InterDigital/Samsung ITC Case: Waiting for a Decision

If there is an award for bad blog-post timing, then I will perhaps be a front-runner this month! On Monday, I posted an article about Nokia (NOK) and IDCC settling their U.K. disputes, where I mentioned that it was a sign of more good news to come. On Tuesday, InterDigital (IDCC) announced that the International Trade Commission [ITC] staff in the Samsung [KSX: 5930] case has favored Samsung. This has let to an astronomical 25% drop in IDCC's share price as people scampered to let go of their shares in anticipation of more bad news.

This is not a great development for IDCC. The downside is that if the ALJ upholds the staff's recommendation, then IDCC will lose any right to collect royalties from Samsung in the U.S. This will also likely percolate to its ITC case against Nokia creating a domino effect. This being said, the dispute still has a long way to go. Both parties are yet to make their respective cases.

For the moment, I am looking for more clarity in this matter. I would appreciate it if readers can provide any information that can be disseminated to educate others here. Please send me emails through the contact form. I would especially appreciate insights on the actual proceedings, court reports etc. that can go beyond what is being commonly reported.

More updates will follow as I come to know more!

Disclosure: Long IDCC at the time of writing.

[Disclaimer: All thoughts expressed by Vijay Nagarajan in his articles are his and do not necessarily reflect those of either Atheros Communications or TensorComm Inc.]

Comments

[Don]

The "Staff" in this preliminary trial is one person only. His name is Benjamin Levi. He is a 32 year old attorney.

He acts alone in this case as a representative of "The People" of the U.S. The Judge in this trial is under no obligation to take the advice of the Staff.

Levi unveiled information that was classified yesterday during the hearing. IDCC, within 15 minutes of Levi's outburst, issued a News Item, refuting what Levi had proffered as truth.

This is not a big deal and will likely be entirely overlooked by the Judge. IMO
Others, more familiar than I, will undoubtably better inform you.

[Ben Around]

The market reaction to any negative news must be looked at and reviewed in light of past performance. In this case I believe that this drop is a buying op and should be acted on. This company below 20 is a buy.

Just my opinion. I have been wrong before. But I did buy on Tuesday.

[alcam]

Please note that a loss for IDCC does NOT mean that they will lose their right to collect any royalties from samsung for sales in the U.S. A loss for IDCC simply means, that samsung will not be subject to a U.S. ban on importation of their products, that IDCC sought to impose. Further, a loss for IDCC at the ITC, will not prevent IDCC from suing for royalties based on samsung's infringment of the exact same patents, in federal court. All a win gives IDCC, is strengthened bargaining power against samsung and nokia, to settle their world-wide disputes. Remember, AAPL, LG, NEC, HTC, RIMM, and many others, have already licensed IDCC's patent portfolio, which includes the exact same patents that are in dispute at the ITC. Don't forget IFX and IDCC's slim chip either. As the aformentioned companies siphon market share from nokia and samsung as the 3G smartphone market takes off, money will be flowing to IDCC's bottom line exponentially, even if nokia and samsung never pay IDCC a thing.

[anthonee]

the thrust of samsung's opening arguments was the FACT they have offered idc what they feel is a FRANDLY amount for the use of their patent portfolio...and that idc wants about 2x what they have offered...which tells me that idc is sticking to their $2.00+ demand that other licensees such as rimm apple and lg are cueently paying and samsung is offering $1.00+ per phone....even if idc recieved only one dollar per phone....their earning would jump to almost 3 dollars overnite....the position samsung is taking is hardly the posture you would see if samsung thought they would win the infringement issue..imo...the staff attorney as the advocate of the people...bought into FRAND as a protection of the general public[thats they way sam and nok sell it]...the only problem w/ that ...is this case is about infringement....the itc is not here to set rates...samsung will be be found guilty of infringing at least one of the myriad of claims accross the 5 patents at issue... and the alj along w/ the commision will rule that a violation has occured...the real power here is not wielded by the staff attorney...but by the judge and ultimately the commsion...which has already overuled the judge and the staff attorney by reinstating the 791 patent into the case after the judge and staff knocked it out over a technicality on the definition of the word "if"

[Coin]

Vijay, one of your statements is completely false.

Vijay, you wrote: "The downside is that if the ALJ upholds the staff's recommendation, then IDCC will lose any right to collect royalties from Samsung in the U.S."

This statement is completely false.

You need to revisit what the ITC is all about. Samsung is using Interdigital's patents. Samsung will eventually pay for their use. The ITC may decide that no Trade violation exists that would warrant an injunction on Samsung's products but this does not mean in any way that Samsung does not owe for the patents in use. Currently, it is believed that the Staff Attorney may have recommended a no violation because he believed that Samsung has an implied license and is thereby not infringing by definition. The fact that they haven't paid yet does not mean that they are in violation by the ITC's definition. The Judge may see it another way altogether, but we don't have that answer as of yet.

Please recheck your facts on what the ITC is and is not and rewrite this article or at least update your readers to the truth of the matter.

If Interdigital fails with the ITC, they will simply have to go back to court the old fashioned way which takes longer for resolution.