Please do not miss the importance of the Zte findings. While many of us are worried about the short term shareholder value, I believe it is more prudent to address the following:
1. The entire patent portfolio of IDCC just increased in value. Some are saying the patents involved have expired concluding that the victory is somehow less significant. In my opinion this line of thinking is simply wrong. Patent holders struggle for years trying to monetize their inventions because the industry sectors effected make it as difficult as they can by stonewalling any attempts to license. The historic game changer for the inventor is the demonstration of the ability to defend and enforce the patents they have been issued. Once the patent holder is successful in defending it's patents, the members of the sector usually see the light and adhere to their implied covenants to license.
2. Until now, sector members have been able to play hardball with IDCC claiming it is a troll, UNFRANDLY and their patent claims are invalid. They have had no fear engaging in the unlevel field of the litigation process. They have been using expert wordsmiths to pick apart each patent claim in an attempt to invalidate the inventions. They have been successful for many years and the government has aided and abetted their schemes to avoid their covenants to license. In my opinion the use of this scheme became less attractive with the victory at the CAFC this past week.
3. I believe the value of the IPR portfolio automatically increased because of the attitude shift phenomenon. The best example I can offer is the legal industry. Many years ago I began practicing law and was confused why the guys I knew from school that were "C" students were more successful than the "A" students. I asked an old veteran how can this be? He quickly said it is the fear of failure. "A" students have been programmed for success and rely on comfort zones over which they have control in their approach to law. They are fearful of juries because you just never know what they will do with a set of facts. "C" students have been programmed that you win some and you lose some. Both groups know there is never a perfect case, but the "A" students take it more personal when a flaw is revealed. Thus, the "A" students despise going to trial and the "C" students view trial as a way of life. Insurance companies hate going to trial as much as "A" students and they make lower settlement offers knowing they can move the case. They make higher offers to the "C" students because they know they will try a case in a heartbeat and the unpredictable nature of a jury puts them out of their comfort zone. Thus, the sector now knows that IDCC will take a case to trial and a jury will have a say in their future.
4. I view this victory as step in a positive direction in the creation of better multiples for IDCC. I believe the odds of getting the 50% holdouts licensed has increased dramatically and increasing revenue is far more likely to occur than not. We have been experiencing a fairly low set of multiples and I believe shareholder value has a better than average chance of increasing over the next year.
5. I believe Zte is now in an uncomfortable zone and will settle. If my math is correct, they have placed over 300 million phones in commerce containing IDCC patent claims. The idea of a jury answering a special issue regarding willful infringement is not a pleasant thought. MSFT/NOK cannot be pleased with this news. In fact, the entire sector has to give IDCC more respect. Our engineers already have sector respect and now our monetizing team can all purchase a set of new Joe Biden teeth and smile their way through presentations and licensing negotiations from this point.
I suggest this board cease the micro-managing and let the natural goodies usually associated with proof that IDCC can and will successfully defend and enforce it's IPR happen in due time.
MO
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