InterDigital Inc (IDCC)

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NOVEMBER 25, 2008 InterDigital Settles Suits With Samsung
By SARA SILVERArticle


InterDigital Inc. and Samsung Electronics Co. settled a pair of long-running patent-infringement lawsuits Monday, on the eve of a U.S. International Trade Commission decision on whether to recommend banning imports of Samsung's high-speed cellphones.

Sprint Instinct made by Samsung
InterDigital has received $1.5 billion from its wireless patents, mostly from licensing fees and royalties. It has issued licenses covering technology in Apple Inc.'s iPhone and Research in Motion Ltd.'s BlackBerry devices.

But the company has struggled to sign up players such as Samsung, the world's second-biggest cellphone maker by sales, and Nokia Corp., the biggest, which it has also sued.

The case before the ITC covered a high-speed broadband technology called 3G used in Samsung's Blackjack II and Instinct handsets. Analysts believe that so-called smartphones will be the most resilient part of the global cellphone market, which is expected to contract next year.

"If Samsung wants to remain competitive where the cellphone industry is growing, it needs to use InterDigital's intellectual property," said Chris Colarik, portfolio manager at Glenmede Trust, a Philadelphia investment-management firm that holds shares in InterDigital. "At the 11th hour, it appears that they are not willing to risk losing the ability to sell their advanced cellphones in the U.S."

Samsung didn't respond to a request for comment.

Engineers who went on to found Qualcomm Inc. developed InterDigital's patents in the 1980s, when InterDigital set out to offer wireless telephony in rural areas. InterDigital never became a major player in telecom equipment but holds an array of patents for wireless technologies, and now makes semiconductors.

According to a statement issued late Monday, the Samsung settlement, which runs through 2012, also covers an earlier technology known as 2G, for which Samsung last year posted a $167 million bond. The companies didn't release the value of the settlement, which requires Samsung to choose one of two payment options within the next 45 days. Both companies have agreed to drop all litigation and arbitration once InterDigital receives its first payment.

Tom Carpenter, a telecom analyst at Hilliard Lyons who owns shares in InterDigital, estimates the value of Samsung's settlement at $400 million to $500 million over the next five years. Samsung sold 87 million 3G phones from 2004 through June 2008, while Nokia sold 142 million, according to IDC. The research firm projects that 3G phone sales will increase from 314 million this year to 721 million in 2012.

InterDigital last year filed a similar infringement case against Nokia, the largest maker of 3G phones. A judge is set to hear evidence in May 2009 and rule in August, with the full ITC ruling due by mid-December. InterDigital won a $253 million payment from Nokia in 2006.

Nokia declined to comment.

InterDigital shares were up 13% at $29 in after-hours trading, after jumping 24% to $25.68 on the Nasdaq Stock Market.
Write to Sara Silver at [e-mail]