InterDigital Inc (IDCC)

[rmarchma]

Jimlur you need to take both sentences from the 10K together and in conjunction with each other. Note my bold of the two sentences as follows:

..."In addition, as part of our development project with Nokia,... Nokia is licensed on a perpetual, royalty-free basis under patents developed in the project. Nokia is also licensed on the same basis with respect to patents technically necessary to implement TDD technology; however, such license does not extend to non-TDD functionality."

The "same basis" is "perpetual, royalty-free" from the preceeding sentence. Thus Nokia appears to get everything from us on a perpetual, royalty-free basis necessary for them to implement TDD products. Before the 10K came out, I had also gotten a somewhat similar response as you did from IR on this issue. For example, from a conversation with IR on Sept. 15, ‘01:

Q. Will we receive any royalty from Nokia on a “TDD-only” device once phase 2 begins?

A. We will definitely receive royalty from Nokia on multi-mode products that include TDD as one of the modes. Most everything that is TDD specific is contained/developed within the Nokia phase 1 agreement. We might receive some royalty from Nokia for some “system” patents that apply to TDD-only products, but not from TDD “specific” technology patents. Our TDD specific technology patents have been developed during Nokia phase 1 project period. Therefore, Nokia will probably pay us a lower royalty rate for TDD products than will other companies.

However this is indeed a "grey" area. Later response, after the 10K, was as follows:

Q. The 10K mentioned that Nokia got perpetual royalty-free use of TDD IPR developed during the P1 project period, but also any other of our patents technically necessary to implement TDD. Does this mean that Nokia does not pay royalty for our TDD system patents developed before P1 began, or any additional TDD patents that we might develop on a self-funded basis after the project period is over?

A. There was a general understanding with Nokia that they would receive our TDD IPR royalty-free. However, all the specifics of this general understanding are not finalized. Since we are still in negotiations with Nokia, there are no real firm answers yet.