Okay, it’s time to play "Guess the Samsung Settlement Amount"

WARNING: My guess may be considered conservative at best and negative at worst, but I’ve explained my reasoning. By all means feel free to come up with your own reasoning. I usually like to set my expectations low and then be pleasantly surprised. If you think I’m all wet, then just remember the $20M+ amounts that were guessed before we found out that LG only paid $1.6M. It would have been much better for the share price if the general consensus for the LG (or any other) settlement was around $2M and then to find out it was actually $10M, yes? It’s the same situation this time IMO, so it should pay to be conservative.

One other point to remember before I proceed... under the heading of managing our own expectations. That it is most likely the settlement will be covered by an NDA and that EDIG’s PR announcing the final settlement will not even include Samsung’s name, much less any financial details. There are other ways that they could communicate the relative success/value of the settlement of course, but I’d look for the PR to be pretty vanilla and compare closely to what we’ve seen in the past. Again, let’s allow management an opportunity to surprise us.

First, my assumptions:

1. When calculating damages, we can use the full retail price of the product (since I believe that is the current precedent used in patent cases - although it is one of the changes that has been considered in recent attempts at patent reform legislation... that is, to only be able to consider the value that the patent adds to the product rather than the product's total value as it is today).

2. That it is not unreasonable to assume that at least 50 Samsung products would have remained in-play, that most or a large percentage of those products would or could have been cell phones, and that an average retail price for those products would/could therefore have been about $200 (some more and some less).

3. That 5 years is a fair time horizon for the purposes of leveling things out. We have to consider that many of these products will have a short lifespan (maybe 2 years or less), but that one infringing product was probably replaced by another, and will again be replaced by another in the future. We have to somehow account for such overlap and future sales. To offset this, I’ve made my unit numbers pretty conservative since I think that many products will have sold way more than 100,000 units/year even in their short lifespans and even in just the U.S.

Now let's consider the following:

50 infringing products @ $200/ea. = 50 x $200 = $10,000 for each one of the products that are sold.

$10,000 x 100,000 units (of each product) sold = $1 billion

$1 billion x 5 years = $5 billion in total sales from infringing products.

The above is very simplistic but I don't think unreasonable. There are many ways I'm sure to estimate the number and value of infringing products that were sold. I doubt that even Samsung would be able to (or would want to) provide perfectly accurate sales figures (and even if they said they did, how would you really know they were accurate?). Anyway, Samsung and DM would have to resort to some calculation even if only to account for future sales. I'm just saying from my simple math to assume a total $5 billion dollar figure with respect to EDIG’s IP.

So $5 billion. Let's say DM would ask for just 1% of that or $50M. I can't remember exactly when or where I read, but it does seem like a fairly standard and reasonable expectation in such a case as ours. This is an amount I think we might have gotten (based on my assumptions) if DM had successfully won our case in court.

So now we’re at $50M... except that we settled. What now? Half of that? Maybe so if we were very, very lucky. Personally I’d have to say that it’s more likely that an early settlement meant just 1 tenth of 1 percent - or $5 million total.

That would still be much more than previous settlements, but far less than most people would like to expect. Consider that we don't know whether Samsung had EVER offered a settlement to DM previously... as we'd like to think they did and then DM said "no way" and pushed for a higher amount. We have no idea how the agreement came about; but since they settled not on the courthouse steps but a full 6 months before even the Markman hearing, I tend to think it was a quick and easy decision for DM to accept the offer whatever it was - especially if they already had other infringers identified and were waiting to move forward with round two pending a conclusion with Samsung.

So $5M is my guess. That should keep people busy during the rest of the weekend. I eagerly await the digEcor judgment next, followed by the settlement PR, then hopefully more infringement filings before October 1st so I can still claim victory on my (and silversurfer’s) earlier prediction. GLTA.

- Sinkman