Friday, November 15, 2013. Yesterday at the UBS Global Technology Conference Universal Display Corporation (“UDC;” Trading Symbol: OLED) was asked about the possible outcomes for next week’s crucial trial. UDC repeatedly makes statements to analysts strongly implying that investors don’t have any reason to worry about its business being damaged by patent litigation, now or anytime in the future, and denying that the possibility that their entire business can be terminated by one international judicial order scheduled to be rendered next week.
UDC responded by saying that “So, and within our Samsung contract whether patents get invalidated or opposed or challenged does not affect our Samsung agreement. And I know there has been a lot of chatter out there that says Samsung is not going to pay them and just hidden Samsung agreement. If you actually go to the SEC website of the redacted version which has pricing and things like that, you go to Section 4.2 of that and if you read it, it says this agreement is not invalidated for any reason including losing of patents or oppositions or challenges. So it’s not going to impact our Samsung agreement.” Article 4.2 has nothing to do with Samsung’s termination rights under the agreement. It is merely an acknowledgement they have determined that the fees and methods they negotiated are reasonable and appropriate. In fact, the methods negotiated include many terms that can result in termination. While UDC carefully redacted ALL causes of termination the redacted agreement still contains references to early termination.
UDC’s Patent License Agreement with Samsung states that a “Valid Claim” is a claim of a UDC patent that has not been “finally held unpatentable, invalid or unenforceable by a court or other government agency of competent jurisdiction” and “excludes any unpatented inventions, know-how or technical information.” Article 4 mentioned by UDC is titled “Consideration” and states that Samsung shall pay the license fees specified in Exhibit A and Exhibit A stated that license fees are subject to the event of any termination of this Agreement. UDC completely redacted 4.5. Article 6.1.5 refers to a termination of the agreement. Article 8.1 specifically states that the agreement permits termination before December 31, 2017. Furthermore, UDC’s materials purchase agreement with Samsung contains a similar termination term in Article 2.2 titled “SMD Purchase Commitment” in a references to its own Exhibit A that refers to a undisclosed cause for termination.
Below is “Section 4.2” referred to by UDC at the UBS Global Technology Conference:
4.2 Acknowledgement. Both parties acknowledge and agree that the license fees and the methods by which they are to be paid have been determined through arm’s length negotiations between the parties and that such fees and methods are reasonable and appropriate notwithstanding whether and to what extent any of the Universal Display Patents have or are in the future issued, expired, invalidated, modified or limited in any manner in any particular country in which Licensed Products are made, sold or used, and notwithstanding the actual number and/or types of License Products SMD may sell or make during the Term of this Agreement.
Below is a transcript of actually exchange.
Sidney Rosenblatt – Chief Financial Officer
Brian Lee – Goldman Sachs
Universal Display Corporation (OLED) UBS Global Technology Conference (Transcript) November 14, 2013 12:00 PM ET
Brian Lee – Goldman Sachs
Okay. That’s good segue into I guess a topic that everyone cares about for you guys on IP and patents, a lot of focus right now on the November 21 or 22 [oral] hearing in Europe. Can you remind us what’s being challenged, what the status of that case has been to-date and then to the extent that you can talk to your base case for what you think the outcome could be?
That is EPO238 and it is a patent that there was a prior hearing where the organometallic part was upheld and the osmium part in the hearing we’ve said, we will take out and that will be part of another divisional patent that have. The parties who brought the opposition up, challenged the opinion. And the appeal is on the 21st and 22nd. As we have always said, we expect the outcome to be positive. And simply also have said though that the outcome of anyone patent decision in any single jurisdiction is not going to affect our ability to license and not affect our existing agreements. We’ve got 3,000 patents issued in pending worldwide. We’re talking about one patent in Europe that has a number of patents that are above it and a number of other patents you would not be able to make a phosphorescent device just by this patent being completely invalidated because there is a number of other patents and you have to make and sell it in Europe. So, and within our Samsung contract whether patents get invalidated or opposed or challenged does not affect our Samsung agreement. And I know there has been a lot of chatter out there that says Samsung is not going to pay them and just hidden Samsung agreement. If you actually go to the SEC website of the redacted version which has pricing and things like that, you go to Section 4.2 of that and if you read it, it says this agreement is not invalidated for any reason including losing of patents or oppositions or challenges. So it’s not going to impact our Samsung agreement. And if somehow the outcome is negative to us, there are still some channels to appeal it. And we will continue to do that.