‘52 Mr. Djavaherian's overall position appears to be that smaller licensees are more likely to agree to terms that are supra-FRAND, and that SEP owners are regularly structuring SEP license agreements in order to have rates "appear higher". I disagree to both of these positions. 53 I consider that these claims are unsupported and are at odds with my experience from licensing over the past 15 years. It is my experience that licensors have no ability to force (and 'hold-up') a licensee into signing an SEP license agreement on terms they do not agree to, as licensees can rely on FRAND commitments made by the SEP owner when negotiating the license agreement terms and in the meantime continue to sell products and generate revenues, while using the patented SEP technologies. As I describe in my First Report (see paragraph 47), I am not aware of any evidence that 'hold-up' exists or has caused harm in the mobile telecommunications market.’
‘Given this, one would expect that everyone would place a high value on the inventions driving this technology. It is therefore strange that at the same time as wireless technologies became ever more important they also started to be viewed as a commodity and there began to be push-back, and downward pressure from some in the industry, on the royalties that the developers of wireless technology were receiving.’
‘Where I refer below to the ‘program’
‘I recall that shortly after this, in 2012, we entered into the agreement with RIM / Blackberry and the rates, caps and floors set out in that agreement, together with the volume discount table referred to in our opening offer, became the new ‘benchmark' for the program.’
‘We also have a number of discounting structures which form part of InterDigital's licensing program which we look to when negotiating a license and assessing internally whether that license is aligned with our licensing program. I have set out some of them below. Our rate and discounting structure has changed over time in an effort to provide additional transparency. For example, historically we used primarily a volume discount approach where a discount was applied to all sales as a licensee hit various volume thresholds. The volume discount used in the 2011 - 2018 time-frame was derived using a company's three year aggregated projected volume against a discount table for the projected 3 year volumes of a company. That discount was then applied across the term of the agreement. Since then, the volume discount has been arrived at by looking at a company's volumes by individual years and the volume from the discount table is arrived at by looking at the various volume thresholds within a given year (much like a US income tax table) to provide incremental discounts levels as the annual volumes increase.’
‘6. In preparing an offer to a prospective licensee InterDigital will, based on the information it has about a licensee and the proposed structure of the license, assess whether the prospective licensee may be eligible for certain discounts. A licensee may be eligible for discounts in accordance with InterDigital's licensing program based on a variety of factors. … 7. Prior to the publication of InterDigital's licensing program rates in 2020, the application of a discount in an opening offer, and whether that was explicitly stated, would depend on the level of discussions that had taken place before the opening offer was made, whether an NDA was in place, and how much we knew about the prospective licensee and the structure of licence they were looking for. Often, the opening offer (which would usually be running royalty but may set out both a running royalty and a lump sum or fixed fee offer - what is set out will depend on what conversations have already taken place) would set out the undiscounted rates and would state (either in the offer itself or the meeting discussing the offer) that discounts may be applied depending on certain factors (i.e. those outlined above). As aspects of the agreement were better understood during subsequent discussions, such as the length of term, type of payment structure and timing etc., the related discounts would be included in future offers, even if this was not explicitly stated in the opening offer… 8. I cannot think of an example of where a licensee might be eligible for a type of discount but was not offered it during the course of the discussions / negotiations, and cannot think of any reason why that would be the case. However, as is also explained in more detail below, any resulting discount calculated based on an initial assessment of eligibility is a starting point in the negotiations and may well be subject to change as the structure of the license becomes more clear (for example changes could be made to address information conveyed by the licensee and/or information that emerges from other sources), and as the top line number and payment structure of the license is negotiated between the parties.’
‘Given our usual negotiation process, it is very difficult to provide a list of the discounts 'actually applied' for each finalized license and how they were determined, other than as explained further below. I have explained above how offers are expressed with regard to discounts during negotiations. If Lenovo's request seeks identification of specific discounts 'actually applied' in the sense of applied precisely to a separately negotiated price at the end of a negotiation, it misunderstands the nature of the negotiation that follows from an initial offer to the conclusion of the license agreement.’
‘In other words, even if there were to be any specific discussion of discounts in the negotiation it would likely only be to increase them.’
‘28. As will be appreciated while InterDigital takes care to make sure the end result through the use of appropriate discounts is consistent with the program, many times the licensee is more focused on what the top line number looks like when extrapolated to a per unit basis so that they can compare the values against what they believe others may have paid for their licenses based on publically available information. As such, even though the publically available information does not necessarily provide all of the pertinent information, as part of the back and forth process, it is the top line number and the value of the license that queries from the licensee ultimately focused on, more so than individual discounts themselves.’
‘The starting point would have been that [REDACTED] was eligible for a term discount, regional sales mix discount, volume discount, fixed-fee discount and a time value of money discount. Any movement on those would have been because of the particular negotiation and its particular context, and eventually we reached a place where both parties could live with the top line numbers even though the parties had differing views on [REDACTED] future sales mix and numbers as I explained at para 68 of my first witness statement. (This was in part due to each side having its own views built from the information available to that party.)’
"When an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non- discriminatory ("
"121. We have come to a different conclusion from that of the judge on the question whether there can be only one set of FRAND terms for any given set of circumstances. Patent licences are complex and, having regard to the commercial priorities of the participating undertakings and the experience and preferences of the individuals involved, may be structured in different ways in terms of, for example, the particular contracting parties, the rights to be included in the licence, the geographical scope of the licence, the products to be licensed, royalty rates and how they are to be assessed, and payment terms. Further, concepts such as fairness and reasonableness do not sit easily with such a rigid approach. In our judgment it is unreal to suggest that two parties, acting fairly and reasonably, will necessarily arrive at precisely the same set of licence terms as two other parties, also acting fairly and reasonably and faced with the same set of circumstances. To the contrary, the reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances."
