Proposed email to MacDonald with copy to Forbes
I plan to email this message later this afternoon, unless someone notices a glaring error or inaccuracy.
Ms. MacDonald,
I read your recent article entitled “Pay Up or Else” in Forbes. Being an informed shareholder in InterDigital since the early 1990s, I was disheartened by your unfair and highly misleading article against IDCC. Based upon some of your erroneous comments, such as listing Docomo as a handset manufacturer, it is apparent that you are not very knowledgeable of the wireless industry in general. However, I was more concerned with your inaccurate understanding of IDCC in particular, especially some of your opinions, insinuations, and possibly misquoted or out-of-context quotations aimed at casting InterDigital in a highly unfavorable light.
Your article clearly depicts InterDigital as a “litigious” company aimed at gauging the handset manufacturers with unreasonable demands for royalties. You also clearly insinuated that IDCC’s management engaged in illegal insider selling, and uses less than honest accounting practices. In addition to not being an expert in the wireless industry, it is also obvious that you are not an expert in accounting principles or in the SEC trading rules. I suppose that you are more knowledgeable in accounting than Price Waterhouse, who audits IDCC’s accounting records and financial reports for compliance with acceptable accounting principles. I also suppose you can judge illegal insider sales better than IDCC’s in-house legal counsel and the SEC, who has not charged IDCC insiders with any wrongdoing.
InterDigital has used litigation as a last resort when all other efforts to obtain reasonable patent licensing royalty agreement from an infringing manufacturer have failed. Throughout its thirty-year history, IDCC has only used court litigation against two companies, Ericsson and Motorola. Litigation was initiated only after several years of preceding licensing attempts had failed at obtaining a patent licensing agreement.
IDCC’s eleven-year lawsuit with Ericsson finally ended when ERICY agreed to a settlement of $34 million, and a forward license for 2G standards through 2006, which should accumulate approximately another $76 million of licensing royalties composed of $24m for infrastructure and $52m for handsets. Therefore, I would say that Ericsson was definitely infringing IDCC’s essential 2G patents. It only took IDCC about eleven years to obtain a degree of justice in this one instance.
Motorola prevailed against IDCC in a 1995 jury trial after what many consider to be a travesty of justice. The lay jury was incapable of understanding the technical issues of the wireless patents issues involved in the infringement suit. It is reported that one juror didn’t even know what a wireless phone was and asked the Judge for clarification. Many felt that Motorola won only after its attorney made a final passionate, albeit false, plea that a Motorola loss to IDCC would cause a loss in US manufacturing jobs. Soon after this decision, a Markman procedure was initiated to help clarify the technical patent issues for the judge and jury. Therefore patent infringement suits are now filtered through a court-appointed Markman expert and procedures first before the formal trial.
After the Motorola defeat, a consortium of Siemens, Alcatel, and Phillips tried to get an equivalent IDCC patent declared invalid in Germany. Germany used a panel of three expert patent law judges, rather than a jury, to decide patent cases. The prestigious German patent court upheld the validity of the IDCC patent in a 1998 ruling. About the same time, Ericsson attempted to get the Swedish Patent Office from issuing an equivalent patent to IDCC. IDCC again prevailed against this effort in ERICY’s own home country, and the contested patent was granted to IDCC in Sweden over ERICY’s objections. IDCC also got three of its important early system patents revalidated by the US Patent Office in 1999.
Now Nokia and Samsung are attempting to avoid the royalty rate provision of their signed contracts with IDCC. They are raising a lot of irrelevant and misleading issues, which have nothing to do with their signed licensing agreements with IDCC. A much bigger story than this continuing saga of one small American company fighting against collusive efforts of giant foreign companies deals with protecting and enforcing patent rights and fair trading practices in the international community. The following are excerpts from a letter that I wrote to Nokia’s Investor Relations department following their court motion to access the court-sealed documents involved in the IDCC/ERICY litigation.
Dear Sirs:
As a shareholder in both Nokia and InterDigital, I was appalled by the recent actions of Nokia in relation to InterDigital. The US federal court filing of July 22 was deplorable whereby you accused IDCC of deception. First you accused InterDigital of deceiving the federal court. But even worse, you implied that IDCC deceived the investment community for their own personal gain based on references to some insider selling at IDCC after March 17.
It is my understanding that Nokia was ready to finalize the rate agreement with InterDigital, but unexpectedly cancelled at the last moment after your top officials met with Samsung's top director on July 17. Nokia has publicly led a collusive effort with other large foreign corporations to try to cap royalties on 3G at a total cumulative rate of 5%. This is tremendously less than the cumulative royalty rate of about 20% in 2G. Where would Nokia, Samsung, and the other leading wireless manufacturers be without the truly amazing innovative work done in 2G? The remarkable success of 2G is clear evidence of the fairness of the existing royalty structure, whereby each value-added contributor should receive their rightful share.
The impression that many people in America are starting to get of Nokia is one of an unscrupulous "big bully" foreign corporation trying to use its enormous leverage to cheat technology developers and patent owners out of their rightful share. You clearly state in your court filing that you feel patents restrain trade. However, most Americans view patents and intellectual property as the primary catalyst that drives technological advances and worldwide economic growth. The American political and legal systems correctly value the importance of intellectual property and the rights of the patent owners, unlike many of the foreign countries.
I think this debacle between InterDigital and Nokia would make a great David and Goliath story. Americans tend to love an underdog who is being unjustly treated by a seemingly more powerful giant, because this is the kind of grit that we are made out of. I also think that with enough adverse publicity there might be the possibility of a successful boycott of Nokia products in America. At least enough to make you feel some financial hurt, although not nearly in proportion to the harm that your shameful behavior has already inflicted upon InterDigital.
Sincerely,
Ronny Marchman, CPA
AI
