InterDigital Inc (IDCC)

[The Count]

Paid up license

IDCC agrees to accept a specific amount to cover all sales from the licencee for a specific time period. Part of the agreement is that the licencee pays the amount in full in advance. Therefore it is a "paid up" license because no further payments are required under the contract. IDCC recognizes the income on a straight line basis over the life of the contract. When they receive the upfront payment, the portion related to the future earnings is credited to a deferred revenue account. Each quarter IDCC debits the deferred revenue account and credits revenue.

I think your confusion is thinking that a paid up license means that there is no more revenue coming. It simply means IDCC was smart enough and had enough leverage to negotiate the prepayment. Revenue recognition does not necessarily match the timing of payments under accrual based accounting. Revenue is recognized when it is earned, not when it is received.