“7. The purpose of the ETSI IPR Policy is, first, to reduce the risk that technology used in a standard is not available to implementers through a patent owner's assertion of its exclusive proprietary interest in the SEPs. It achieves this by requiring the SEP owner to give the undertaking to license the technology on FRAND terms. Secondly, its purpose is to enable SEP owners to be fairly rewarded for the use of their SEPs in the implementation of the standards. Achieving a fair balance between the interests of implementers and owners of SEPs is a central aim of the ETSI contractual arrangements. The ETSI IPR Policy 8. The ETSI IPR Policy (‘the IPR Policy’) is a contractual document, governed by French law. It binds the members of ETSI and their affiliates. It speaks (clause 15(6)) of patents which are inevitably infringed by the sale, lease, use, operation etc of components which comply with a standard as ‘Essential IPR’. By requiring an IPR holder whose invention appears to be an Essential IPR to give an irrevocable undertaking to grant a licence of the IPR on FRAND terms, it creates a ‘stipulation pour autrui’, in other words an obligation which a third-party implementer can enforce against the IPR holder. The IPR Policy falls to be construed, like other contracts in French law, by reference to the language used in the relevant contractual clauses of the contract and also by having regard to the context. In this case, that context is both the external context and the internal context of the IPR Policy document itself, such as the policy objectives declared in the document. 9. The external context includes (i) the Guidance (above) which ETSI has produced on the operation of the IPR Policy, (ii) ETSI's statutes (above), (iii) the globalised market which ETSI and other SSOs were and are seeking to promote, which we have discussed in para 4 above, and (iv) the fact that ETSI is a body comprising experts and practitioners in the telecommunications industry who would be expected to have a good knowledge of the territorial nature of national patents, the remedies available to patent owners against infringement of their patents, the need to modify by contract the application of patent law to promote the development of a globalised market in telecommunications products, and the practice of the industry in negotiating patent licensing agreements voluntarily. 10. The policy statements which provide the internal context include the objectives set out in clause 3 of the IPR Policy. They include the statement in clause 3.1 that the IPR Policy: ‘seeks to reduce the risk to ETSI, MEMBERS, and others applying ETSI STANDARDS and TECHNICAL SPECIFICATIONS, that investment in the preparation, adoption and application of STANDARDS could be wasted as a result of an ESSENTIAL IPR for a STANDARD or TECHNICAL SPECIFICATION being unavailable.’ That statement clearly reveals a policy of preventing the owner of an Essential IPR from ‘holding up’ the implementation of the standard. But that policy is to be balanced by the next sentence of clause 3.1 which speaks of seeking a balance, when achieving that objective, ‘between the needs of standardization for public use in the field of telecommunications and the rights of the owners of IPRs’. The importance of protecting the rights of the owners of IPRs is declared in the second policy objective (clause 3.2) in these terms: ‘IPR holders whether members of ETSI and their AFFILIATES or third parties, should be adequately and fairly rewarded for the use of their IPRs in the implementation of STANDARDS and TECHNICAL SPECIFICATIONS.’ This objective seeks to address the mischief of ‘holding out’ by which implementers, in the period during which the IPR Policy requires SEP owners not to enforce their patent rights by seeking injunctive relief, in the expectation that licence terms will be negotiated and agreed, might knowingly infringe the owner's Essential IPRs by using the inventions in products which meet the standard while failing to agree a licence for their use on FRAND terms, including fair, reasonable and non-discriminatory royalties for their use. In circumstances where it may well be difficult for the SEP owner to enforce its rights after the event, implementers might use their economic strength to avoid paying anything to the owner. They may unduly drag out the process of licence negotiation and thereby put the owner to additional cost and effectively force the owner to accept a lower royalty rate than is fair. 11. Having looked at context, we turn to the operative clauses of the IPR Policy. A member of ETSI is obliged to use its reasonable endeavours to inform ETSI in a timely manner of Essential IPRs during the development of a standard or technical specification. If a member submits a technical proposal for a standard or technical specification it is obliged to inform ETSI of its IPRs which might be essential (clause 4.1). Clause 4.3 confirms that this obligation of disclosure applies to all existing and future members of a ‘patent family’ and deems the obligation in respect of them to be fulfilled if an ETSI member has provided details of just one member of the patent family in a timely manner, while also allowing it voluntarily to provide information to ETSI about other members of that family. A ‘patent family’ is defined as “all the documents having at least one priority in common, including the priority document(s) themselves’ and ‘documents’ in this context means ‘patents, utility models, and applications therefor’ (clause 15(13)). The patent family thus extends to patents relating to the same invention applied for and obtained in several jurisdictions. It shows an intention for the arrangement to apply internationally. This is important because the undertaking to grant a licence under clause 6, to which we now turn, extends to all present and future Essential IPRs in that patent family. 12. The key to the IPR Policy is clause 6, which provides the legal basis on which an owner of an Essential IPR gives an irrevocable undertaking to grant a licence and thereby protects both ETSI and implementers against ‘holding up’. Clause 6.1 provides so far as relevant: ‘When an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory (‘FRAND’) terms and conditions under such IPR …’ It provides that the licences must at least cover the manufacture of equipment, the sale, lease or other disposal of equipment so manufactured, and the repair, use or operation of such equipment. FRAND licensing undertakings made pursuant to clause 6 are intended to bind all successors-in-interest in respect of a SEP, and upon transfer of a SEP the SEP owner is required to take steps to ensure that this is achieved (clause 6.1bis). The undertaking made in respect of a specified member of a patent family is applied to all existing and future Essential IPRs of that patent family unless specified IPRs are excluded in writing when the undertaking is made (clause 6.2). It is envisaged in the IPR Policy that this process will usually take place while ETSI is working to create a standard because clause 6.3 provides that, if the IPR owner does not grant the requested undertaking, relevant office-bearers in ETSI will decide whether to suspend work on the relevant parts of the standard or technical specification until the matter is resolved, or to submit any relevant standard or technical specification for adoption. Similarly, if, before a standard or technical specification is published, an IPR owner is not prepared to license an IPR, clause 8.1 provides for the adoption of a viable alternative technology for the standard or technical specification if such a technology exists. If such technology does not exist, clause 8.1 provides an option for work on the standard or technical specification to cease. If the refusal to grant a licence occurs after ETSI has published a standard or a technical specification, clause 8.2 provides the option of modifying the standard so that the relevant IPR is no longer essential. 13. Clause 6bis instructs members of ETSI to use one of the declaration forms annexed to the Policy. So far as relevant, the licensing declaration is an irrevocable declaration by the declarant and its affiliated legal entities that, to the extent that disclosed IPRs are or become and remain Essential IPRs, they (a) are prepared to grant irrevocable licences in accordance with clause 6.1, and (b) will comply with clause 6.1bis. 14. It appears from this brief review of the IPR Policy in its context that the following conclusions may be reached. First, the contractual modifications to the general law of patents are designed to achieve a fair balance between the interests of SEP owners and implementers, by giving implementers access to the technology protected by SEPs and by giving the SEP owners fair rewards through the licence for the use of their monopoly rights. Secondly, the SEP owner's undertaking, which the implementer can enforce, to grant a licence to an implementer on FRAND terms is a contractual derogation from a SEP owner's right under the general law to obtain an injunction to prevent infringement of its patent. Thirdly, the obtaining of undertakings from SEP owners will often occur at a time when the relevant standard is being devised and before anyone may know (a) whether the patent in question is in fact essential, or may become essential as the standard is developed, in the sense that it would be impossible to implement the standard without making use of the patent and (b) whether the patent itself is valid. Fourthly, the only way in which an implementer can avoid infringing a SEP when implementing a standard and thereby exposing itself to the legal remedies available to the SEP owner under the general law of the jurisdiction governing the relevant patent rights is to request a licence from the SEP owner, by enforcing that contractual obligation on the SEP owner. Fifthly, subject only to an express reservation entered pursuant to clause 6.2, the undertaking, which the SEP owner gives on its own behalf and for its affiliates, extends to patents in the same patent family as the declared SEP, giving the implementer the right to obtain a licence for the technology covering several jurisdictions. Finally, the IPR Policy envisages that the SEP owner and the implementer will negotiate a licence on FRAND terms. It gives those parties the responsibility to resolve any disputes as to the validity of particular patents by agreement or by recourse to national courts for determination.”
