extended nor do I believe that one will be extended unless there is an absolute win by IDCC at the CAFC. The thought of another possible split the baby decision terrifies me because that will just leave us in limbo.
M3S, I guess all of the conversation up to now has centered mainly on a win or lose scenario. I really haven't given much thought to another split the baby decision. What is the possible outcome of a split the baby decision, a reduced royalty rate? That could be another huge incentive for Nokia to hold out until the end. As much as I would like to see a settlement, I just don't give it much chance of happening.
Joel, can anyone on this board cite an instance where Nokia negotiated in good faith with anyone?
I think IDCC would take your proposed terms in a heartbeat but those terms are not yet on the table as far as Nokia is concerned. They may be on the table after a win at the CAFC so I don't think Nokia really feels it has anything to lose by going the distance. By the way, how many more royalties will be discounted 10 - 20% by waiting another 30 days for the CAFC ruling? Nokia knows full well that time is money.
Paheka, under normal circumstances, I would agree with you but the arrogance of Nokia and its attornies in these proceedings has been an eye opener. I tend to think nicmar hit the nail on the head when he said that Nokia will only feel compelled to negotiate once they lose at the CAFC. I don't know what they could possibly use as a bargaining chip in the event of a loss at the CAFC, but it certainly fits their past MO.
Could IDCC be holding up a settlement agreement for the inclusion of 4G? I could understand Nokia not wanting to include 4G in an agreement now because they could then drag that technology out another ten years which I'm sure IDCC would like to avoid. There are just too many moving pieces to this puzzle to come to a rational conclusion.
I agree with Loop's reasoning. I am confident enough in a win at the CAFC that I am favoring holding out for an opinion from the panel. My confidence stems from the fact that a simple affirmation of the ITC ruling probably would have been issued by now. Also, having the panel review the claims language on a "de novo" basis coupled with some of the comments made by the ITC's cousel in the appeal hearing that rebuts several of the arguments in the initial ITC Order lends credence to the notion that Judge Luckern interpreted the claims language incorrectly and will get reversed. Finally, with the panel wanting to present its opinion containing discussions and/or findings related to confidential information contained in the filed documents gives me a feeling that the ruling will not be in Nokia's favor and that disclosure of the confidential information is necessary to support the panels ruling. In other words, I think there is a greater need to disclose the confidential information to support a reversal and remand of the ITC ruling than there is to affirm it. What do others think about this notion?
Now, assuming IDCC has a chance for victory at the CAFC, do they settle or hold out for the order? A settlement on amicable terms represents a guaranteed victory of sorts, hence, we don't lose. But, having a published document in a court of law that signifies a win for IDCC will go a long way in the advancement of licensing negotiations with other parties on terms that are more likely to be favorable to IDCC, especially if the win results in a higher rate from Nokia. An amicable settlement would always be acceptible but it will not provide legal precedent in a future court proceeding should the need arise.
You can tell that I am not an attorney because an attorney will always choose to settle rather than leave their fate in the hands of a court. (At least any attorney other than Nokia's)
Whoa, was that a slip identifying Boeing, BAE Systems and General Dynamics as TPM users? Are these some of the contracts Steven has been talking about? If so, I might be able to understand why these companies don't want their security plans and platforms identified publicly. Hopefully, we'll be able to see the revenues pouring in though. Bring on the Defense Department for a full house.
You know Nokia is getting desparate when they start whining about unlicensed copycat phones in havily discounted third world markets. It's good to see them get a taste of their own medicine.
Comments on the Stock Option Grants
I was wondering when the officers would start awarding options again to replenish the shares sold years ago. Actually, I think this is a very bullish sign that Steven thinks the share price is going to start appreciating rapidly. Even though the options seem a bit on the high side, it tells me that they want to lock in a large number of shares before the price starts to go wild.
