02-28-2019, 12:22 PM
(02-28-2019, 11:34 AM)fenders53 Wrote: Thanks Otter. IMO step 3 is when it becomes too confusing for the typical investor to have a meaningful understanding of what this does to the investment thesis.
Not my intent to derail this away from QCOM, but tech investing is so tough to analyze, and tech + legal seemingly impossible.
If I am in PFE and it comes to light their drug is killing way too many people, it's clear to anyone this problem might be around for a decade or more of litigation. Same thing if I fail to immediately take action when the forklift I manufacture is defective. In technology, many of these fights become fairly meaningless with the passage of only a few years.
I view this sort of litigation as high-end patent trolling, rather than your typical liability set-up from defective drugs, medical devices, or products. The latter can drag on for up to a decade, but companies are typically pretty good at setting adequate reserves for those litigation contingencies. Big jury awards in the trial court are just an opening salvo to the appellate round, and for drug/medical device liability especially defense counsel have gotten very effective at attacking the necessary scientific linkage (such as specific causation to a reasonable degree of medical probability) between an injury and claimed damages. In many forums, they also have significant weapons available such as remittitur. Usually the initial jury award is, again, a starting point for a negotiated settlement during the appellate phase. Plaintiffs in those cases are also typically severely injured/ill individuals or their surviving families, and their attorneys are working on a contingency fee basis, so they have every motivation to stay in as long as it takes to effect some sort of meaningful recovery.
What's going on between Apple and QCOM is just the legal extension of a business dispute (does Apple need QCOM's tech more, or does QCOM need Apple's revenue stream more, and who has a better negotiating position to increase their share of the pie). Outside counsel handling the case are billing $1,000+/hr for each partner working the case, plus costs on top of that. Dragging these sorts of things out indefinitely doesn't really benefit anyone. At some point, clear-eyed attorneys on both sides can paint a basic picture for the executives--"here are the potential outcomes, the following outcomes may be the most likely to occur, and here are the risks/benefits associated with each outcome." It's then up to the executives to use that information to get the best deal they can for the business.