“61. … Nor do we construe the IPR Policy as prohibiting the SEP owner from seeking in appropriate circumstances an injunction from a national court where it establishes that an implementer is infringing its patent. On the contrary, the IPR Policy encourages parties to reach agreement on the terms of a licence and avoid litigation which might involve injunctions that would exclude an implementer from a national market, thereby undermining the effect of what is intended to be an international standard. It recognises that if there are disputes about the validity or infringement of patents which require to be resolved, the parties must resolve them by invoking the jurisdiction of national courts or by arbitration. The possibility of the grant of an injunction by a national court is a necessary component of the balance which the IPR Policy seeks to strike, in that it is this which ensures that an implementer has a strong incentive to negotiate and accept FRAND terms for use of the owner’s SEP portfolio. The possibility of obtaining such relief if FRAND terms are not accepted and honoured by the implementer is not excluded either expressly or by necessary implication. The IPR Policy imposes a limitation on a SEP owner’s ability to seek an injunction, but that limitation is the irrevocable undertaking to offer a licence of the relevant technology on FRAND terms, which if accepted and honoured by the implementer would exclude an injunction. … 90. … In the final analysis, the implementers and the SEP owners in these appeals are inviting a national court under the current IPR Policy to rule upon and enforce the contracts into which the SEP owners have entered. If it is determined that the SEP owners have not breached the FRAND obligation in the irrevocable undertakings they have given, they seek to enforce by obtaining the grant of injunctive relief in the usual way the patents which have been found to be valid and to be infringed. The English courts have jurisdiction to rule upon whether the UK patents in suit are valid and have been infringed, and also have jurisdiction to rule on the contractual defence relied upon by the implementers based upon the true meaning and effect of the irrevocable undertaking the SEP owners have given pursuant to the ETSI regime. In agreement with Birss J (para 793), we observe that Huawei is before this court without a licence in respect of infringed UK patents when it had the means of obtaining such a licence. … … 164. There are … no grounds in this case for a concern of the kind expressed by Kennedy J in the eBay case. The threat of an injunction cannot be employed by the claimants as a means of charging exorbitant fees, or for undue leverage in negotiations, since they cannot enforce their rights unless they have offered to license their patents on terms which the court is satisfied are fair, reasonable and non-discriminatory. … 166. … in a case of the present kind, an award of damages is unlikely to be an adequate substitute for what would be lost by the withholding of an injunction. The critical feature of a case of this kind is that the patent is a standard technology for products which are designed to operate on a global basis. That is why standard technology is essential, and why the patent-holders whose patents are accepted as SEPs are required to give an undertaking that licences will be made available on FRAND terms. Once the patents have been accepted as SEPs, it may well be impractical for the patent-holder to bring proceedings to enforce its rights against an infringing implementer in every country where the patents have been infringed. That is because … the cost of bringing enforcement proceedings around the world, patent by patent, and country by country, would be ‘impossibly high’. 167. In those circumstances, if the patent-holder were confined to a monetary remedy, implementers who were infringing the patents would have an incentive to continue infringing until, patent by patent, and country by country, they were compelled to pay royalties. It would not make economic sense for them to enter voluntarily into FRAND licences. In practice, the enforcement of patent rights on that basis might well be impractical ... An injunction is likely to be a more effective remedy, since it does not merely add a small increment to the cost of products which infringe the UK patents, but prohibits infringement altogether. In the face of such an order, the infringer may have little option, if it wishes to remain in the market, but to accept the FRAND licence which ex hypothesi is available from the patent-holder. However, for the reasons explained in paras 164-165, that does not mean that the court is enabling the patent-holder to abuse its rights.”
‘114. The text of clause 6.1 lends itself naturally to being read in this unitary way. The “non-discriminatory” part of the relevant phrase gives colour to the whole and provides significant guidance as to its meaning. It provides focus and narrows down the scope for argument about what might count as “fair” or “reasonable” for these purposes in a given context. It indicates that the terms and conditions on offer should be such as are generally available as a fair market price for any market participant, to reflect the true value of the SEPs to which the licence relates and without adjustment depending on the individual characteristics of a particular market participant. Put another way, there is to be a single royalty price list available to all.’
‘119. In TCL Communication Technology Holdings Ltd v Telefonaktiebolaget LM Ericsson Case No 8:14-cv-00341-JVS-DFM (CD Cal, Nov 8, 2017), the US District Court for the Central District of California noted the deletion and regarded it as providing guidance regarding the interpretation of the FRAND obligation (pp 13-14 and 91). The Court of Appeal, in the judgment below, took the same view: para 199. We agree.’
‘the ability of the owner of a SEP to hold implementers to ransom by reason of the incorporation of the invention into the standard by declining to grant them a licence at all or only granting one on unfair, unreasonable or discriminatory terms.’ ii) Second, his characterisation of ‘hold out’ at [95]: ‘The idea is that an unscrupulous licensee may use their economic strength to avoid paying anything to a patentee, unduly dragging out the process of licence negotiation, thereby putting the patentee to additional cost and forcing it to accept a lower royalty rate than is fair.’
