InterDigital Inc (IDCC)

[Eneerg]

jaykayjones.. also not being an attorney, 100% of Ericsson's 2G handset production was combined with 100% of Sony's 2G handset production to form a new JV called Sony/Ericsson. 100% of Ericsson's infrastructure prodution remained intact.

As I understand the settlement, the JV: S/E (established in 2001 subsequent to the 1999 contract signed with NOK) became a new licensee; Ericsson's prior handset obligation presumably was settled using the same royalty IPR calculation as JV S/E (which is now being applied to NOK and Sam, contested in arbitration). Ericsson's low 2G infrastructure rate (6M/year) applied backwards and forwards.

I posted when the arb was first announced that NOK more than likely took issue with S/E's handset IPR royalty calculation rate(s), considering NOK's stated objective was to supply about 40% of the worlds handsets, while the survival of E, the largest infrastructure supplier, and JV S/E was being questioned in the media. I believe NOK is now saying the accompanying license announcement with S/E was skewed higher for handset production(as opposed to infrastructure) was collusively agreed upon to harm NOK, (i.e. NOK believed they would enjoy a zero 2G IPR rate, perhaps indefinitely for Phase II).

Another issue with NOK arises as to "intent" to resolve and remit payment under Phase II of their convenience license. NOK opted not to accept Interdigital's PHASE II 2G IPR rate demand for infrastructure and handset production, in effect gambling that a default rate by a named OEM or assignee triggering NOK's obligation would not occur. Ericsson and JV S/E were jointly identified as "triggers in March 2003 settlement/licensing announcement, disputed by NOK resulting in ongoing arbitration, and the subject of your question to attorneys.

Brief S/E Background...

Sony Ericsson - mobile phone joint venture

Sony Ericsson is a 50-50 joint venture established in 2001 by the Japanese consumer electronics company Sony and the Swedish telecommunications company Ericsson, to make mobile phones. Both companies have stopped making their own mobile phones, letting the new company use Sony's knowledge in customer electronics and Ericsson's know-how in cellular technology. The company's global management is based in London, has R&D in Sweden, Japan, China, US and UK, and in total has approximately 3,500 employees around the world.

President is Katsumi Ihara, and Executive Vice President is Jan Wäreby.

Sony Ericsson announced its first joint products in March 2002 and now has a full product portfolio covering all target groups. In 2002, Sony Ericsson sold close to 23 million mobile phones.

After years of losses, Sony Ericsson posted a fourth-quarter profit in 2003, buoyed in part by sales of its new line of camera phones and a strong showing in Asia, earning 43 million euros in contrast to a loss of 69 million euros a year earlier. Analysts had expected a profit of 32 million euros. It was the second consecutive quarter that Sony Ericsson, which had steadily lost money since it was founded in 2001, posted a profit.

Article text is from Wikipedia and licensed under terms of the GFDL. The original article can be found here.

Business in Japan: Related Links, Resources & Shopping
http://www.japan-101.com/business/sony_ericsson.htm

One observation is the JV S/E was losing money at the same time Ericy was struggling financially for 2 years before Interdigital settled with Ericy in March 2003. What perhaps caught NOK by surprise, was Interdigital's simultaneous announcement of a new 2G GSM license with JV Sony/Ericsson,as well as NOK's obligation had been triggered "by one": Ericsson, "or more", Ericsson plus Sony/Ericsson, named OEM's or assignees or successors.

I'll speculate that NOK was hoping Ericy prevailed during the litigation, and failed to take into consideration that money losing JV S/E at the time, not a party in the litigation, would simultaneously license with Interdigital at a rate NOK is now contesting. NOK more than likely assigned a low probabability during 2G royalty rate calculation deliberations with Interdigital for their existing convenience license (subsequent to Jan 1, 2002), that the trigger provision for "one or more" named OEM's would likely occur, and perhaps even if the trigger provision occurred, the IPR rate would be less than Interdigital was demanding from NOK in ongoing separate deliberations.

One of Interdigital's additional arguments might be: if JV S/E's IPR royalty rate for handsets is excessive, how could the JV enjoy growing sales success subsequent to signing the license with Interdigital? Conversely, what effect has monies set aside for NOK's convenience license from 2002 to date had on NOK, particularly in light of Interdigitals claim "they are being assessed on identical terms as now profitable E and S/E"?