A big chunk of IDCC's short position is nothing more than a hedge against the IDCC convert. In a deal scenario the convert would be converted, the arbs. would end up "short against the box" (long and short identical securities), and their positions (long and short) would simply be cancelled with no market impact.
I realize that this goes over the heads of the IDCC faithful, but hey, there's a reason some of us make money doing this and some of us don't.
Yes - hedging with a short position against a convertible is standard practice. So what? I haven't seen anyone pumping the potential of a short squeeze. This is not a situation that will benefit from a short-squeeze.
If there is a buyout, the shorts will get caught but they will not push the price above the buyout price. They will simply cover their position slightly below the buyout price.
If there is no buyout, the price will drop and the shorts will either cover and take their profit or hang in depending how they view the stock price going forward.
As usual, you use a non-event to try and make yourself look smart. And as usual, you end up looking stupid!