InterDigital acquires more than 21,000 global patent assets from Technicolor, which will more than double InterDigital’s current portfolio of 19,000 patent assets.
On Thursday, March 1st, Wilmington, DE-based mobile technology research and development firm InterDigital (NASDAQ:IDCC) announced that it had made a binding offer to purchase the patent licensing business of French media and entertainment firm Technicolor. InterDigital will pay $150 million in cash plus future considerations in a deal to quire the majority of the Technicolor patent portfolio, specifically including assests related to its mobile and video technologies.
The agreement between InterDigital and Technicolor will include the sale of substantially all of Technicolor’s patent portfolio, excluding certain mobile patents, a small number of patents for nascent technologies and some patents associated with patent pools. The agreement also covers Technicolor’s interest in the joint-licensing program with Sony in the fields of digital TVs and computer display monitors, as well as certain royalty-bearing contracts. A few contracts, notably those related to patent pools such as MPEG LA and HDMI, will be retained by Technicolor.
When the deal is completed, InterDigital will end up acquiring more than 21,000 global patent assets from Technicolor, more than doubling InterDigital’s current portfolio of 19,000 patent assets. This includes more than 2,500 Technicolor patents which cover video coding technologies. Along with the the $150 million up front cash payment, InterDigital will also give 42.5 percent of its future cash receipts in the consumer electronics field to Technicolor. InterDigital will keep all of its revenues from licensing activities in the mobile industry.
As part of this transaction, Technicolor and InterDigital will also enter into a perpetual grantback licensing agreement, which will give Technicolor freedom to operate its remaining businesses and benefit from existing and future patents.
The deal is expected to close by mid-2018 and expand InterDigital’s footprint in mobile devices. The new licensing operations also gives the American R&D firm new opportunities to access consumers with home electronics products such as set-top boxes and video streaming devices. As part of the deal, InterDigital will assume Technicolor’s role in that company’s joint licensing agreement, becoming the exclusive licensing agent for display technologies in that joint venture. In return for selling off its patent portfolio to InterDigital, Technicolor is granted a perpetual license for all of the patent assets acquired in the deal by InterDigital.
In a press release, InterDigital President and CEO William J. Merritt noted that the collaboration between his company and Technicolor was expected to produce strong results for both firms.
“Technicolor has long been a world-leading research contributor in key technology areas; there is no one like them in video technologies. For InterDigital’s mobile device customers, the combination will mean greater value, and a broader range of technologies that can form the basis for partnership, collaboration, and deeper, more productive relationships. The transaction also rapidly expands our addressable markets.”
Technicolor CEO Frederic Rose also added that the deal would help his company focus on their core operating business while InterDigital puts its focus on the licensing operations. “As a focused, R&D-backed licensing business with a strong industry reputation, InterDigital is well positioned to unlock the potential of our strong intellectual property and innovation,” Rose said.
In late February, InterDigital released its earnings report both for the fourth quarter of 2017 as well as its full year earnings. Fourth quarter revenue at the company saw a year-over-year increase in recurring revenue from $93.6 million in 2016’s fourth quarter up to $99.1 million in the recent quarter. InterDigital reported that this increase in recurring revenue, which includes current patent royalties and technology solutions revenues, was driven in large part by a patent license agreement signed with Korean tech developer LG Electronics during that quarter. However, the company has suffered a sizable year-over-year decrease in past patent royalties from $180.3 million in 2016’s fourth quarter down to $106.2 million in the most recent quarter. InterDigital remarked that the recent agreement with Technicolor is expected to drive shareholder value up in the months to come.
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10 comments so far.
Night WriterMarch 13, 2018 05:41 pm
>>do you hear the industry really complaining about IDCC as a troll despite its NPE status.
In general, yes I have heard this from in house attorneys at big corporations that have license deals with IDCC.
Night WriterMarch 13, 2018 05:39 pm
@8 Nothing you said is inconsistent with this basically being a deal to outsource the licensing to IDCC, which is impressive for IDCC that they are being trusted to monetize the portfolio by Technicolor. This means the licensing team at IDCC must be impressive. I wonder if there are claw backs if goals aren’t met?
So, IDCC doesn’t do FRAND. Huh. Interesting.
Still, IDCC is without question one of the companies that people had in mind when they wrote the AIA.
ValuationguyMarch 13, 2018 05:22 pm
None of what I related is insider info…as it is available publicly.
https://mpeg.chiariglione.org/standards/exploration/future-video-coding/n17054-results-joint-call-evidence-video-compression (Open the zip file to get the Word document report…).
