InterDigital Inc (IDCC)

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From the 10K:
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 Interdigital (IDCC) 
 Patent Portfolio 
 As of 12/31/2002 
                                 2001           2002 
 .... 
 .... 
 US patents                       199            240 
 Foreign patents                  403            520 
 .... 
 US patent applications            NA            375 
 Foreign patent applications       NA           1443 
 .... 
 .... 
 

ITC’s patents have effective terms of up to 20 years from the date of the first application upon which the patent is based.

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....Intellectual property, in the form of patents, trademarks and copyrights, has long been a basic asset of commercial organizations, but it has traditionally received little attention from strategic decision makers. Over recent years, however, more and more technology-based companies are recognizing the vital role played by their intellectual property (IP). As the June 2002 edition of Forbes ASAP notes, "Until recently, intellectual property had been an arcane subject reserved for geeks and mad scientists. Today, IP is the currency of our new economy."

In their 2001 annual reports, companies such as IBM, Pfizer, Intel and Merck all refer specifically to the importance of intellectual property to their commercial success. These references are not mere lip service to a fashionable idea. Companies are becoming increasingly active in their management of intellectual property, and are exploiting its value through extensive licensing agreements. In difficult market conditions, the revenues generated by these agreements can provide a major boost to company profits. For example, in 2001 alone, IBM generated over $1.5 billion in revenue from licensing its intellectual property, following many years of increasing revenues from this source, as shown in the figure below.

(Chart source: Salomon Smith Barney, reported in Berman B. (ed)"Investing Wisely in Intellectual Property," Wiley, 2002)

Companies are also setting up incentive schemes to encourage their employees to become more proactive in patenting new inventions. One of the most famous of these schemes is Hewlett-Packard’s Invent campaign, under which HP inventors receive financial incentives for invention disclosures and granted patents. After launching this program, Hewlett-Packard doubled its number of patent applications between 1999 and 2001. Smaller companies have also introduced similar schemes.....

For example, InterDigital Communications has recently started to offer stock options to employees who produce patents. In the first six months of 2002, InterDigital was granted almost as many US patents as it had been in the whole of 2001......

http://www.chiresearch.com/about/newsletter/nov02.php3

More on CHI Research.....

.........Yes, many investors have long hazarded guesses about how key patents might pay off. But CHI Research, a consulting boutique in Haddon Heights, N.J., is pioneering a strictly quantitative method. CHI got started in 1968 reviewing patents for the National Science Foundation. It later nabbed corporate clients and, in 2000, branched out to Wall Street with a pricey stock-evaluation service it calls Investor Tech-Line. CHI each month examines nearly 400 companies with strong patent activity, ranking them on investment potential.

Far more important than just the number of patents a company holds, or even how many it is adding, are a battery of more subtle indicators. At the core of CHI's system is something it calls "citation impact." This is a measure of how often a patent is cited by later patent applications and, by extension, its importance. At the same time, CHI checks how many references a patent makes to scientific papers, as opposed to earlier patents. Its hunch is that patents flowing out of academic work are closer to basic science and likely more valuable. The firm also measures what it calls "technology cycle time," or the median age of patents cited in an application. Citing more recent patents can indicate a company is dealing in fresher technologies, with the possibility of greater future profit.

Tests of these theories, first reported in a 1999 paper published in the Financial Analysts Journal and later by CHI itself, are intriguing. CHI's back-test over the 1990-99 period found its picks outperformed the Nasdaq Composite Index in 7 of 10 years and the Standard & Poor's 500-stock index in 8 of 10.

Investor Tech-Line, for which CHI last year received its own patent (you can view it at www.chiresearch.com), is slowly drawing the attention of institutional investors. Christopher Rowane, manager of the $60 million Huntington Mid Corp America Fund, attributes much of the fund's outperformance since its start a year ago--a 4.5% gain, vs. a 2.6% loss for its average midcap rival--to relying on patent research for a first cut through the clutter of stocks....

http://www.chiresearch.com/about/newsletter/nov02.php3