Samsung Inks $500M Wireless Patent Deal With InterDigital

Some more closure in the ongoing, foot-dragging world of patent infringement, at a very lucrative price: Samsung and InterDigital have signed a patent license agreement and dropped all litigation, active and pending, against each other. They have not released the terms of the deal but from what I understand the deal is worth just under $500 million (I’ll explain some of the math below).

InterDigital, you may recall, filed a suit in January 2013 against Samsung, along with Huawei, Nokia and ZTE in the U.S., at the International Trade Commission, asking for import bans on products that InterDigital claimed violated its patents. That suit came in the wake of a previous agreement with Samsung expiring the month before, in December 2012.

Samsung, the world’s biggest handset maker in terms of volumes both of basic phones and smartphones, was the key fish for InterDigital to land in that collective dispute. It seems like last year, resolution and licensing were the direction that things were moving between the two parties; now they are complete.

InterDigital is no stranger to patent infringement processes: the company first signed on Apple as a licensee covering the iPhone back in 2007, inked before the company had started selling its first device. Interestingly, that deal is up for renewal this month.

It also works with BlackBerry (a deal that was extended last year to include 4G).

Samsung and InterDigital are not giving details of the financial terms of the deal, although we understand that it covers devices dating from January 2013 through to 2017. “The royalty-bearing license agreement sets forth terms covering the sale by Samsung of 3G, 4G and certain future generation wireless products,” InterDigital notes in a statement on the news.

As a point of comparison for how much a company like InterDigital might earn in such agreements, back in 2007 it was thought that its Apple deal was worth around $56 million, in what was a fixed-fee deal, made when no one had any inkling of just how well the iPhone would do and the other products (namely, the iPad) that would come in its wake.

Fast forward to this year: On May 21, when InterDigital gave revenue guidance of $65-72 million, that just today they have revised up to $172 million – $210 million, they also noted recurring revenue expectations of between $72 million to $80 million. Subtracting its earlier recurring revenue guidance, you get a range of $17 million – $25 million. On top of that, it notes revenues from past sales of  $100 million to $130 million. If you take the $17 million – $25 million range, and then multiply it by 15 quarters (covering up to 2017) and add the past sales, this is how you get to around half a billion.

On the other side of the story, InterDigital has in the past reportedly been weighed up as a potential acquisition target by none other than Apple, as well as Qualcomm, a rationale that makes sense if you consider what kinds of licensing fees it may be collecting as a separate entity.

“We are very happy to have resolved the licensing dispute with Samsung on mutually agreeable terms. This agreement with Samsung shows how our longstanding patent licensing framework and process can lead to effective, productive discussions and eventual resolution on fair and reasonable terms,” William J. Merritt, president and CEO of InterDigital said in a statement.

As for the licensing deal with Apple that expires this month, it’s not clear that the new agreement will be out quickly: it took from the end of December 2012 up to now to iron out the deal with Samsung, and in the case of Apple it will also see the companies widening its provisions to cover 4G devices as well as tablets.

InterDigital has some 21,000 patents in its library, and employs a team of engineers to work on developing more. For now, none of them are used in direct product deployments from InterDigital itself.