Looking at some value comparisons:
Apple has a stock price of $332.68, earnings of $15.15, and a P/E of 21.96. They have approximately $55 in cash per share. If you remove the cash value from the share price, they have an adjusted PE of 18 on future earnings. ($332.68 - $55.00 / $15.15)
QCOM has a stock price of $51.33, earnings of $1.96 and a P/E of 26.19. QCOM has approximately $11 in cash per share. If you remove the cash value from the share price, they have an adjusted PE of 20 on future earnings. ($51.33 - $11.00 / $1.96)
IDCC has a stock price of $47.56, earnings of $3.54 and a PE of 13.45. IDCC has approximately $11 in cash per share. If you remove the cash value from the share price, they have an adjusted PE of 10 on future earnings. ($47.56 - $11.00 / $3.54)
Is Wall Street valuing the LG contract at between $18 to $28 per share which represents the difference in share price using a forward PE of 10, 15 and 18? It seems like we are still discounted by an amount far greater than the value of the LG contract.
usn..I think M3S was approaching the AT&T decision from the standpoint that maybe Apple put some pressure on them to back away from Nokia. It is certainly plausible due to the impact that Apple has had on AT&T's business.
Apple and Nokia are using scortched earth tactics against one another around the globe. I am sure Apple would like to see Nokia suffer significantly and would like to participate in extending that suffering in the future.
Of course, I agree with your comments about Nokia's Symbian platform as well. It is not the future and maybe AT&T is concerned about that as well.
There were many more patents included in the initial filing with the ITC. I believe the ITC requested that the parties narrow the patents to be reviewed in the proceedings because there is a limited amount of time available for the hearings and review of briefs. IDCC therefore settled on a reduced number of patents that it felt it could best argue at the time. Some of those patents have since gone through resubmissions at the Patent Office to clarify claim language that was misinterpreted or misconstrued by Nokia, ITC Counsel and Judge Luckern at the hearing. Some of the misconstrued claims language dealt with the definitions and applications of the terms "code", "short code" and "spreading codes" in the power ramp up patents.
Loop, your closing remark speaks volumes. I too believe our current management and legal team is much more capable of closing a good deal than previous management. I am very happy that Uncle Billy chose to take Nokia to the mat and feel we will finally be rewarded for standing our ground. If we can get past infringements rolled into forward looking payments, that would be tremendous reward for shareholders but that has not been our previous MO. We'll just have to see how it plays out.
Jim .. I agree that ERICY is tied to Nokia and I also believe Motorola is tied to a Nokia settlement. That is why I don't want to let Nokia off for past infringements because I believe that benefit will then be passed to ERICY and Motorola. Companies that prefer to litigate rather than partner should pay a premium for their actions. I would like to see IDCC get paid for all past infringements and fair value going forward regardless of how Wall Street chooses to value it.
Loop .. I understand your point but am hesitant to let Nokia off the hook for past infringements. That is precisely why Nokia has fought this battle since 2000. They know from past experience that holdouts are rewarded. I would only agree with your premise if there is a 20% penalty added to the forward looking rate and that agreement must be for a minimum of ten years. Otherwise, bury those bastards so they can never compete in a level playing field again. I have no sympathy for them or their legal counsel.
M3S..I'm sure Flynn would favor a settlement but the snake in Finland really has a burr up his @SS with IDCC so I am not counting on a settlement. A settlement would be a nice surprise though.
And no more contingent licenses based on the signing of others. That't the reason Motorola and ERICY are not signed to date. I also don't understand why IDCC has not licensed any Chinese other OEMs. Is everybody waiting on the Nokia verdict? If so, a Nokia signing will have the same impact that the ERICY and Nokia signings had with QCOM. That is sure a pretty picture to contemplate.
IQ,
I find it hard to believe counsels for ITC and Nokia didn't meet prior to the hearing to iron out their stories and the topics they would cover to make the most of their shared time. Based on what I heard, that didn't likely happen. It seemed to be a real waste of time for the Nokia attorney (Flynn) to have to do damage control after Ms. Valentine spoke but it seems that justice may have finally prevailed and Nokia's arrogance has finally caught up with them. I too am of the belief that the panel of judges will rule in favor of IDCC on claim construction and remand the case back to Luckern.
I sure would like to have heard Flynn's summary of the hearing results phoned back to Finland this afternoon. "Nokia, we have a slight problem here. Our boosters have shut down and we're headed back to earth. Please advise for rescue operation."
IQ,
I thought it was also telling when ITC counsel Valentine kept saying that codes were not required to spread anything and that IDCC's short codes didn't spread anything. That seemed to fly in the face of the claims construction adopted by Luckern that all codes referenced by IDCC were spreading codes and performed a spreading function.
If I am not mistaken, at that point, didn't one of the Judges ask if that wasn't the argument IDCC was trying to make? Nokia counsel Flynn had to be coming out of his chair by then. Nokia has pulled out some miracles in these proceedings but this one will be hard to dig out of.
