Paying to win: Arbitration decision boon to InterDigital
By:By CARL ROTENBERG, Times Herald Staff January 09, 2003
UPPER MERION - A binding arbitration decision in favor of InterDigital Communications Corp. late last year has clarified its 1996 "most favored licensee" contract with Samsung Electronics Co. Ltd. of Korea.
The American wireless technology company agreed seven years ago to license its UltraPhone telecommunications products and patents along with its Broadband Code Division Multiple Access air interface technology (B-CDMA) to Samsung for payments of more than $35 million.
The International Court of Arbitration decided Dec. 26 that Samsung's prior royalty credit of $18.7 million for the $35 million contract would be reduced to $6.7 million to account for royalties due on sales of licensed TDMA products sold through the end of 2001.
InterDigital will recognize $500,000 of the Samsung revenue in the last quarter of 2002, company officials said. The Upper Merion company expects to collect the remaining $6.7 million in revenues in the future from Samsung as a result of the arbitration decision.
The royalty dispute with Samsung started sometime after InterDigital signed a similar "most favored licensee" contract in 1999 with rival wireless manufacturer Nokia Corp., said William J. Merritt, the executive vice president and intellectual property/general patent counsel of InterDigital.
"The issue is resolved," said Merritt. "We know the terms under which we'll see revenue from Samsung.
"I'm happy with how the contract is positioned."
InterDigital alleged in its complaint that without the "most favored licensee" contract with Samsung, the Korean manufacturer would owe past due royalties of more than $100 million.
The company had total revenues in 2001 of $52.5 million with net losses of $19.4 million. Year-end figures for 2002 have not been released yet, said Guy Hicks, the spokesman for InterDigital. But the stock price advanced from $9 per share at the beginning of 2002 to $16.20 earlier this week.
The company has benefited from a steady stream of patent approvals in wireless technology. Between 1996 and 2001, the company had 116 patents approved in the U.S. In fact, Inc. magazine included InterDigitial in its "Innovation 50" list of America's 50 most inventive firms.
At the same time, InterDigital, with 300 workers worldwide, was granted more than 400 patent "families" around the world.
The company has also developed 2G and 3G standards that have been adopted by worldwide standards organizations. That has made it simpler for InterDigital to profit from its patents and to license its electronic innovations, Merritt said.
"We have created very fundamental innovations," he said.
Carl Rotenberg can be reached at crotenberg@timesherald.com or 610-272-2500, ext. 350
