QCOM 10-K says little about the likely outcome here
Here are the declared legal proceedings from QCOM's 10-K. I've shown just enough to indicate the complainant in each instance. The "possible but not probable" comment does not apply to the ParkerVision lawsuit individually - that guidance is in respect of QCOM's potential liability from these eleven actions as a group.
1. Tessera, Inc. v. QUALCOMM Incorporated
2. MicroUnity Systems Engineering, Inc. v. QUALCOMM Incorporated et al
3. MOSAID Technologies Incorporated v. Dell, Inc. et al
4. ParkerVision, Inc. v. QUALCOMM Incorporated
5. Icera Complaint to the European Commission
6. Korea Fair Trade Commission (KFTC) Complaint
7. Japan Fair Trade Commission (JFTC) Complaint
8. Securities and Exchange Commission (SEC) Formal Order of Private Investigation and Department of Justice (DOJ) Investigation
9. Unspecified - a pending lawsuit in which QCOM is named as co-defendant
10. Unspecified - a pending lawsuit in which QCOM is named as co-defendant
11. Unspecified - a pending lawsuit in which QCOM is named as co-defendant
"We will vigorously defend ourselves in the foregoing actions. However, litigation and investigations are inherently uncertain. Accordingly, we cannot predict the outcome of these matters. We have not recorded any accrual at September 30, 2012 for contingent losses associated with these matters based on our belief that losses, while possible, are not probable."
The guidance continues -
"We are engaged in numerous other legal actions not described above arising in the ordinary course of our business and, while there can be no assurance, we believe that the ultimate outcome of these actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows."
In my opinion the fact that the PRKR action is specifically named reflects only the possibility that patent infringement actions could result in higher production costs through additional license fees - whereas a lawsuit by a visitor to a QCOM facility who has slipped on a wet floor does not have the potential of resulting in a permanent increase in expense.
I do agree that there is significance in the fact that QCOM has mentioned the PRKR action in the 10-K for the twelve months ended September 30 2012 - whereas there was no reference to it in the 10-K for the twelve months ended September 30 2011. But I'm not at all sure that there is a favourable interpretation here. PRKR filed its initial complaint on July 20 2011. The fact that QCOM's initial reaction was that it simply didn't warrant a mention in the subsequent 10-K is not encouraging.
I suspect there may be some here who will claim that QCOM's decision not to mention the PRKR action in the initial 10-K was part of an elaborate bluff on their part. I would disagree with that interpretation - unless such a claim is supported by evidence that QCOM has adopted the same ploy with any of the numerous other patent infringement actions against them.
Companies such as QCOM don't use their SEC filings to play games. As a general rule, if they see the slightest possibility of an adverse development they warn the shareholders about it at the first opportunity. To do otherwise is to invite class actions.
For me, QCOM's initial assessment was that there is no realistic possibility the PRKR action could be successful. A year later, they see the chance of the action being successful as being high enough to meet the "better to be on the safe side" criterion.
What a bunch of #$%$. The statement in the 10-K says what it says. It doesn't mean that PV is going to win the lawsuit. It doesn't mean that PV is going to lose the lawsuit. It just means that of the scores of lawsuits that an $18 billion per year company is a party to (including many patent lawsuits) Q identified the PV lawsuit as one of 4 lawsuits where there it is "reasonably possible" that there could be a verdict awarding "substantial damages." This is the considered opinion of Q after consultation with its in-house and outside counsel, and after a substantial amount of discovery has been completed, including the submission of expert reports.
The shorts who are pooh-poohing this are whistling past the graveyard. The inclusion of this lawsuit in the 10-K is significant. However, for longs it is not a slam dunk- it just means that Q understands that this lawsuit is a dogfight in which it could get whacked for a lot of money. It doesn't mean that Q is not going to fight this suit like crazy.
Now if only the judge would get this Markman ruling out.......
"reasonably possible" is your wording not QCOM's. QCOM stated that an unfavorable result while possible was not probable. "While possible" means greater than a 0% probability so 1% or more. "not probable" means less than a 50% probability. So QCOM in reality is giving a range of 1%-49% of PRKR prevailing and being awarded significant damages and I suspect that QCOM, on advice of its lawyers believes the probability of an unfavorable outcome is far less tha 49%.
QCOM's legally stated view in the 10-K is certainly very different from that of many of the bulls on this board who do think it is a slam dunk for PRKR, that QCOM has no chance and it is only a matter of how high the damages will be. The professional shorts who most likely have had their own experts vet the case may not be as dumb as some of you think