InterDigital Patent Acquisition Strategy Positions them a threat to Chinese Companies
Founded in 1972, InterDigital is a wireless communication research and development company with headquarters in Delaware, US. As a research company, it provides wireless and video technologies for mobile devices, networks, and services worldwide. InterDigital has had a big hand in 3G and 4G LTE SEPs and is heavily invested in 5G and IoT.
In brief, InterDigital’s business model mainly consists of filing and owning patents that they collect royalties on when the patented technology is implemented. Their key model is to own a significant number of SEPs. When products are manufactured based on said SEPs, the company enforces its patent rights and monetizes on it. This requires extensive litigation which is quite common in the telecom industry.
To give you an idea of how substantial this technology development and patent filing process is – the company roughly pays more than $100 million every year to their “patent administration and licensing” team which is one of the largest expenses that the company bears.
Apart from that, the company pays about $70 million every year to its “Development” team a big chunk of which goes to the engineers.
According to Seeking Alpha:
“If the company decides to cease business immediately and just monetize its existing patent portfolio and investments in research and development, then the existing research and patent portfolio will be valued at approximately $1.96 billion.”
In 2018 alone, InterDigital had revenue of $307.4 million and a portfolio of more than 40,000 U.S. and foreign issued patents and patent applications. This includes both the patents that they produce in house and the ones they acquire externally.
From the above chart, it may seem like the company is going if other metrics tell the other side of the story. Let take a look at them:
If you see their Net income which was at a loss in 2016-17, saw $o loss in 2018. Their shareholder’s equity and total equity also got increased by a good margin.
These metrics have an indirect correlation to its big patent portfolio. They have been doing the in-house research consistently but the company saw their biggest patent acquisition in 2018 when they acquire Technicolor patent portfolio.
To find the motive behind this we analyzed the patents acquired by Interdigital since 2018. So, without wasting any time let’s jump into it.
Interested in knowing which companies are leading 5G research? What companies like Samsung, Intel, Qualcomm, At&T are working on? We analyzed top 12 companies which are investing heavily in 5G research and have published our findings in this report which you can download from here:
Interdigital’s Major Patent Acquisitions in 2018-2019
In 2018, Interdigital’s major patent acquisition activity was the acquisition of Technicolor’s patent portfolio which consists of 21000+ patents. Besides, they have also made some deals with Panasonic, LG, and Kyocera Corporation.
In March 2018, InterDigital acquired Technicolor patent portfolio for $150 million. While the total number of patents acquired from Technicolor is more than 21000, USPTO reassignment shows a count of 4361 patents that have been assigned to Interdigital through Technicolor’s licensing arm, Thomson Licensing.
The company didn’t just stop at that and took another bite when they took hold of Technicolor’s Research & Innovation department in a second deal conducted in June of the same year. Now they have more than 300 engineers and researchers of Technicolor’s R&D departments who work for Interdigital.
Also, with this acquisition Interdigital entered into consumer home electronics, display technology, and video technology segments.
With a portfolio of more than 40,000 patents, Interdigital seems to be in a strong position in the technology industry.
Patents Acquired from Panasonic
This is not the first time when Interdigital acquired patents from Panasonic. In the last few years, we have noticed that Panasonic sold/licensed its patents to various NPEs. In 2016, Panasonic made deals with a range of companies varying from small and medium-sized sell-offs to big names like WiLAN, Conversant, Intertrust, and InterDigital. 2017 was majorly dominated by a single assignment sending over 200 US patents to Intellectual Ventures in March.
In 2016, Panasonic and Interdigital made their first deal where Interdigital was assigned 83 US patents. Again in 2019, 128 US patents were assigned to Interdigital by Panasonic.
Most of Panasonic patents cover the following technologies:
- Transmission of information-carrying signals
- Transmission of signals having been supplied in digital form, including data transmission
- Wireless Communication networks for selectively establishing one or a plurality of wireless communication links.
Interdigital – LG Electronics Licensing Deal
In 2017, InterDigital signed a multi-year, non-exclusive patent license deal with LG Electronics, a technology innovator in consumer electronics, mobile communications, and home appliances. The agreement covers LG’s 3G, 4G, and 5G unit products which were handed over to InterDigital in a patent assignment of 39 US patents.
William J. Merritt, President and Chief Executive Officer of InterDigital said: “We are very happy to have resolved our licensing dispute with LG on mutually agreeable terms and look forward to a successful relationship with LG going forward. This agreement with LG shows how our longstanding patent licensing framework and process can lead to effective, productive discussions and eventual resolution on a worldwide basis.”
Interdigital’s deal with Kyocera Corp
On April 4, 2018, InterDigital signed a multi-year patent license agreement with Kyocera Corporation, a Japanese multinational ceramics, and electronics manufacturer. The agreement consisting of 12 US patents, covers Kyocera’s terminal unit products designed to operate per WCDMA and LTE standards.
Top CPC Classification of Acquired US Patents
The table shows the CPC classifications of the US patents that InterDigital has acquired from 2018 to 2019.
The biggest box of CPC (G06F00030482) represents 77 US patents and the smallest CPC (H04W002806 ) represents 33 US patents. The patents of the top three CPC classifications originally belong to Technicolor. The 4th and 5th classification patents were filed by Interdigital itself showing their focused research on wireless communication.
Interdigital’s Future Plans: A Few Predictions
Interdigital Entrance in Consumer Electronics Segment
InterDigital mainly works in the field of wireless and what goes on inside mobile phones. It develops the technology and licenses it to players working on telecommunications. And now when they hold 21000 patents of Technicolor, which mostly belongs to the consumer electronics segment, we believe that the company is highly likely to enter the consumer electronics market to license these assets.
Interdigital’s love for Chinese Market
InterDigital is eyeing a permanent presence in China since it is one of the world’s most dynamic markets for smartphones and other consumer electronics companies.
InterDigital has shown a lot of interest in moving to China. In their 2018 annual report, the company quoted: “Companies headquartered in China currently comprise a substantial portion of the handset manufacturers that remain unlicensed to our patent portfolio. Our ability to license such manufacturers is, among other things, affected by the macroeconomic and geopolitical climate, as well as our business relationships and perceived reputation in China.”
Further, IAM-Media also stated, “While it (InterDigital) has been successful in recent years in signing new deals with several big global players, including Apple, LG, and Samsung, China probably represents the company’s biggest opportunity as several of that market’s biggest players remain unlicensed. Huawei is one notable exception after it signed a deal with InterDigital in 2016.”
All these facts show that purchasing Technicolor portfolio wasn’t a fluke, but a well-planned strategy by Interdigital which is planned to enable them to license their patents to the Chinese players.
Interdigital’s Emergence in the Visual Technologies
As Technicolor is a pioneer in video technologies, it is not surprising that Interdigital picked visual technologies as one of its core technologies to focus on. Using Technicolor patents and R&I departments, Interdigital is doing intense research on AI, Home Experience, Imaging Science, Immersive Rich media, etc.
Recently, its R&I team even showcased its immersive video technologies at the Inaugural IBC Showcase and returned with an award for Best in Show for the Digital Double technology.
For brevity’s sake, we are going to stop here. But a lot is going on within the company, and we are planning to cover more about it in our future articles. If you’d like to get access to all the super valuable insight-rich content as soon as it gets published, do subscribe to our insider list by clicking here.
Authored by: Oorja Pandya, Research Analyst, Market Research