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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: JGoren who wrote (75660)	3/20/2008 9:35:33 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 197214

There is merit in your perspective that Qualcomm can't settle for 2%, for example. I need to think through the implications. Thank you. Also, ordinarily (if this was a green-field negotiation) I would agree with you that arguing for an unbundled valuation and a cap on the total would indeed be viewed askance. However, that's not where we are. I believe that there are two issues. The first issue is a difference of opinion on the "no SULA" position of the parties. Qualcomm's position is that without a SULA, Nokia is without license, and therefore subject to an injunction. Nokia's position is different. They are claiming that even without a SULA, there must be a license, patent-by-patent if necessary, on all of the IPR that's really important to Nokia (the Essential IPR) by operation of law through Qualcomm's commitments to ETSI. Therefore, no injunction can issue on any of these licensed patents. Yet. The second issue is the amount of revenues Qualcomm can expect to receive from Nokia, and whether whatever they get is really "FRAND". The issues are intermingled. As to FRAND/cap, there is already a "cap" on the table. Nokia doesn't have to argue what the cap should be, because Qualcomm has already repeatedly declared that its price for "all" patents is, in Qualcomm's view, FRAND. If Qualcomm were to attempt to demand a higher price for all, or some, of its patents, Nokia would have a more than valid complaint - more than FRAND can't be FRAND. Therefore, Qualcomm has already capped the license fees it can extract from Nokia. But Nokia can argue this cap lower. Qualcomm has asserted that Nokia can either take a license on all of its patents, or take no license at all. This "all or nothing" pricing structure is the only structure that Qualcomm is willing to offer. Nokia is explicitly rejecting this pricing structure, and specifically rejecting the notion that it must pay for patents that it is not using. To paraphrase, Nokia is willing to give Qualcomm it's pound of flesh, but not one drop of blood. Such a position is not confined to French law... I expect most Delaware judges will remember enough of their high-school education to recognize my reference. Furthermore, while rejecting Qualcomm's price for "all", Nokia is simultaneously observing that Qualcomm is contractually obliged to offer them something other than "all or none", namely "all or only some". None is not an option! Having publicly put a price on the table for "all", and argued that this price is fair, reasonable and non-discriminatory, Qualcomm would now be hard pressed to argue that "some", being less than "all" should command the same or higher price. Furthermore, whatever price they establish for "some", then by inference they are simultaneously establishing the FRAND price of the remaining "all but some". And vice versa. By virtue of the "all but some" containing some licenses which Qualcomm has declared to have significant value (namely the fully paid up [redacted] Patents), as I have explained, it will be difficult, if not impossible, to propose that the price of "some" should not be significantly discounted from the price of "all". Which position leaves Qualcomm in between a rock and a hard place. If it is true that Nokia is not obliged to accept "All", and that Qualcomm can not offer "none" until such time as Nokia can not prove that they've offered a FRAND price for "some"... then before seeking an injunction, Qualcomm must either offer (a) All at a discount steep enough that Nokia will accept, or (b) Some, at a price that Nokia can not reasonably defend as being not FRAND, i.e. at a reasonable discount from All. (c) No license (injunction) is not an option. In other words, Nokia gets a discount, or Nokia gets a discount. One way or the other. Which circles back to the implications if they can't accept a discount.... Hmmm.... Rocks and hard places abound. Unlike some people, I am not hung up on the "one at a time" piece. I view that as the legal construction that validates the premise of "at least some", which is the lever that obliterates "none". Obliterating "none" is sufficient to achieve the discount objective. Unbundling does not have to be patent-by-patent, it only has to begin to be unbundled for the discount to materialize. I believe that a practical approach will be a comprehensive SULA, and that the parties may reach agreement prior to this issue going to judgement. At a discount to what Qualcomm is currently requesting. But then, I have yet to factor in the merits of Qualcomm's response, which I have yet to see. I am very interested.