Danny: What bothers me about the newly describe incentive plan is that I am not sure what it expects to accomplish. The way I see it, IDCC’s patent licensing business plan is unlike most other businesses. There is a very limited market of large corporations, it is a very expensive product, and they probably feel that a license is being forced on them by legal not business considerations. So it is easy to understand that negotiations can take a long time before an agreement, if any, is reached. From statements made by management during recent conference calls (see below), it would appear that they are in negotiations with most potential licensees, that the negotiations follow a plan i.e. first technical then economic considerations, and that there is no urgency to finalize negotiations until they have gotten the best possible deal. If they are doing their job as they are already getting paid to do, just what else can they be expected to do in order to finalize more licenses in a shorter time frame. The only thing I can see happening, is that in order to meet goals, they may more easily give up on conditions that would have benefitted IDCC.
4th qtr 05 CC
Since the bulge of the sales are in the future, it's far more important to work hard and if need be, wait to get the right royalty rate than rush the deal to completion at a lower rate.
We have a 3G licensing program that's running very well.
So in 2006, look for us to do the following. Successfully execute on the 3G patent licensing plan, including seeking to license other toxic(sp) manufacturers.
Q: maybe you can comment on your strategy around getting more 3G licenses? Are you targeting smaller vendors in order to get a portfolio of agreements or a bigger portfolio of agreements to be able to present a larger OEM or is the LG agreement getting you in the door with some large OEMs already?
A: Really, it is both. And there's -- also things on top of that. The patent licensing team is focusing not only on the, obviously, top part of the market, but also continuing to work with other participants in the market. As you can see, folks like Kyocera provided a good contribution to revenues and we want to continue to go after them. You're exactly right, as you add more of those folks to the roster, it certainly makes things a little bit easier as you move up or work with the top folk.
Q:Talk to me about the process, if you can, around your patent licensing agreements? I mean, how do you go to the customers? What's the environment like when you approach these people right now? The top six that you're talking about.
A: I think the environment we're operating in now is one people respect the Company. They respect our contributions to the standards and so it is a very different environment than when I got here ten years ago.
I think that as you would expect, that the issues with all of the licensee, whether they are top six or not is economics at the end of the day. They want to make sure that the deal makes sense for them. And in particular, some folks want to make sure what they do with us, they have to think through the ramifications of that, not only this direct ramification, but also other perspective patent holders and how they make sort of want a leverage off a deal that we were to do.
So, I think that, though, the dialogue is always a good dialogue. As I said, we tend to spend more time on these things because we are patient. We want to get the right deal. Therefore, we don't want to rush a deal. Ultimately, we believe we can put together deals like LG, which the structure of that deal varied from some things we had done before. But that's what they -- that's what made sense to the parties at the end of the day.
So I think all told, I think we're in pretty good shape on this stuff. Dealing from a position of good respect; good respect for the patents, I am just really working out the economic side of the equation.
Nokia Settlement call
Q: can you talk a little more about the process for negotiating the 3G licensing with the Nokia?
A : Okay, as far as the process going forward we are now sort of back into the environment of a very normal process for InterDigital which is basically, you know, just working through the patent issues and then working through the economic issues. That’s the process that we know well, we do well in. As I indicated during the remarks well, we don’t have anymore of the overhang of the current license agreement, which while serving us well had created some other
issues for us and that’s now behind us. So I think we are in a very good, comfortable known position moving forward with them. So we are happy about that.
Q: And what IDCC resources of this kind of free up to pursue
for new license agreements with others,
A: .... But in the meantime we have lots of other people working on licensing who frankly were involved in this and they were out there doing what you expect to go out visiting the folks in kind of US, in Korea and Japan and other places.
Q: And just a point of a clarification, on the call today you said you
expect to sign additional 3G deals or get additional 3G deals done this year. I think in one of the prior calls you mentioned that you expect to sign additional 3G agreements with other top 6
manufacturers besides LG this year, is that still the case?
A: that’s the goal of the corporation. As you know Tommy we
model the company. That’s where the value is. So while we sort of focus that well points in the value chain with respect to licensing, there is a particular emphasis on the topic.
Q: but, or do you sense as you went through this settlement process with Nokia a change in attitude on their part. I mean should you –would you describe this or do you feel that there is been fundamental change in their attitude with respect to their willingness to negotiate the 3G deal
A: I think, consistent with lot of the other negotiations that we have, as we work through the negotiations as and we mentioned it on the call this morning – I think people do realize two things about the company. One is that we all are very – that we have a tremendous result on this. And that you can throw as many lawyers as you want against us and we are not going to be faced by that. And I think at some point people begin to realize that and say okay, maybe we need to just negotiate that because the other paths isn’t really working, or it maybe at a point of diminishing. I think people also recognize that we have – as we’ve thought this as. I think it’s very important for us to be very firm – we have a strong resolve in the firm. But I also think that what is successful for us is showing flexibility. And so what you have even with this deal is us being flexible and coming up as a solution, which wasn’t simply a pay out under the award but some other tweaks to that. And I think that everyone we’ve dealt with along the way, I think Nokia is included in that, appreciates the fact that we are flexible. And so I think we leave this particular negotiation in a good position with them. I think that we are, as I said before, in a good shape on 3G. I think that
the negotiations with them should be sort of standard solvent negotiations that we’ve had. And we’ll say. But I think that they have witnessed sort of first-hand that we are not a company that’s
going to back down.
1st Qtr 06
Q: Bill, now that Nokia is settled and you had some success earlier this year
signing LG to a 2G and 3G agreement. Have you noticed any change in the negotiations or pace
of negotiations in the past week on 3G licensees with other unlicensed manufacturers at this time?
A: Yes. The, what we've seen historically on these things is that these
types of events actually do drive people to want to get deals done. We saw it with a ten
acceleration following the, you go back a number of years ago we had Ericsson and Sony Ericsson
take us [ph] on. We saw it with LG, we saw some acceleration with a couple, a number of folks and
I'm certain that Nokia will create the same sort of environment for us because the number, it
demonstrates a couple of things, it obviously, it demonstrates a very strong position for the
Company from an ability to kind of just stay with these issues. And also these people, they say,
well you know I don't want to get caught in that same situation and have a very substantial liability.
So it's obviously a little early coming off the Nokia deal but I expect that it will have the same sort of
– give us the same sort of amended as past deals have.
2nd qtr 06 CC
Our discussions with licensees are taking place in a typical manner, with topics ranging from technical due diligence to financial terms. I'm happy with the progress that the InterDigital licensing team is making on these new deals. And while it is difficult to predict a precise timing of any new deal, we believe that we can close additional patent agreements this year. But remember, we enter into agreements when it makes sense from a financial standpoint, which is largely driven by the financial terms of the deal, not its timing.
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