InterDigital was one of the first companies to define digital cellular, and one of the earliest contributors to global standards that would come to define the industry. And we haven’t stopped: through multiple generations of wireless, all the way to 4G LTE and continuing now with 5G, InterDigital engineers have been at the heart of new global standardization efforts, and our innovations have been at the core of new capabilities.
Our engineering heritage is matched by our rigorous adherence to fair licensing practices. We understand that the combination of new wireless and video capabilities and the fair licensing of those capabilities across the industry have been key to the success of the global handset industry. We’ve now decided to compile and make broadly available our base rates for handsets, additional information about our IP position, and various other data that can help better convey our licensing approach.
As a publicly traded company, InterDigital has always provided more transparency on our licensing business than many companies in our industry. Through our transparency effort, we are not only gathering information that is already public and available and making it easy to access in one place, but are also providing a level of data that previously was only provided to prospective customers within the scope of licensing discussions. We feel that our approach aligns very well with the transparency we see in the technical development of the standards themselves, where innovations are presented in open forums to industry peers.
Licensing, like any business negotiation and agreement, involves some measure of confidentiality. Critics of licensing often seize upon this fact to accuse the industry of unfair practices. We believe that claim has no merit, and that our transparency efforts will continue to support the factual basis that underpins our IP position and handset licensing business.
We strongly believe that our licensing program meets our commitment to be prepared to offer licenses on fair, reasonable, and non-discriminatory (FRAND) terms. Please see this document for a review of our FRAND approach.
We’re not new at this. InterDigital has been involved in mobile patent licensing for over two decades. During this period, InterDigital has negotiated hundreds of agreements involving our patents, with manufacturers of all sizes, without the need for litigation. The basis of the rates in these agreements was purely the value of our patent portfolio, not any additional products or technologies with which it was bundled.
In addition to our licensing history, InterDigital has participated in arbitration and litigation proceedings that have also supported the fairness of our licensing program. Indeed, in any instance where disagreement remains over terms of our licenses, InterDigital is willing to have the issue resolved in neutral binding arbitration.
We believe that license rates for large SEP portfolios like InterDigital’s should be determined based upon the value of a portfolio as a whole, rather than looking at individual patents and assigning individual value.
The entire purpose of cellular, Wi-Fi, and video coding standards is to provide manufacturers with easy access to technology that enables them to address a global market. A leading standards-based portfolio like ours includes thousands of patents and applications, and is implemented by companies that design, develop, manufacture, distribute and sell a range of products to markets around the world. The concept of valuing individual patents related to specific geographies is completely contrary to the original intent of standards, and would result in an endless and extremely inefficient process that would make reaching agreement on licenses nearly impossible.
In addition, since research is ongoing, technology standards and our portfolio continuously evolve. A portfolio license is the simplest way to ensure that a licensee has full coverage for any technology that might find its way into the standard over time. As a result, portfolio licenses are done for the benefit of both the licensor and the licensee. For the purposes of simplicity and convenience, InterDigital recommends a license to cover all or multiple of the relevant standards, but does not obligate licensees to do so.
Given our contributions, we feel our rates represent a very fair value for the key standards research that we perform for the benefit of all industry participants. However, we understand that we and a licensee may disagree on the specific terms of a license.
In those cases, we feel the solution is simple: refer the matter to neutral binding arbitration. InterDigital has utilized arbitration in the past. We believe the arbitration process is ideally suited to look at the totality of information related to the licensor’s portfolio and its licensing history, as well as all the information related to a licensee’s business (such as product mix, shipments, etc.), and determine fair rates. You can read a summary of our arbitration principles here.
The development of standardized wireless technology has had a transformative effect on the mobile industry and the lives of consumers. That development is the result of decades of competitive research and development, to bring innovations to every device. In so doing, standards have torn down barriers to entry, creating new opportunity for implementers. And we’re just at the start: wireless technology, which has transformed the lives of people, stands poised to revolutionize industries.
But as the industry has grown, so has the scope of the conflicts around licensing. We hope greater transparency, a call to neutral arbitration to resolve conflicts, and a common-sense approach to licensing that balances the interests of R&D contributors and implementers is essential in ensuring the continued good health and continued growth of our industry.
In conclusion, InterDigital believes in a balanced and pragmatic approach to FRAND licensing, one that focuses on increased transparency and finding a middle ground that will appropriately compensate innovators while meeting the needs of implementers and allow the process for standards development in the wireless communications area to continue to drive the innovation that has fueled our industry.