InterDigital, Bill Merritt, CEO: What to expect in 2014

Rory Moore:Hello, everyone. This afternoon, at CES 2014, this is Rory Moore, CEO of CommNexus, here with the CEO of InterDigital, Bill Merritt.

And, Bill, you’ve been going to this show as long as anybody. You traveled the world going to some of these shows. And we were talking earlier about industry sectors that have been talked about over the years, but they weren’t quite ready; the industry wasn’t ready for them, the technology wasn’t there, the cost of silicon wasn’t there, the development.

So, let’s talk about some areas that you’re excited about, where InterDigital can enable these areas to grow and be important sectors.

Bill Merritt:Great. We’ll start with healthcare. Terrific.

Well, I think that, you know, you’re absolutely right. I think the wireless opportunities continue to be there. They’re different than they were, years ago. It used to be all about the handset, which was a talking device. Then it became all about the smartphones, and tablets, and things like that. But they were basically cellular devices.

And as the networks have built out, right now, you have a whole new opportunity. So, one of the big things at this year’s show is sensors, right? So, why are sensors so exciting now? Because the networks are finally there to support them. And I’ve said before, you had spotty networks or inefficient networks.

Now you have pervasive networks, and cellular Wi-Fi, and a whole bunch of other things, which now make the sensors’ connectivity capability so much better, and then the technology for the sensors themselves are so much better.

And for us, it’s a great opportunity, because we’ve been working on machine-to-machine technology, which is basically, you know, internet of things - connecting everything to everything, every person to every person - and really taking all of those wireless networks that are out there, and using them very efficiently to connect up all these things.

And I think it’s going to create two great opportunities. So, healthcare is a great opportunity, right, because now people who before had to stay in the hospital to be monitored, now they can go home. And people always do much better at home getting better than they do in the hospital, right?

It creates other opportunities, because the amount of data that will be created in exchange through wireless health - if people can then begin to mine that data, it’s just like - you think about all the things that Google’s been able to do with advertising. I think it’s not so much - the value isn’t so much in them giving you a position on Google Maps; it’s knowing where you’re going, why you’re going, and creating that database that they can then access to give you better information the next time you’re going to do something.

Wireless also can be the same thing. You can create this river of data for medical purposes. That could enable much better, more efficient services, and much better care for folks.

So, it’s one of many areas, and I think that’s, to me, the exciting thing about sensor technology. It’s not so much connecting one person to another; it’s creating an ocean of information now that can be mined and used for all sorts of purposes.

And the networks that we’re helping to create at InterDigital will drive that. So, very exciting for me. I think that’s the number one thing I’ve seen here this year.

Rory Moore:You know, as an entrepreneur myself, it’s very difficult for a startup to get a foothold in an area, especially when the cost of capital is so much, and venture capital is hard to raise. So, if you’re a startup - you want to be a chip company, you’ve got to have $200 million in the bank before you even begin.

But these new sectors, I think, will allow emerging companies. The entry point cost is less. They don’t need cutting-edge facility, like you do if you’re making an app processor for a handset.

Bill Merritt:Right, absolutely. Because you think about, you know, some of the sensors out there can be just plain Bluetooth sensors. And if you’ve created a very efficient network, where it can glom onto - you know, you think about something that can glom onto everybody that walks by’s handset, just for the purposes of getting a signal out, you know, that could be a Bluetooth sensor. You can use Wi-Fi for so many things. And it’s so much cheaper.

So, you’re right, you know. It used to be, if you were going to be a chip company, especially in the cellular market, that is a - you know, we did it at InterDigital. It’s a massive investment, and, really, that massive investment was a huge barrier to entry for folks.

With these new applications - which will not be - you know, in some ways, they’ll be a niche, compared to maybe the global-wide, but there are still going to be huge opportunities for folks.

So, I think you’re right. I think there’s great opportunity for small companies to come in. They won’t be constrained in terms of needing, you know, access to the most expensive processing technology. They don’t need to do that. Instead, they can bring other types of innovation into those spaces, and be very valuable enterprises.

Rory Moore:So, you said a brute-force transistor size - it’ll come down to clever design, and software, and leverage of the network.

Bill Merritt:Absolutely, it will. I think you’re exactly right, and I think it’ll create a lot of opportunities for a lot of new companies. It also can create opportunities for companies that have struggled in the current environment, to kind of, you know, catch up with the Qualcomm, catch up with other folks.

They can redirect now, because you think about how pervasive, you know, wireless health could be. You know, you could make an entire business just supplying wireless health, right?

Rory Moore:Well, you’re also known as an IP company. And, you know, that’s an area that, for a startup, is hard to get - hard to find new IP, especially in areas that the large companies control, with thousands of patents. So, this also opens up - there might be opportunities for small emerging companies.

Bill Merritt:Absolutely. I think that, you know, typical with any type of, you know, investment in this case, if you come up with a really good idea, you have two options, right?

You have the option to drive that product into the market yourself, right? But with a good patent system available to you, you also have the ability to protect that technology, and you can either sell that particular technology to somebody else, or you could license it. You have a lot of avenues for bringing that technology into market.

And so, you know, patents have been critically important in this market. And I’ll take it back - not so much patents, it’s the incentive to innovate, and compensating folks for innovation has been so important in driving wireless. Think how far you and I have been coming to these shows - how far it has come in such a short period of time.

Why is that? Because people have believed that if you make the investment, it will be protected. And I think, you know, that will continue.

And so small companies - even if, at the end of the day, they’re not the ones with the product on the Best Buy shelf, the technology could be in that box.

Rory Moore:So, since you have basically a worldwide view of IP protection around the globe, do you feel like that the companies internationally are behaving more appropriately with IP, because of the fact that it’s such a global economy with electronics?

Bill Merritt:I think, like anyone, I think you got a mixed bag out there of, you know, good behaviors and not-so-good behavior. I think, you know, certainly, the market is so large that, a lot of times, the economics around licensing become so big - because we talk about an industry where you’re shipping out a billion and a half units. That’s a lot of money.

But I think, you know, generally, there continues to be a very high respect in most quarters for intellectual property. I think those folks believe that incentive out there, the fact that that creation of yours is going to be protected is why people make the investment.

You know, think about pharma. No one would ever invest in pharmaceuticals, but for that strong patent protection around pharma.

Bill Merritt:And I think people are beginning to better understand the huge investment that actually goes on in wireless. You know, it’s worse. Frankly, most other investments out there turn to how much money’s spent on standardization. And I think as people appreciate that, they’re going to understand. The reason people make that investment is because they’re protected.

Rory Moore:Last question - I don’t know if you’ve had a chance to walk much of the show, because you’ve been working. But has anything here just really blown you away?

Bill Merritt:So, I haven’t had too much time to walk around, so not yet, but there always are things that blow you away. I think, you know, the amazing thing to me is, you know, the capability of these devices. I think the consumers now have come to expect so much.

And you think about what we’re packing into a phone these days, and that’s probably 10 times the technology that was on all of the originals - Mercury, Gemini, and Apollo launch vehicles combined - into a device that’s this big, right? It’s remarkable.

So, I’ll take a walk around. I heard sensors are hot, and wearables are hot. So, we’ll see what’s out there.

InterDigital, Bill Merritt, CEO: What to expect in 2014

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