interdigital 
IDCC Executives attended the JPMorgan TMC conference to outline the company’s licensing model, growth goals and patent enforcement strategy, and highlight the company’s role in wireless, video compression and artificial intelligence research.
InterDigital CEO and President Liren Chen said the company was founded in 1972 and focuses on “fundamental research” in wireless, video compression and artificial intelligence. He said InterDigital develops technology, contributes to open standards and monetizes its patent portfolio through licensing agreements. Revenue from the license will be reinvested in research and development, he said.
Chen said InterDigital has licensed eight of the world’s top 10 smartphone vendors, including Apple, Samsung, Xiaomi, Oppo, Vivo, Honor, and Lenovo, which covers about 85% of the smartphone industry. He added that the company licenses its technology to consumer electronics vendors, TV manufacturers, PC manufacturers, and even the connected car industry.
Role of standards and patent portfolio
Chen explained that InterDigital’s business begins with innovation and expands through participation in standard-setting bodies such as 3GPP for mobile phone technology, IEEE for Wi-Fi, and MPEG for video. He said InterDigital engineers participate in and often lead standards development efforts, holding more than 110 leadership roles across standards bodies.
Chen said InterDigital is one of three companies in the world in 3GPP, which defined 5G and will define 6G, and the only U.S. company to hold multiple chairs among the organization’s 15 working groups. He said the company has two chair roles in 3GPP.
Chen said InterDigital’s technology could become part of the standard if it can demonstrate to peers that its solution is faster, more efficient, more reliable or has less latency than alternatives. If adopted as a standard, this patented technology could be used on billions of devices, creating licensing opportunities.
ARR target and growth areas
Rich Brzewski, InterDigital’s executive vice president, chief financial officer and treasurer, said the company aims to have annual recurring revenue of “more than $1 billion” by the end of 2020. He said InterDigital’s ARR is now about $560 million, up from about $400 million two years ago.
Brzewski said the company’s smartphone ARR goal is $500 million, and InterDigital is “very close to achieving it” after posting record levels of smartphone ARR in the first quarter of this year. He said consumer electronics and IoT account for $200 million of the company’s $1 billion ARR goal.
According to Brezski, the biggest growth opportunities are in video services, cloud, and content. InterDigital’s goal is to generate more than $300 million in ARR from video services by 2030, but he said the company currently has zero ARR in this category. He said the technology is already being developed and used in major subscription and advertising video-on-demand models, and now is the opportunity to “get compensated for its use.”
6G, AI, connected devices
Chen said InterDigital engineers have been working on 6G for several years, and the standard is expected to be completed by 2029, with broader adoption expected around 2030. He listed several anticipated pillars of 6G, including native AI, integrated sensing and communications, and non-terrestrial networks that combine cellular and satellite communications.
Chen said that just as current 5G mobile phones support previous generations, future 6G devices are also expected to continue supporting older technologies such as 4G and 5G. From a licensing perspective, this creates an opportunity to license multiple generations of technology, he said.
When it comes to connected devices, Chen said InterDigital’s technology is becoming more relevant as more products become wirelessly connected and video-driven. He cited potential use cases such as humanoid robots, industrial applications, smart agriculture, smart manufacturing, satellite connectivity, and self-driving cars.
Chen also talked about AI-based video compression, noting that InterDigital has acquired Deep Render, a London-based startup that has been developing software that uses AI to compress video signals. He said the current technology is too complex and remains proprietary, but InterDigital is working to simplify the technology and could contribute to the next generation of video codec standards. He cautioned that success was not guaranteed.
Chen said InterDigital is also researching machine-centric video codecs for wireless networks designed for AI-driven traffic patterns that include more uplink traffic, and for applications such as autonomous driving, where video is processed by computer systems rather than human viewers.
Patent enforcement and streaming litigation
Chen said InterDigital typically negotiates license agreements over long periods of time, using engineers, patent attorneys and sometimes outside lawyers to explain its technological contributions and patent coverage. He said contract terms are typically around five years, and the company considers a balance between long-term licenses and changes in market volume.
Regarding streaming, Chen said InterDigital has been negotiating with major companies for several years, but has not yet reached agreements with some companies. He said the company filed a multijurisdictional patent enforcement lawsuit against Disney last February after they could not agree on the value of the patents. He said five patents have gone to trial so far, two in Brazil and three in Germany, and that InterDigital has won in all final cases, and the court has issued preliminary injunctions and injunctions.
Chen said additional patents will be heard in the Unified Patent Courts of Germany, Europe and the United States, with a trial currently scheduled for February next year. He said the lawsuit is not the company’s end goal, but part of its efforts to secure licensing deals that reflect the value of its portfolio.
For Amazon, Chen said the situation is different because Amazon first sued InterDigital before a small license agreement on the device side expired. He said InterDigital filed a countersuit in November of last year, and that the Amazon issue lags behind the Disney lawsuit in terms of timing.
Cash flow and capital return
Brezski said InterDigital’s licensing revenue often comes in at “basically 100% gross margin” because the underlying research investments were made several years ago. As a result, he said, the increase in revenue can help improve margins because there are typically no additional costs when licensing technology the company already uses.
Brezski said cash is a strategic asset for InterDigital, especially since the company needs to enforce its rights against large companies. He said InterDigital has returned approximately $800 million to shareholders over the past five years while maintaining a strong balance sheet.
Chen concluded by stating that InterDigital is “very excited” about the opportunity and believes its value to the industry has been repeatedly proven.
About Interdigital IDCC
InterDigital, Inc is a mobile and video technology research and development company that designs and licenses innovative wireless communications and video compression. The company’s patent portfolio includes key standards across 3G, 4G LTE, and 5G wireless networks, as well as video and multimedia technologies. By focusing on creating foundational technologies rather than device manufacturing, InterDigital provides core intellectual property to smartphone manufacturers, chipset vendors, and carriers around the world.
The company’s main services include patent licensing, technology evaluation, and consulting.
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