‘It only “wants” a licence on its own terms and at a time of its own choosing, and then only conditionally; it reserves the right to say no altogether. Its contention is that it ought to be able to use Optis’ technology for another year and then, if it declines to take the FRAND terms on offer, never to have had a licence.’
‘As to the allegation that the SEP owner is not prejudiced by having to wait for its injunction, I have found above that damages are not an adequate remedy, and that (among other things) having to wait in a state of uncertainty as to whether other proceedings in other jurisdictions are needed is a form of potential hold-out which damages the patentee. To make the patentee wait for a year or more (it would have been two years had the patent in Trial A not expired) from infringement finding to FRAND trial would be almost like a compulsory licence, and that is not justified. It is not just a question of an interim position pending a further determination but a substantive loss of rights for the patentee in respect of an ageing property right.’
‘Apple undertakes to enter into a licence in the form that is determined to be FRAND at Trial E in these proceedings or, to the extent that there are any appeals of the judgment in Trial E, a licence that is finally determined to be FRAND on appeal.’
‘It can be seen from the Supreme Court’s analysis that clause 6.1 must be interpreted in a manner which avoids both hold up by the SEP owner and hold out by an implementer. Hold up by the SEP owner will be avoided by ensuring that the SEP owner is held to its ETSI Undertaking. Hold out by the implementer will be avoided by allowing the SEP owner to enforce its normal right under the general law to obtain an injunction to prevent infringement of the SEP by the implementer save to the extent that this would be inconsistent with the SEP owner’s ETSI Undertaking.’
"4.4 Notice on the use of NDAs in IPR negotiations It is recognized that Non Disclosure Agreements (NDAs) may be used to protect the commercial interests of both potential licensor and potential licensee during an Essential IPR licensing negotiation, and this general practice is not challenged. Nevertheless, ETSI expects its members (as well as non-ETSI members) to engage in an impartial and honest Essential IPR licensing negotiation process for FRAND terms and conditions. 4.5 Financial contingency Members developing products based on standards where there may be Essential IPRs, but there is uncertainty, have mechanisms available which they can use to minimize their risk. As a non-exclusive example, a member might wish to put in place financial contingency, based on their assessment of “reasonable”, against the possibility that further/additional license fees might become payable."
‘It is the responsibility of each STANDARD user to contact directly the patent owner.’; ii) Second, in answer 6: ‘It is necessary to obtain permission to use patents declared as essential to ETSI’s standards. To this end, each standard user should seek directly a license from a patent holder.’
“Provided that it is agreed that doing so will fully resolve the parties disputes and proceedings, InterDigital is willing to consent to submitting to the Delaware District Court a single claim settling binding worldwide terms (including rates) for a FRAND licence for the Lenovo Group to the [InterDigital] 3G/4G Portfolio, provided also that your clients are also so willing and will proceed in Delaware without delay, and on condition that your clients provide an irrevocable undertaking [to be bound by the terms of a FRAND licence resulting from the Delaware District Court to the InterDigital 3G/4G Portfolio]”
‘175. The general law, as stated in Unwired Planet is that if an implementer refuses to take a FRAND licence an injunction may be granted unless and until they do. However, a major issue left unresolved by Unwired Planet and more recently Optis v Apple is by which court or courts such a licence should be determined (if global) and what the terms of such an undertaking should be. The present case differs significantly from the position in Optis v Apple[2021] EWHC 2564 (Pat) , and[2021] EWHC 2759 (Pat) , because of its commercial and regulatory history and the existence of past and current foreign proceedings. 176. In this case, the question of whether Lenovo is a willing licensee once the English Court has decided what FRAND terms are by English rights alone cannot be determined merely on the basis of whether it was/is willing to give to the English Court an unqualified undertaking to accept whatever the English Court decides is FRAND, in the absence of mirrored undertakings from InterDigital to respect the decisions of the US and Chinese courts. Lenovo has indicated that it is willing to give an undertaking to accept a FRAND licence, settled by this Court (a) for at least the whole world except the US, China and non-patent countries, or (b) for the whole world provided that InterDigital gives reciprocal undertakings to respect the decisions of the US and Chinese Courts for sales where the protection is governed by infringements in those jurisdictions.’
‘Hold up occurs when a patent holder seeks to extract more for the use of his patent than the value which the patent adds to a standard.’
‘Sound methodology should preclude the experts from cherry-picking facts from the business cases or each other’s reports they choose to accept; rather, they must provide a factual basis for their opinions. The Court is very cognizant of just how easy it is to pick particular assumptions or approaches in order to manipulate the unpacking analysis to arrive at a preferred rate for each license. The more that the unpacking analysis can be manipulated, the less it represents what the parties actually agreed to do, and therefore the less useful it is to the Court.’
‘The Court generally views released sales as part and parcel of the forward-looking terms of the license agreements. The Court decides this based on a pragmatic view of the negotiations between sophisticated parties. When Ericsson and Apple negotiated their license agreement, they both knew that there were unlicensed sales, and they had even engaged in substantial litigation across the globe on that very issue. (Brismark Decl.#108). To then exclude released sales and the initial lump sum payment ignores the reality that, particularly for lump sum deals, the released sales are being paid for as part of the same transaction. The Court is therefore skeptical of any unpacking which ignores released sales and an initial lump sum payment for the purposes of determining a FRAND rate. The Court believes that parties to these license agreements generally care much more about the total amount they have to pay and the total value they receive, rather than whether a payment is labeled as a release from past liability or for the future license.’
‘It is certainly possible that parties could specifically agree to different royalty rates for released and prospective sales, but that is not the case for any of the licenses the Court unpacked.’
‘68 In my experience, in SEP licensing negotiations, it is quite common that a licensor will start by providing a term sheet offer based on a percentage running royalty, with floors and caps. This will give the licensee a very good understanding upfront of the economics of a deal. Having said this, in most negotiations the licensor will be asked to make offers in all of the structures discussed above as part of the negotiation. In the end, it is my experience that as a licensor you will need to show a great deal of flexibility on deal structure in order to get a negotiated deal in place.’
