Agoracom

"Supreme Court ruling on LG vs Quanta-The Supreme Court, earlier this week, handed down a ruling denying chip licensors the chance to secure additional fees from chip component users (system suppliers) if not specifically covered in the contract. TPL has focused the MMP Licensing Program on system suppliers not chip suppliers and accordingly, the ruling does not have a significant impact on TPL’s strategy. "

If we go back to the earlier fights with AMD and Intel, we have to realize that TPL/PTSC made the strategy changes since signing license deal separately with AMD and Intel before the master agreement. These two licenses paved the way for system suppliers to get in board with a price - potentially reducing the chance to get more royalty down the supply chain for customer of AMD and Intel. Quanta case made it more difficult now than before Quanta ruling to go down stream. If anyone were to do the Monday morning quarterback reasoning, then one would say that suing AMD and Intel were not wise strategic choices. TPL and PTSC realize this even long before the conclusion of Quanta case, since TPL and PTSC did not continue suing big chipmakers such as TI, ARM, IBM (IBM has its own Power chip used to be on Apple’s mac and IBM’s power workstation/servers) but suing j5 instead. J5 are mainly system suppliers (they are chipmakers in smaller scale). After AMD and Intel, getting more chipmakers to sign license deals will not be good business for us. Take ARM as example – if ARM agrees to pay us $50 million to cover ARM and their customers, or pay us $25 million to cover ARM and leave some room for us to go down steam, will it be a good deal? The answer is no. Getting ARM to sign now is kind of picking the little apples in June instead in picking them two/three month later when the fruits are ripe. The current TPL strategy as stated by Rick above make a lot more sense going forward, since going after ARM’s customers, J3 included, will be more profitable and take less effort. TPL can charge a lot more for a single system than for a single chip (or multiple chips in that system) because the value difference. So, unless we can get a huge sum from ARM or get a injunction against ARM, it is better to drag ARM’s feet (or other chip suppliers’ feet) as long as possible. In short, early license from chip makes are not good choice; costly court battles are more likely to be involved to force down stream Co. to pay. Without licenses at chip level, system suppliers are more vulnerable. By reading Quanta ruling and Rich’s letter, we can get more deeper into heads of TPL lawyers.

Do you guys still remember the poster Mike3691 who predicted that the Quanta case will destroy the SP and value of MMP? Now we see the result – we get over this big hurdle with a minor scratch. I say minor in comparative sense. If we compare the hair cut of 40% sp after the Q3 release to the 20% hair cut after the Quanta ruling, 40% can be regarded as major and 20% as minor. As a shareholder, we all get hurt badly. To me, the most significant message I got from this letter is this – “the ruling does not have a significant impact on TPL’s strategy”. The market will eventually (may be sooner than we think) get over the negative impact of the ruling. We get over this big hurdle with a 20% cut in one day, 10% in a week and may be back to where is was in two more weeks, that may not be as bad as some people think.

I guess All MMP infringers have been waiting for LG/Quanta ruling and have been re-evaluating the impact after the ruling. Some who agree with Rick’s assessment will sign the dotted line sooner or later, some will wait for re-exam results and some will have to be taken to the court to pay. Each category should have enough licensing $ for the short, medium and long term of the prosperity of PTSC, respectively.

GLTAL