InterDigital Inc (IDCC)

[0nceinalifetime]

I don't see it that way:

"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."

First of all, Nokia doesn't want to renegotiate the deal, they want IDCC to abide by the original terms of the agreement. Apparently, IDCC is interpreting the terms differently than Nokia. The claim that Nokia wants to reneg on the original deal is absurd. Arbitration is not set up so parties can re-write the deals, it's there to help iron out differences of opinion of what the agreement means.

With that ridiculousness out of the way, we can contemplate the original deal. Unfortunately, none of us are privy to the language of that deal and our only clues about it come from IDCC's management and their cryptic comments about the deal. The agreement happened at a time that Nokia needed engineers and technical expertise in order to hasten their CDMA chip development efforts. It's also true that IDCC had some CDMA test data that could be useful to Nokia in order to help shorten their development cycle. So this was the leverage I can see that IDCC had with Nokia to get them to sign anything in the first place.

What did they actually sign? We aren't privy but, IMO, it was a general loose-knit sort of thing that essentially said Nokia would pay a rate commensurate with whatever their peers are paying. The specific terms we may never know. Now we have the IDCC/Ericy agreement (which again, we don't know the specific terms of) but apparently IDCC thinks it defines Nokia's royalty obligations to IDCC. However, Nokia disagrees. IMO, Nokia is likely saying "wait a minute, there are certain inconsistencies with the structure of the IDCC/Ericy agreement, things that are not standard in the industry, specific contract terms which appear to be designed solely in an attempt to increase our royalty to IDCC under the 1999 agreement. We think this is just sneaky lawyering that violates the spirit of our 1999 agreement. We think IDCC is trying to extract payment from us when none is due.

The above is my read of the situation, you can argue till your blue in the face and it won't change the fact that we don't have access to the pertinent documents. And the biggest unknown of all with my scenario is, how good is IDCC's legal case? It doesn't have to be very good at all for IDCC lawyers to cover their butts and claim they were acting in good faith.

My guess is all this bad news will come out around the time for new stock options to be issued. Remember, it's just as valuable for management to get a low strike price as it is to get a high exercise price! The profit is the difference between the two. And does anyone want to guess which is easier to achieve?

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