"2.24 Mr Brismark claims (paragraph 67 of Brismark 1) that "
"71 …The value that, for example, the LTE technology brings to a high-end smartphone with the latest camera technology and a large high-performance screen etc. is higher than the value LTE brings in a low-end device with less performance, a smaller screen etc. In the high-end smartphone, the LTE technology is more utilized since the phone will require higher speed and lower latency when communicating over the wireless network. Therefore, a higher royalty in the absolute is justified, whereas for a low-end device a lower royalty is justified. This is reflected in a royalty which is based on a percentage of the ASP. A percentage based running royalty combined with a floor and/or a cap is used as the standard structure by many licensors in industry and provides for the above mentioned effect, while still achieving a minimum absolute royalty amount and a maximum royalty amount. 72 In negotiations an implementer with predominantly high-end phones would typically argue that it should pay no more than the absolute amount (i.e. in dollars, euros or any currency agreed) the implementer with the lowest ASP on the market pays, thereby effectively asking to pay a much lower percentage royalty compared to its competitors. An implementer with low-end phones will, conversely, normally ask to pay no more than the percentage royalty of the implementer with the highest ASP on the market, while ignoring that there is an ASP cap in doing so and effectively asking to pay a much lower absolute amount per phone than its competitors. These are extreme positions to take and, in my experience, could be a sign of hold-out if insisted upon by a licensee. 73 However, as a general rule, companies with high ASP phones will prefer a structure with an absolute amount per device when negotiating, or at least insist on a cap. Conversely, companies with low ASP phones will prefer a straight percentage structure, without floor (for a low ASP player, the cap plays no role). 74 An effective way of striking a balance is to use a royalty based on a percentage of the ASP, but with caps and floors. This provides a relationship between the royalty paid and the price (and use of the standardized technology). At the same time the floor protects the licensor against business models which may have artificially low prices on a device, whereas the cap protects the licensee in instances where a phone is priced higher than the value the standardized technology enables [fn: To take an extreme example, if the phone is gold-plated for example]."
‘Mr Meyer relies on a small number of comparable licences, which reduces the reliability of his analysis 2.2 As explained in my First Report, a comparables analysis uses the effective rates implied by commercially negotiated licences, for the same or a similar set of rights to those in the subject licence, as a guide to the market value of those rights. The implied rates must be interpreted with care as there may be issues of reliability (in their calculation) or comparability (to the subject licensee). 2.3 Whilst certain differences in characteristics between licences can be adjusted for (e.g. the time value of money), the impact of other characteristics (such as a licensee’s market position or differences in the underlying circumstances of the licence negotiations) are not always directly observable or quantifiable. 2.4 I therefore consider it preferable to rely on more rather than fewer comparables and to consider what those datapoints imply (in terms of the value of the rights), in the round, taking account of both factors that can, to some extent, be adjusted for and those that cannot. This reduces the likelihood of reaching an incorrect conclusion based on a small number of datapoints that may be affected by unobservable factors (that have not therefore been adjusted for) or uncertainty in respect of the appropriate assumptions.’
‘… Mr. Bezant's analysis relies on the assumption that a valuation unpacking of comparable licenses should in effect "restore" revenue and value for the licensor that was not actually realized in the transaction, and which the licensor considers was forgone as a "discount", in order to arrive at an assumed market value. The goal of a market comparables valuation approach is to determine the value at which a particular transaction was actually realized in the market. Such an analysis indicates the actual realized value of the rights being licensed. A market comparables valuation analysis cannot be achieved by simply accepting one party's view that various comparable transactions were "discounted" and then grossing them up to an inflated rate that the licensor party would have preferred to achieve. Indeed, doing so simply measures what one party believes it should have received, rather than the actual market rates charged, and that it realized. …The assumed discounts for which he adjusts include those related to: (1) past sales; (2) geographic scope; (3) license term; (4) sales volumes; and (5) previous licensing behavior. In situations where no further discounts other than payment structure-related discounts are said to have applied, the Pre-Discounts Rate is the same as the Common RR- Basis Rate. This is broadly the case for the InterDigital Comparable Agreements [i.e. the InterDigital 20]. However, when calculating the Pre-Discounts Rate for the InterDigital Lump Sum Agreements [i.e. the Lenovo 7], Mr. Bezant performs the following series of additional steps where he: (1) determines the consideration related to the future royalties by deducting the consideration relating to past sales (prior to the effective date) from the PV-adjusted total consideration; (2) uplifts the PV-adjusted future consideration to estimate the consideration before all discounts are taken into account; and (3) divides the PV-adjusted uplifted future consideration by the PV-adjusted future sales volume to obtain a per unit Pre-Discounts Rate. This complicated methodology strays from the core valuation exercise that seeks to understand how much is actually paid per device by other companies in the market that are comparable to Lenovo.’
‘In my view, the Common RR-Basis Rate and Pre-Discount Rate analyses are flawed and if presented without the full context could be misleading and, as such, should be viewed with the appropriate degree of caution. As addressed above, the Common RR-Basis and Pre-Discount Rates do not measure and represent the value at which the transactions actually took place. Instead, these metrics artificially adjust upwards the price at which the InterDigital portfolio was actually licensed by applying a series of retrospective adjustments to gross-up the realized royalty rate to take account of certain "discounts" InterDigital considers itself to have offered during negotiations. As these "discounts" have been applied by InterDigital to its starting position and/or so-called "program rate" in negotiations, the effect is invariably to return to effective rates consistent with InterDigital's starting position or notional "program rate" during the negotiations rather than what was actually agreed upon. I do not regard this as a correct, useful or informative approach at all, as it effectively simply measures what one party to the negotiation, InterDigital, would like to have achieved (but did not actually achieve). …The exercise of valuation should assess what the buyer and seller agreed to pay for a particular asset; not what one party to the transaction contends it is worth. …In his analysis, Mr. Bezant does not seem to be attempting to estimate and present the value at which the transactions actually took place, but some other amount, which adjusts the actual royalty values of the transactions so as to reconcile them with InterDigital's internal desires for its royalty program. In my opinion, this approach is far removed from the principles of market valuation.’
