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Telecommunications equipment industry

InterDigital Announces Final Award in Arbitration Proceedings with Nokia

Strategic Insights

— 2 min read

InterDigital Communications Corporation, a leading designer, developer, and provider of wireless technology and product platforms, announced that the Arbitral Tribunal has delivered its Final Award in the arbitration proceeding between InterDigital, InterDigital Technology Corporation, and Nokia Corporation. The Tribunal established royalty rates applicable to Nokia's sales of covered products for the period from January 1, 2002, through December 31, 2006. InterDigital estimates that Nokia's royalty obligations for covered infrastructure and handset sales from January 1, 2002, through December 31, 2003, will be approximately $112 million. For the period from January 1, 2004, through December 31, 2006, InterDigital estimates that royalty obligations will be in the range of $120 million to $140 million, depending on whether Nokia avails itself of a prepayment option.

Key Takeaways:

  • The Arbitral Tribunal established royalty rates for Nokia's sales of covered products for the period from January 1, 2002, through December 31, 2006, reflecting Nokia's leading market position.
  • InterDigital estimates that Nokia's royalty obligations for covered infrastructure and handset sales from January 1, 2002, through December 31, 2003, will be approximately $112 million.
  • For the period from January 1, 2004, through December 31, 2006, InterDigital estimates that royalty obligations will be in the range of $120 million to $140 million, depending on whether Nokia avails itself of a prepayment option.
  • The Final Award relates to Nokia's royalty obligations on its worldwide sales of 2G GSM/TDMA and 2.5G GSM/GPRS/EDGE products under its existing patent license agreement with InterDigital Technology Corporation.
  • InterDigital expects to recognize revenue associated with the Final Award once all criteria for revenue recognition have been met.
  • The company is optimistic that Nokia will comply with its contractual requirements and pay past and future amounts owed, but has filed an action against Nokia in the U.S. District Court for the Southern District of New York to enforce the ICC's decision.
  • InterDigital is currently reviewing the impact of the Final Award on the Samsung patent license agreement, which was exercised by Samsung in 2002, electing to have its royalty obligations defined by the terms of the Nokia Patent License Agreement.
  • The company will host a conference call on July 5, 2005, to discuss the Final Award and its impact on the Company.

Statistics:

  • Estimated royalty obligations for covered infrastructure and handset sales from January 1, 2002, through December 31, 2003: $112 million.
  • Estimated royalty obligations for covered infrastructure and handset sales from January 1, 2004, through December 31, 2006: $120 million to $140 million.
  • Number of employees at InterDigital: not specified.
  • Revenue recognition criteria: not specified.
  • Number of patent license agreements: 2 (Nokia and Samsung).
  • Number of arbitration proceedings: 2 (Nokia and Samsung).

Sources:

  • InterDigital Communications Corporation press release (exact citation not provided).
  • International Chamber of Commerce (ICC) (exact citation not provided).
  • InterDigital Technology Corporation (exact citation not provided).
  • Nokia Corporation (exact citation not provided).
  • U.S. District Court for the Southern District of New York (exact citation not provided).

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