Investors continue to hang-on to Universal Display Corporation's ("UDC"; NASDAQ: OLED) claim that it owns patents on inventions that assure its participation in OLED's future. But what exactly does UDC claim it invented and when and where did it make and patent these inventions? Below we present our review of UDC's disclosures describing its claims and inventions and the experiments that UDC alleges backs up these claims.
First we compiled a list claims that UDC has made to investors and patent offices led by UDC's so called dramatic OLED invention. These are what UDC sometimes calls its "key PHOLED technology patents" and other times its "Universal PHOLED phosphorescent OLED technology." Then we conducted an exhaustive investigation of UDC's disclosures describing the experiments and results that it says support these claims. The disclosures detailing UDC's experiments and their results are a lot simpler and much more straightforward than the language that UDC used to write about its alleged breakthrough discoveries. As we all know the real story is often remarkably simple.
Investors may not know that the real origins of all of UDC's identifiable claims originate from government-funded experiments conducted by two undistinguished college professors performed almost 20 years ago.
As shown below and in an accompanying report titled "Technical Observations on UDC's Underlying Experimentation" UDC's experiments were not breakthroughs but routine laboratory work following the prescribed instructions known to yield the results obtained. Yet this simple laboratory work and entirely unremarkable results are the basis for the only UDC patents that have any discrete identifiable economic value.
A U.S. federal government agency, the Defense Advanced Research Projects Agency ("DARPA") provided funding for research into OLEDs from 1994 to 2002. It was this government-funded research that provides the sole basis for UDC's 'key patents.' Even though UDC claims to have made a dramatic breakthrough, a review of the DARPA experiments done by a leading expert shows that UDC conducted no fundamental experimentation that used any new theories, equipment, observation methods, materials, or OLED architecture. UDC merely used existing materials and architectures and routine prescribed laboratory methods that are, at best, commonly referred to as optimization work. UDC built one example of one OLED using one combination of existing materials and architecture following methods developed by others.
The OLED and phosphorescent OLED fields rest on real fundamental breakthroughs in the study of ultrafast chemical reactions that date back to the 1970s. Tellingly, UDC itself has admitted in its legal defense that OLEDs were common before it commenced its experimentation and the any materials and architecture used in a fluorescent OLED were easily transferred to a phosphorescent OLED, and has even admitted that the only difference between a fluorescent OLED and a phosphorescent OLED is the type of material used in the emissive layer.
Based upon our interviews with an expert and other confirming sources, at the time that UDC made its breakthrough claims, OLEDs had already moved well past the theoretical development stage and were at a highly developed stage of scientific field of research. Work on ultrafast chemical processes, an area requiring more complicated experimental methods and measurements than the laboratory work performed by UDC, had been on-going for over 30 years. As a result, there was a great deal of comparable experimental information available on the work done in the DARPA project. Any independent informed expert can give an investor a clear layman's explanation of the routine and unremarkable nature of UDC's OLED from a viewing of a UDC slide show presentation disclosing the laboratory work it performed, which is attached to the 2002 DARPA report. An earlier 1998 version of the DARPA report is available here.
A companion report gives specific details and instances of the routine, optimizing nature of the DARPA experiments.
The findings of our review stand in stark contrast to the promotional claims of UDC. In the final DARPA report, UDC scientists claimed to have "made a significant difference in the prospects of OLEDs." UDC scientists claimed that the project's "largest breakthrough" occurred in 1998 and that this was using iridium to produce light in a process called phosphorescence, made possible by a "chemical suite developed by our team." UDC reiterated these promotional claims in a September 29, 2011 filing with the EPO, claiming to have been the inventor of a "class of phosphorescent organometallic iridium compounds" that were "nothing other than a dramatic breakthrough, opening a new field of OLED technology."
As we show in our report titled "UDC's 'glaring confessions' contradict its claims. Confessions were made unbeknownst to investors and analysts," under pressure from the EPO's supreme adjudicators, clearly in hopes of saving some sort of claim it can continue to use in this stock promotion, UDC itself has now backed away for the only real claims listed above, which is of having invented a chemical compound.
Based on our review, there was no real breakthrough in the DARPA experiments; it was trial and error, with no invention that was predictable. It was simple optimization. The mundane nature of UDC's laboratory work supports the position that UDC's OLED claims will be revoked after the November EPO hearing and that their revocation will trigger undisclosed termination clauses in UDC's 2011 Samsung agreement.