‘68 Discussions continued and in [REDACTED]we finally reached agreement. The [RED] PLA includes various discounts such as a term discount and a pre-payment discount. We also recognized that because [REDACTED] China exposure was increasing as a proportion of its overall exposure (as its sales elsewhere decreased for the reasons set out above) that it would become harder to get [REDACTED]to pay anything for its use of our patents. Through the use of the discount mechanisms and the changing market dynamics, we were eventually able to come to an agreement on a top line number, although the sides did not see eye to eye on many of the parameters. The [REDACTED]sales projections (at the table with InterDigital) were lower than what we believed they would end up at, while their statements to the outside world (beyond our negotiation table) were higher than what we believed to be the case (it transpired eventually that third party analysts such as Counterpoint came to forecast [REDACTED] sales in a similar light to those we were looking at). After much back and forth on the rates and the volume parameters, eventually we reached a place where we both looked at what was on the table and decided we could live with it. We agreed on the amount of the consideration but we never fully agreed on what the assumptions were.’
‘164 As explained in InterDigital's evidence, while the payment structure discounts that it has given are a pure matter of economics, and while term and renewal discounts can be thought of in like terms, the volume discounts that it has given are, in one way or another, reflecting the commercial reality of negotiations and are means that have to be used to get commercial deals done. Faced with the reality of hold out, known to both sides of any negotiation, InterDigital has no realistic choice but to recognise that commercial reality and offer bigger players with more power to hold out increasing discounts if they are to get them to take a licence at all. Mr Djavaherian and Mr Meyer seek to side-line the relevance of volume discounting and decide for themselves not to take it into account.’
‘53 Where past sales have gone unlicensed, InterDigital will also seek to identify the licensee's past sales over the relevant period. InterDigital will then consider what the realization rate should be for those sales. Typically, this results in past sales being discounted for a couple of reasons, to reflect the real (or at least a closer approximation of the real) value of the historic sales. First, there can be significant legal limitations in terms of securing payments for past sales. So, as an example, if a region had a three year statutory look back period, that would limit our ability to secure damages (or royalties) on sales in that region before that time. Second, and in addition to the first point, one has to acknowledge that collecting the payment of past fees through the Court system is an inherently slow, expensive and risky process. Third, perhaps because of this, past sales have typically been in licensing negotiations the area where the licensor can be the most flexible, and this was widely understood among licensing professionals 54 That said, licensors do not want to create incentives for licensees to delay license negotiations on the hope that it would get better rates on past sales. So, as a result, InterDigital developed a couple of approaches to deal with past sales. The first approach was where you had a customer that was renewing a license and there was a modest gap between the old license expiring and the new license starting. In those cases we would be more likely to forgive those past sales or apply a steep discount since we were dealing with what was, in effect, a good customer or a compliant licensee. The second situation would be one where we conclude a deal with a new customer where there was considerable past sales. In that case we would sometimes apply what we called a 'donut hole' concept. The sales that would be forgiven would be the very old sales (given the legal challenges with them anyway) and then the most recent sales would be captured by the usually retroactive effective date of the agreement. The sales in the middle (in the donut hole) would essentially be left to deal with upon the next renewal. Typically, if the next renewal occurred without delay or litigation, then the sales in the donut hole would be discounted when the new deal was executed. Basically, the idea was to give the customer a financial incentive to become a long term licensee. A third situation that we have yet to deal with would be the customer that takes InterDigital through years of litigation and only signs a license under a court ordered mandate. In that case any forgiveness for past sales should be modest since the licensee has, by their choice and actions, extended that period of past sales and they should not be in a better position than compliant customers who took licenses in a more timely manner.’
‘Significantly, and although this may seem counterintuitive, it should be appreciated that the exclusion and/or discounting of past sales in the royalty terms of a license may actually work to the longer term advantage of a licensor. This is because the nominal discounting or omission of significant volumes of past sales from a license in practice allows the licensor to claim a higher effective rate for those sales which are included within the scope of the forward-looking term of the license. In effect, the licensee in such circumstances can simply agree to a nominally higher forward looking headline royalty rate in return for some form of de facto or implied (as opposed to express) discounting or exclusion of past sales, which is frequently framed in a way that is practically difficult for third parties to analyze and unpack. For the licensor, extracting an increased headline rate which it may seek to rely on as a comparable in other negotiations and/or litigation, and which (in the case of a listed company) it may take back to shareholders and investors as purported vindication of its licensing program rates, is a valuable outcome. One of the effects of this practice is that then if, in another case, that increased rate is applied to all sales (i.e., without accounting for the value of the past units that were effectively dealt with by the terms of the agreement, regardless of whether formally "released") the total royalty will be significantly overstated relative to those other licensees. Viewed at a high level, it may be considered that the practice of omitting certain past sales and/or discounting the royalty to be paid for past sales is a counterbalance to the parallel practice of the nominal overstatement (on the face of the license) of the headline rate.’
‘44 InterDigital's approach to releases for past unlicensed activity prior to the term of the license is largely informed by an appreciation that were we to sue to recover such sums then the amount recoverable would be subject to a statutory limitation period and other uncertainties. I don't know if there is a maximum look back duration, but we have been known to look back six years if we are able to do so. We therefore consider what the sum would be if we recovered 100% of the royalties for the period during which the licensee has been using our technology without paying for the same and then discount the sum based on practical considerations such as the risks, time and expense that would be incurred in any litigation(s) seeking to recover the same.’
"5.3 In this section, I focus on the future period and present the future blended Licensee Effective Rates that result from my unpacking analysis to enable a direct comparison between Mr Meyer's and my results. I focus on the future period rate because I understand that the treatment of past sales is an "area where [InterDigital] can be the most flexible". [fn 184, Merrit 1 [53]]. It appears to be highly dependent on the specific circumstances of the licence negotiations, [fn 185] so the treatment of the past in one licence does not necessarily provide a useful guide to the relevant treatment of past sales for the subject licence. I present the results for the past in Appendix 17. Fn 185: For example, in Appendix 17, I demonstrate the wide range of past period effective rates implied by the comparable licences, and the large variation in the implied discounts that appear to have been granted, by [InterDigital], on past sales, from 0% to 95%."
‘7.25 Whilst volume discounts may not necessarily imply non-FRAND terms, the discounts in the region of 70% (or more) offered by InterDigital would seem to create significant discrimination within the market and an "uneven playing field" for competition - particularly excluding smaller and medium-sized companies seeking to enter the market. The intention of ETSI and standardization, on the other hand, was to create a more-level playing field in which companies could innovate and compete. If a 70% discount is offered, that puts a new market entrant at a significant disadvantage to an established market participant. Further, many of the companies which are entitled to a notional 70% discount end up agreeing to a lump sum license structure rather than a running royalty. The notional discounts offered to these larger companies does not seem to be grounded in any clear reason other than an effort at rationalizing that the rates which have been negotiated so as to present them for an "unpacking" that does not reflect the actual economics of the deal (e.g., does not reflect the actual amounts paid per unit by the licensee).’
