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Japan Patent Problems Reveal Something Else?

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June 10, 2011 – Comments (0) | RELATED TICKERS: OLED

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Board: RBS: Universal Display

Author: TMFBreakerThiel

Thought I'd weigh in on the Japanese patent situation, although its already been covered in several posts.

First, the situation itself: I'm not a patent lawyer, but I don't think it's a big deal. The company has a huge range of IP, but even assuming the worst--that these three patents, if considered invalid on appeal, totally negated the ability of the company to collect royalties...it would still only apply to products made, used, and sold in Japan. That's not a realistic problem.

Here's what CEO Steve Abramson said at the June 2 Cowen conference:

Abramson: "Bottom line: I would prefer that we never lose anything, because that's the goal--is to never lose anything. But this is not going to really damage our patent portfolio, and we're doing everything we can to reverse the Japanese decision."

Analyst: "Even if, within Japan, someone was able to make use and sell, that's a relatively small market out of worldwide handsets. That wouldn't translate to make, use or sell for Europe or Korea or the United States--each of those is a separate jurisdiction."

Abramson: "Rarely do you see in electronics anything made, used, and sold in the same country. It just really doesn't happen--the electronics, communications industry is a worldwide industry. So any one country isn't going to be damaging no matter what happens."

That jibes with my understanding, but if any lawyers out there want to weigh in differently, I'm definitely interested in hearing!

The first of the three patents in question was partially invalidated (what the company describes as the "broadest claims") on 2/28/2011.

The other two were invalidated 3/31/2011. So the Korea Times article was pretty much old news. There have been no further court actions since then, according to the company. It's certainly worth following this story, but I don't think it poses any significant threat to the company.

The second issue, however, is the company's honesty. I have to say that PANL has left a bad taste in my mouth regarding this.

Here's what happened: I called Exec. VP and IR contact Dean Ledger to ask him about the situation. I did this after having read the Korea Times article but without having done much other digging on the subject.

Ledger simply denied the whole thing--told me the whole article was a lie and an attempt at manipulation, that no patents had been invalidated. He then backtracked and said some past patents had been invalidated, but nothing new.

This kind of jibed with the news flow in some ways. The Korea Times article has been picked up elsewhere, but no one else was reporting on it themselves, which is odd if it were really a significant development. (And as I say above, I don't think it is all that significant).

He then proceeded to give me a bizarre speech about "what does patent invalidation really mean anyway?" and how the layman would think a patent invalidation meant the patent was no good. Call me a layman, but a patent invalidation, if upheld on appeal, means the patent is no good. (Or, if it is specific claims invalidated, they are no good).

Here's what I think was going on: When I called, I just gave my name to the person who answered the phone. Normally I identify myself as being with the Motley Fool, but I was flummoxed by the fact that she answered the phone as a different company--Global Photonic Energy Corp.--and I started asking questions about that and never got around to saying where I was from. So I think he thought I was an individual retail investor. I think I would have gotten a different spiel if I'd said I was with the Fool.

Anyway, I dug a little more and called back and left a message asking for a followup, this time identifying who I worked for. He called back--a little peeved about the Fool thing--and I asked again what part of the Korea Times article was untrue. He sort of backpedaled without backpedaling...he more or less stuck to the same line, but said that his reading of the article was that three NEW patents had been invalidated, which is untrue.

Bottom line: I think he straight-up lied to me the first time around. I'm sure he'd say differently, but I think the conversation was at least meant to deflect me rather than addressing the issues. In his defense, the Korea Times article is misleading about the impact of the invalidation and vague about the timing of the second two patent invalidations.

In any case, I'm not happy that this is how the company would treat an individual retail investor with a question. It's one interaction with one person, with some admitted confusion involved, so I don't want to over-interpret it. But I won't forget.

Karl

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