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InterDigital's huge patent mountain may come to market

IPR giant is exploring strategic options, including sale, as Nortel auction highlights strong value of LTE patent holdings


Published: 20 July, 2011

READ MORE: M&A | InterDigital | Patents/IPR | LTE

Hard on the heels of the auction of Nortel's massive store of patents, another IPR treasure trove could come to the market, perhaps giving Google another chance to shore up the position of Android against attacks from Apple, Oracle and Microsoft. InterDigital said this week that it planned to "explore its strategic options", including the possibility of putting itself or some of its patents up for sale.

This highlights the rising value that is attached to wireless patents, which not only offer licensing revenues to their owners, but help protect them from litigation and shift the balance of power in key technologies. This has been very clear in the spate of lawsuits against various Android players, seeking to rob the OS of its low cost advantage and create fear among potential adopters. InterDigital has a huge IPR position in the mobile world, being one of the major patent holders in 3G and an arsenal of about 8,800 patents (even more than Nortel's 6,000 and many in similar areas). It also has a further 10,000 patent applications in process around the world and numbers all the handset majors among its licensees.

In a statement, Terry Clontz, chairman of InterDigital's board, said: "Over the past year we have seen the value of intellectual property rise substantially as major players in the mobile industry increasingly understand the strategic and economic value of this type of asset." The company retained Evercore Partners and Barclays Capital as its financial advisers.

In January, ZTE published an analysis of various IPR databases, which rated InterDigital as the leading holder of essential patents in LTE, with its Patent Holdings arm controlling 13% and its Technology unit 11%. After that came Qualcomm with 13%, Nokia and Samsung on 9% each, Ericsson and Huawei on 8%, ZTE on 7%. LG on 6%, and NTT DoCoMo on 5%. A different study by Informa also placed InterDigital in the top three, along with Qualcomm and Samsung, and closely followed by Huawei (though Ericsson itself claims the lead position in essential patents). In W-CDMA, Qualcomm, Nokia, Ericsson and InterDigital were dominant.

Whatever the precise rankings, it is clear that InterDigital has a major position in LTE, and one which, in the current situation, is vendor neutral. Should that pass to a manufacturer, it could create all kinds of shifts in the balance - towards China, if Huawei or ZTE stepped in; towards Google, if it snapped up the IPR to support Android devices; or to shore up the existing giants like Qualcomm, Nokia, Ericsson or Microsoft. It could also be a way for Apple to strengthen its hand in wireless essential IPR, where it is far weaker than in software or device patents, as its defeat in its patents with Nokia demonstrated.

The Nortel auction and intensifying IPR battles in the handset world are clearly grabbing boardroom and market attention. According to Reuters, the value of InterDigital's stock has increased by 26%, adding $500m to its market value, on the basis of its new plan and the $4.5bn sum paid for Nortel's assets (which was more than the total spent on acquiring all its equipment businesses). The firm now has a market capitalization of nearly $2.5bn.

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