"22 It is my experience that the risk of hold-out by implementers is what has pushed the price of licenses below the value that the patent portfolio offers. In my experience, it is not feasible for a licensor to litigate against every implementer that is holding out in multiple jurisdictions and so discounts are often used by licensors to at least incentivize implementers to take a license."
‘7 Prior to the publication of InterDigital's licensing program rates in 2020, the application of a discount in an opening offer, and whether that was explicitly stated, would depend on the level of discussions that had taken place before the opening offer was made, whether an NDA was in place, and how much we knew about the prospective licensee and the structure of licence they were looking for. Often, the opening offer (which would usually be running royalty but may set out both a running royalty and a lump–sum or fixed fee offer - what is set out will depend on what conversations have already taken place) would set out the undiscounted rates and would state (either in the offer itself or the meeting discussing the offer) that discounts may be applied depending on certain factors (i.e. those outlined above). As aspects of the agreement were better understood during subsequent discussions, such as the length of term, type of payment structure and timing etc., the related discounts would be included in future offers, even if this was not explicitly stated in the opening offer. After the publication of InterDigital's licensing program in 2020 the process remained very similar except that due to the publication of the licensing program we did not need to wait for an NDA in order to provide an opening offer. Our website sets out our rates per standard and also states that "additional discounts may apply based on duration of the agreement, product volumes, payment timing and structure, special market considerations and other factors." 8 I cannot think of an example of where a licensee might be eligible for a type of discount but was not offered it during the course of the discussions / negotiations, and cannot think of any reason why that would be the case. However, as is also explained in more detail below, any resulting discount calculated based on an initial assessment of eligibility is a starting point in the negotiations and may well be subject to change as the structure of the license becomes more clear (for example changes could be made to address information conveyed by the licensee and/or information that emerges from other sources), and as the top line number and payment structure of the license is negotiated between the parties.’
‘26 Given our usual negotiation process, it is very difficult to provide a list of the discounts 'actually applied' for each finalized license and how they were determined, other than as explained further below. I have explained above how offers are expressed with regard to discounts during negotiations. If Lenovo's request seeks identification of specific discounts 'actually applied' in the sense of applied precisely to a separately negotiated price at the end of a negotiation, it misunderstands the nature of the negotiation that follows from an initial offer to the conclusion of the license agreement. 27 In our initial offers and during the negotiations, a series of offers and counter offers are usually made by both sides and further information about the licensee's business comes to light. Throughout the negotiations, we continue to discuss the offers, counteroffers, and revised offers internally and to calculate, using projection spreadsheets, how further variations of offers or potential offers might affect the top line value of the license. We also in that process consider the information we have about a licensee, the market in general, the scope of the license, and any outside factors that may affect such value. Throughout we continue internally to discuss and assess offers and counteroffers on the same basis, including applicability of discounts. The aim is to get to an offer which is acceptable to both sides and which is consistent with InterDigital's licensing program. 28 As will be appreciated while InterDigital takes care to make sure the end result through the use of appropriate discounts is consistent with the program, many times the licensee is more focused on what the top line number looks like when extrapolated to a per unit basis so that they can compare the values against what they believe others may have paid for their licenses based on publically available information. As such, even though the publically available information does not necessarily provide all of the pertinent information, as part of the back and forth process, it is the top line number and the value of the license that queries from the licensee ultimately focused on, more so than individual discounts themselves. 29 Even if an issue arose in any individual negotiation in respect of a particular discount (for example if a potential licensee claimed it should receive a larger discount for volume of sales) the prospective licensee is very unlikely to negotiate a reduced discount. That would be counter to its interests. As such, the ultimately agreed final rate or lump sum (i.e. the top line number) will be based, in InterDigital's perspective, on the licensee at least getting those discounts offered at the outset at the levels initially offered. In other words, even if there were to be any specific discussion of discounts in the negotiation it would likely only be to increase them.’
‘I have set these monies aside to pay to the SEP licensor(s) and I will pay them over just as soon as the appropriate rates have been agreed or set’
‘131. …Only when Samsung acknowledged, after prodding by InterDigital, that it was not actually willing to enter into such a deal, did the ITC staff conclude that Samsung may not be a willing licensee and could be subject to an exclusion order. 132. It was at that point that Samsung fully engaged on resolving the license dispute. In return, InterDigital looked at a 10 year structure and, applying higher discounts for the ten year period (given the uncertainty of Samsung maintaining its market position), and extending the volume discount table (as had occurred with Nokia in 2005 with the parties' arbitration) to reflect Samsung's much higher volumes we arrived at a mutually acceptable deal.’ e) To similar effect, Mr Grewe explained that at the time of the deal, InterDigital considered there to be a ‘reasonable possibility’ that they would succeed in obtaining the exclusion of all of Samsung’s standard-compliant products from the USA. vii) ITC proceedings: Mr Bezant mentions those but also a Reuters report from December 2013 which related that the ITC had found that Nokia, Huawei and ZTE had ‘not violated’ certain of InterDigital’s patents, but it was under appeal. He said: ‘It is unclear how the ITC proceedings would have affected the negotiations between IDG and Samsung and the rates agreed in the licence, but it may have meant that IDG agreed to a lower rate to conclude the deal, all else equal.’
‘Fairphone’s very small size meant it may have had low bargaining power to negotiate with IDG or challenge (via litigation) the rates offered by IDG. However, I have no evidence that the rates in Fairphone 2020 were not the result of thorough negotiations between the parties.’
‘Wistron entered into a prior PLA with IDG in 2012, following brief negotiations. I understand that Wistron considered the rates agreed were too high and challenged them after the license was signed. Therefore, I consider it likely that Wistron negotiated thoroughly before agreeing the 2017 PLA.’
‘Based on that history, when LG was willing to commit to pay a considerable sum for a three year license, we found that acceptable under the umbrella of our customary licensing terms as (i) we believed that LG's business was not likely to perform at the level that it hoped it would and was paying for, and (ii) because they were renewing an agreement, we could be flexible on past sales (albeit they had gone unlicensed for an extended period of time.). I note that since doing this deal our concerns were correct in that LG has now exited the smartphone market.’