Given the tone of the hearing today, Nokia will still not settle unless a cease and desist is ordered. I hope it comes soon.
IQ, thanks for the play by play. it sure seems like the judges had some preconceived notions and were looking form somthing or someone to change their minds during the questioning. It doesn't seem like that happened based on your summary of notes. They sure seemed to pounce on the term used by Luckern "a code that intends to". Hopefully, IDCC's attorney persuaded them sufficiently on the spreading code issue as well.
I sure don't see how Nokia can win the argument about increased power (stair step) versus increasing power as argued by Nokia during the ITC hearing. The claims language specifically uses the term "increased power from a previous transmission". There is no doubt in my mind that that language denotes a step function. Hopefully, the CAFC panel will right that wrong committed by Luckern.
Fish..I don't agree with your theory. I think a lot of options were bought last week by investors who intended to sell stock before the CAFC hearing. It is a pretty cheap hedge against a potential loss at the CAFC. I anticipated a lot of selling this week. If the hearing appears to favor IDCC, the option holders will simply exercise the options to get the stock back. I would have done it if my pension fund allowed me to purchase options.
We are also post dividend which may have triggered some sales today.
Looks like the close was $39.09 for a loss of only $.15 on an options expiration day. That is a first. It looks like the days of blatant price manipulation are coming to an end.
Thanks MPartners for the timely upgrade.
Think about it. Apple already has a license with IDCC so any additional patents acquired by IDCC probably won't change anything with Apple. Apple would just a soon not have to pay anyone else for patents but has been sued by Nokia for infringement. IDCC wants to strengthen its patent portfolio whereas Apple wants to acquire enough patents from Nortel to force Nokia into a cross licensing agreement with no cash exchanging hands. Its a win-win for IDCC and Apple. They both get what they want. Apple is in a better position to cross license with other OEMs and they don't have to purchase the entire patent portfolio of Nortel. Even though Apple can afford it, why buy more than you need?
IQ, IDCC would be far more valuable to Apple and Google than to Nokia unless Nokia bids up IDCC to try to keep them away from Apple and Google. Now wouldn't that be an interesting turn of events? Future headline: "IDCC stock value approaches $100 as wireless phone giants continue bidding war for valuable 3G/4G patent trove", LOL
IDC is partnering with one of these companies to purchase a block of Nortel's patents. My gut tells me it is Apple. Apple is probably trying to buy a block of patents to ward off Nokia in its patent infringement suits against Apple. I'm sure Google has the same litigation fears as Apple due to its entry into the smart phone market.
Nokia is probably bidding on the Nortel patents just to keep them away from Apple and Google. This is getting very interesting.
If Nokia walks away with the patents, I can see Apple attempt to acquire IDCC, especially if IDCC prevails against Nokia at the CAFC. If Nokia walks away empty handed, they will be toast.
IDCC closed at $29.61 on September 30. We are up $10.00 since then. Those shorts have got to be feeling some pain by now, about $70M worth. I hope it gets much worse for them in the near term. I can only surmise that they are holding out for a loss at the CAFC.
Fish, my wife always says to take some off the table as well. The only problem is, if I take it off the table, she just wants to spend it and there is never anything to show for it. A month later she asks why we don't have any money. LOL
NJ, that is a very concise and appealing summary you have presented. With the continuation patents in hand to prove intent of initial claims terms, I believe IDCC has a good chance at the CAFC as well.
As for the forward looking PE, I would be elated if IDCC were valued at a PE of 25. That would put us at or above a price of $100 per share. I can tell you one thing, a settlement with Nokia will bring all other players to the table and IDCC will be licensing 100% of the industry from then on.
hock, if that is the case, a lot of investors will be pretty pi$$ed off when they get their 1099's at the end of the year. It doesn't seem right because the investor has no control over whether the stock is loaned or not. In some instances, it is a matter of policy for the brokers to loan any stock that is under their control, whether in a margin account or not, simply because there is money to be made on interest. It is just another way for the brokers to earn interest on other people's money.
The only way you can truly prevent the broker from loaning your shares is to request that the shares be put into your name and there are usually significant charges from the brokerages for this service. One positive to come out of this, people will know if their shares are on loan and many of them will probably be surprised to find the answer.