Despite frequent litigation (required by the Ebay decision and the AIA scheme enabling efficient infringement)….IDCC is known for fairly licensing its patents. Only in certain cases where opponents THINK they can take advantage (ZTE in China soon after a federal judge irresponsibly miscalculated the rate Apple was paying for 2G patents as covering all 3G patents as well) do you hear the industry really complaining about IDCC as a troll despite its NPE status. The entire industry can’t impeach the contributions that Interdigital provides to EACH iteration of the global wireless standards.
Given Interdigital’s legal stance refusing any further FRAND commitments due to the one-sided changes to the Standards body rate policies (which imo violate anti-trust laws despite Obama’s DoJ’s pass of it)…scale is necessary to be taken seriously in an environment where contributions to a standard are now based on quantity of ‘essential’ patents rather than any measure of patent QUALITY….as a 9th Circuit federal judges in CA recently applied in a FRAND rate case based on % of declared essential patents owned by the patent owner.
As to your contention it is basically a licensing deal…you are incorrect. While there are important aspects which include the licensing deal….the bigger picture is the combined offering of Technicolor and IDCC separate codecs is STRONGER than each individually…since they are now a package deal where both codecs can conceivably be improved by the insights of the other’s engineers….further strengthening the business case for them to be accepted by the standards group. In such a case….BOTH parties benefit. In addition, Technicolor can ‘hide’ behind Interdigital’s previous stance against the standard body’s FRAND policy without openly opposing it.
Those who control the standards…controls the industry. (This is why so many competitors are attacking Qualcomm’s growing dominance in 5G technologies…on top of its already dominating tech in 3G/4G….and probably why Pres. Trump stepped in to nix any Broadcom acquisition of Qualcomm.)
Night WriterMarch 13, 2018 01:18 pm
This deal is basically a licensing deal. They are using ID to monetize their portfolio. What was it 43% of the license fees (so 50/50 after expenses).
Well, ValuationGuy, it sounds like you have a lot of inside information. I don’t think it is in-house attorneys, though. I think they use a couple of law firms.
>>nterdigital’s resilience is more due to the SIZE and STRENGTH of its patent portfolio (
Maybe, but I think that scale allows for a lot of sophistication and expending more capital to get a return. I think one thing I see is the big corporations that are serious about licensing keep a continuation pending, as an example.
angry dudeMarch 13, 2018 12:09 pm
ID is doing fine with their very many (mostly junk “software”) patents on DSP related tech and I can’t do anything at all with one fine patent on similar tech
Silicon Valley InventorMarch 13, 2018 11:32 am
I hasten to add they have an awful lot of lawyers on staff. They’re basically a company of attorneys and support staff for those attorneys. If I had an army of attorneys working full time to monetize my patent portfolio and figure out how to make them cover government regulated standards, I’d probably be doing ok.
ValuationguyMarch 13, 2018 09:51 am
I would also add that both Technicolor and Interdigital recently tested as the current best technical options by one of the Working groups for the upcoming H.266 video codecs to be included in 5G standards. This would be the follow-on standard to HEVC (H.265) which itself replaced MPEG 4.0 in 2016.
This initial testing revealed their codec’s resulted in 40-50% less bit rate due to better compression to support streaming 4K-16K resolution video.
My guess is that the merger is to combine their efforts to ensure both are accepted for standardization.
ValuationguyMarch 13, 2018 09:40 am
The AIA hurt Interdigital in multiple ways…..most specifically in the fact that despite holding some 7% of 2G, 3G, and 4G wireless essential patents (and soon to be more of 5G)…it has been unable to sign more than 60% of global wireless handset makers to a license. How would you like one piece of legislation (creating that biased abortion of a PTAB) providing justification for 40% of the market to ignore you…while the other 60% uses the very credible new threat of the PTAB to REDUCE the fair rates you should be charging for your portfolio?
Interdigital’s resilience is more due to the SIZE and STRENGTH of its patent portfolio (which was created almost entirely INHOUSE)….which is unmatched by most other NPE’s (except maybe Dolby labs). Without the AIA….IDCC would be worth double it current value.
Night WriterMarch 13, 2018 05:46 am
Article suggestion: do a fair sampling of the “trolls” before the AIA and now and see how they are doing. Some were hurt, but not all. Probably learn a lot about the patent ecosystem by doing this.
Night WriterMarch 13, 2018 05:44 am
> the American R&D firm
Actually, there is very little D at InterDigital (ID). ID was actually one of the prototypical “trolls” that the AIA was meant to rein in. But, looking at their income sheet, it doesn’t look like the AIA slowed ID much.
Probably this supports one of the things I’ve been saying that the AIA favors the more sophisticated applicants.