‘[o]ur agreement with LG is a multiple-element arrangement for accounting purposes. We recognized$42.4 million of revenue under this patent licence agreement during 2017, including$34.5 million of past sales.’
‘[i]n 2019, we recognized$19.8 million of non-current patent royalties primarily attributable to the Funai, ZTE Corporation and Innovius LLC patent licence agreements, all of which were signed in fourth quarter 2019.’
‘we were very concerned that not only might we fail to secure a license but even if we did do so that ZTE simply would not be able to pay us.’
‘…to look at patent families in the abstract without regard to where actual patents are enforceable would result in a subsidy to consumers in countries where the SEP owner has more enforceable patents from consumers that are not legally obligated to pay such a royalty. In essence, a global patent rate that does not account for differences in national patent strength provides the SEP owner a royalty based on features that are unpatented in many jurisdictions.’
‘there is no need to know who has the highest number of patents.’; ‘...valuation is not a numbers game.’ ii) Mr Djavaherian indicated that parties focus on claim charts and proud lists rather than considering whether the patentee has x% of the standard. He also pointed to patentees having differing ‘hit rates’ in terms of validity. iii) Dr Putnam agreed that ‘The size of a portfolio is, by itself, not a good predictor of the royalty payment.’ iv) Mr Peters agreed that portfolio valuation was not a numbers game, and that you get higher value and lower value patents. He explained that a top-down analysis might be of some use when you are ‘starting from scratch’ but agreed that when you have a track record, you look at that. v) Lenovo also put to Mr Merritt an article written by him and published in April 2018 in which he was critical of courts using ‘hypothetical’ approaches instead of ‘first assessing what other companies have paid for a relevant license’
‘161. Conceptually, the premium for 3G, 4G or 5G technology in a handset is divided between the seller of that technology (the SEP holder) and the buyer (an SEP licensee), in the form of royalties that the buyer pays to the seller. Those royalties then form part of the cost of manufacturing the handset, which in turn helps determine the handset’s price. The cellular premium, which is revealed in the transaction between the SEP holder and the handset manufacturer, simply describes the market value of the gain from standardised technology that SEP holders and manufacturers divided between them. 162. The question remains whether and how much of the premium should be captured by SEP licensees as opposed to by SEP holders. There is no clear economic answer to this question: under ETSI rules, the royalties charged by SEP holders must be “fair and reasonable”; SEP holders are also entitled to be “adequately and fairly rewarded” for their innovations. Taken by itself, “fairness” does not have an independent economic definition. 163. In my view, a reasonable split would be 50/50 between SEP licensees and SEP holders. A 50/50 split can be justified on multiple grounds. [fn 48] It could be seen as a conservative choice for SEP holders: there is no reason to believe that implementers deserve more than 50% of the gains from implementing a standard that they did not create. [fn 49] FN 48 For example: 1. Under very general conditions, economic equilibrium implies an equal division of the gains from trade if bargaining positions are symmetric. As I have explained, ETSI rules require “fair” terms for both innovators and implementers. Therefore, if these two groups bargained with each other, we might expect an equal division of the gains. 2. In experimental economic studies of bargaining over the division of a surplus, equal division is frequently observed, with “fairness” being the usual justification. 3. Many telecommunication firms are both implementers and innovators, and so must adopt the bargaining positions of both. For example, in taking the position that royalty rates for patents should be “high,” a firm would simultaneously advocate that it should pay higher royalties to its rivals on the sales of its own products, increasing their cost and reducing its profits. These countervailing internal forces balance the opposing demands of innovators and implementers. Fn 49 Implementers already gain through the profits they make on additional sales of units that practise the new standard. Awarding them a share of the premium is thus an additional gain.’
‘While it has limitations in this application, it has recently started to be applied in evaluating SEPs in telecommunication matters alongside other traditional valuation methods.’
‘We appreciate your patience and efforts to work with Lenovo on this issue, John asked me to let you know that, given the royalty demands Interdigital is making, we are unable to accept your current offer or make a meaningful counter-offer at this time. We will continue working through these issues internally with respect to your portfolio and the many others that allegedly impact this same technology. If Interdigital modifies its licensing practices or royalty model in the future, please let us know.’
‘I believe this is the first communication we have received from your company in over 7 months. In addition to the passage of time, I also understand that Interdigital has been involved in several litigations which may have impacted the patents you were previously asserting against Lenovo. If you would like to re-open our discussions I would expect an updated assertion/patent package for us to review – as well as an updated royalty offer….so that we are all starting on the same page. On another note, you mention below that Interdigital’s strategy is going to include the sale of patents. Lenovo would be interested in being involved in the review of any portfolios which you are going to offer for sale – especially any including wireless essential patents.’
“We need help with all the above data for two reasons. First, Lenovo’s management is keenly sensitive to competitive issues and always wants reassurance that the competition is (a) actually paying for the license that Lenovo would take; and (b) paying at least as much as Lenovo would be paying (either on a per unit or a percentage basis). Second, when proposing licensing deals, management always asks that question: “What is the alternative”? For this, we ask our litigation group to do an analysis of the risk adjusted cost of a legal dispute. This includes attorneys’ fees, risk adjusted damages, risk of injunction, time value of money etc. For this, we need to show that taking a license is less expensive than the risk adjusted cost of litigation. Particularly for this second point, any data you have regarding litigation outcomes worldwide will be useful. Once we have all of the above information and materials, we can then make the case to management. Of course the other question I will get is, 'Is this the best deal you can negotiate'? This is the other reason that I prefer to negotiate to a best and final set of terms before presenting to management… In the current case, all of the above is complicated further by the fact that I will need to present to and get approval from three different business units…”
‘Q. And in your experience, do parties to licensing negotiations assess the anticipated outcome of any litigation when evaluating their position in the -- in the negotiation? A. I can't speak to everyone, but certainly that's the number one thing I use to assess whether I want to sign a license, is a careful analysis of whether litigation and the likely outcome of litigation, plus the expense, taking into account the time value of money and so on, is ultimately greater than or less than the negotiated alternative. And I'm very pragmatic; when the negotiated alternative is clearly less expensive, I'm happy to take a license. When the negotiated alternative is equal to or greater than the likely litigation outcome, I'm not ready to sign, and I'm ready to keep negotiating and/or litigating as necessary. That's certainly been my -- my experience, not only for myself, but at least for the more successful licensing folks that I've dealt with over the years.’