Joel
Out of respect for the readers of this board, my concentrated effort to not confuse the options versus cash compensation debate with performance issues by upper management and in a genuine effort to not cause a food fight over the Ericy results, I will limit myself to the following reply.
The p
urported shots across the bow of others was really the slamming shut of Mr. Fagan's and Mr. Merrit's cheeks when Sharp informed them that they would not be renewing the March 19, 1997 license agreement that generated 25 million 2002 recurring revenue dollars. Trial of the Ericy case just had become too risky to cash flow and the Sharp notice seriously threatened to close off the chance of PHS/PDC technology royalty from Japanese manufacturers that would be supplying China with handsets using same. Chinese operators were exempt from government licensing to deploy this technology and it was gaining momentum in many Chinese provinces. They had allowed NEC to have a paid up license for this same technology in the settlement terms of the arbitration. The litigation regarding 2 patents narrowed and/or voided by the JPO at the close of evidence in the NEC dispute was scheduled for trial in March and April of 2003. Ericy had huge exposure, poor cash flow and had just been manhandled in Judge Lynn's court by Harris. Ericy was also a named manufacturer in the Nok agreement which was being piggy backed by Samsung as a result of a favorable ruling in its arbitration with IDCC. 3g had gone from a mass roll out forecast to a gradual and steady forecast over the next 7 years.
Based on the above cited historical setting, the mandate was clear. IDCC was in a must situation to accomplish the following:
1. Replace cash flow which they did via the Ericy resolution.
2. Gain recognition of the technology that Sharp was refusing to renew for negotiating strength which they did in the Ericy/Sony license.
3. Trigger the 3rd rate setting option and protect the 2002 accruals under the Nok and Samsung licenses which they did with the Ericy and Sony licenses.
4. Complete the patent litigation in Japan in which they are still in progress at this time.
5. Get Nok and Samsung paying for 2g to insure good cash flow as 3g ramps up under the new forecast which they are in progress toward completion.
IDCC had no other logical choices available at the time and that is pretty much a working definition of the word, mandate. A trial with Ericy and appeals for 2 years just did not make sense in light of the Sharp departure, the 3rd option for rate setting under both Nok/Samsung and reality of the 3g forecast.
Did Ericy get a good deal? Yes, perhaps one of the best results they could possibly have expected. Why? The answer is simple if we look at the mandate. The Sharp expiration hurt big time. IDCC and Ericy were running at each other full speed on the Chicken Highway. Ericy had the potential backing of the Swedish government, Appeals back up with probable Amicus Curiae briefs from the entire GSM membership, bankruptcy protection and exposure limited to US usage only on its front bumper. Half of IDCC's bumper broke off with the Sharp departure and the other half was stress fatigued due to the revised 3g roll out plans. IDCC had been unsuccessful in getting additional 3g licensing and 2g would remain dead until Ericy was resolved. IDCC was facing serious choices regarding cash necessary to operate for another 2 years and possible downsizing problems because ole good buddy Nok had pulled the payment plug on the joint development W-TDD project and it was now IDCC's nickle.
This is/was the mandate under the operative facts at the time.
MO
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