Replies to post #21854 on InterDigital Inc (IDCC)

[Jean-Michel RIOND]

Mschere, very clear and helpful. Thanks. I should have read your post before posting my last one.

[Learning2vest]

mschere, good chance that the sentence you highlighted in the excerpt from IDCC's 10K points us to the "indemnification" issue. Kinda interesting that InterDigital found it necessary to call out "CDMA 2000" for specific emphasis(copy below with my underline). That particular narrowband CDMA standard has evolved from the initial IS95 standard developed by Qualcomm.

From what I can figure out, Qualcomm actually DID HAVE all of the IPR necessary to license that earlier version(i.e., the IPR was either developed and patented by them, or they had cross-license agreements which gave them rights to license it to others. We know they did that with InterDigital when they paid over $5 million for the sub-license rights on a specific set of CDMA IPR and limiting conditions back in 1999.). Qualcomm licensed IS95 to a LOT of folks over the years, and I'm betting that those early license agreements included an indemnification clause. Why not, if Qualcomm had acquired rights to all the IPR necessary for IS95? And I think they did just that.

Now we have some "unidentified wireless technology company" creating discussion over an "indemnification" issue with "some of InterDigital's 3G license agreement negotiations". I'm connecting the dots there and seeing some old Qualcomm IS95 license agreements which have been "upgraded" to CDMA2000 with the original indemnification clause still in effect. OOPs! Tilt. Time for Irwin to call a huddle with his licensed customers and figure out what to do next.

Rate concessions on CDMA2000 by Qualcomm in exchange for limiting the scope of the indemnification in those license agreements seems logical, but one never knows, do one? A phone call kinda like the following is another possibility IMO; "Hello, KOP? Irwin here..... Well yes, the sky is blue and the sun is shining brightly out here in Southern California as well.... Nope, no big earthquakes lately.... The reason I'm calling, Howard, is not about the weather or faultlines. I wanted to ask how much you would want in exchange for adding InterDigital's CDMA2000 "essential" stuff to our current sub-license rights agreement?" ..... Now, that would be an interesting conversation to listen in on.

Here is the sentence in InterDigital's current 10K that got me thinking along these lines;

"Based on these limitations, the Siemens and the Qualcomm agreements do not provide a license under all the ITC patents or IPR Holdings Patents which we believe to be essential to 3G, including CDMA 2000, or all of the inventions which we believe will be essential and which are contained in pending patent applications."

[0nceinalifetime]

Mschere, regarding the 10K excerpt you provided, it's very important to look at the exact language. I really like to rely upon SEC filings because the company can be held to them and they are a primary source of ammunition for shareholders should we find out that things are not as we have been led to believe. In other words, the company is (or should be) very specific about how they word things of importance. In your example the company said:

"Based on these limitations, the Siemens and the Qualcomm agreements do not provide a license under all the ITC patents or IPR Holdings Patents which we believe to be essential to 3G, including CDMA 2000, or all of the inventions which we believe will be essential and which are contained in pending patent applications."

That word "or" is very important to a lawyer or anyone who understands how such language is interpreted in a court of law. Taking this into account I don't believe the sentence says what you think it does. It's not a very well-written sentence and it is somewhat complex but two things are certain:

1) If the word "or" (in bold) was changed to "and" then the sentence would say what you believe it already says.

2) By changing "or" to "and" the entire meaning of the sentence is changed.

Something to consider before interpreting the specific parts of the 10K that are most important to IDCC's future value in a way that favors IDCC's position in the world of IPR. Just remember, a court of law knows all about the differences between "and" and "or". I have to believe the lawyers at IDCC understand this also.

Once