Following news of InterDigital’s proposed acquisition of the Technicolor patent licensing business, IAM delves into each company’s patent holdings in a special analysis piece. With data and insight provided exclusively to us by leading IP analytic services, we explore the key strengths of each portfolio and the compatibility between the two; we also provide a summary of the most important IP-related events for both companies over the last five years.
Patent portfolio breakdown
Using data from ktMINE, below is an overview of the InterDigital and Technicolor portfolios – by number of US and worldwide patent grants and top five patent classifications – as of 8th March.
It is should be noted that in its press release, InterDigital provides its own figures for both its own and Technicolor’s portfolios: respectively, 21,000 and 19,000 patents and applications. The data in the table below reports only granted patents currently in force. Although ktMINE’s database accounts for a larger subset of both granted patents and applications than the figures above, Megan Rourke, data operations manager at ktMINE, explains, such discrepancy is due to a difference in how the patent assets are counted when considering granted patents, patent applications, or abandoned patents, among other factors, such as where an entity maintains and houses certain patent assets.
Technicolor’s portfolio (with Thomson Licensing as a subsidiary):
IP analytics platform Relecura conducted an exclusive analysis for IAM of both companies’ portfolios on 7th March. Individual taxonomies were created for each portfolio and a ‘Portfolio Fit’ table was constructed, comparing the two portfolios based on the composite taxonomy. Additionally, a comparison of each company’s key technologies and a breakdown of the quality of their patents was provided. While the above data from ktMINE focuses on patent grants, Relecura’s figures refer to patent applications currently in force. The full report can be seen here.
As noted by Relecura, the two portfolios “complement each other very well”, as InterDigital has used the acquisition to fill gaps in its own holdings to extend its technology coverage. The analysis also points out that both portfolios have “a fair number of high quality patents in their key focus areas”, based on Relecura’s ‘Star Rating’ (those that score a 3 or more out of 5 are considered to be high quality). Examples of factors that affect this rating include the number of forward citations, number of backward citations, number of years until expiry, prosecution time, number of claims, length of the specification, number of family members and geographical coverage.
Martin Bijman, director, IP products at patent services and technology intelligence company TechInsights, agrees about the good fit: “Combining the patent portfolios of InterDigital (communications connectivity) and Technicolor (digital experience) results in a patent landscape which is mostly complementary, with some overlap in networking and other base technologies in transmission.”
He adds: “InterDigital’s patents are represented in the networking and wireless transmission area, with some patents in radio and antenna, particularly around beam management. Technicolor has a more diversified technology base that includes DTV and cable reception, content processing of image, motion, audio/video, and streaming, content presentation to users, and also includes networking and messaging to mobile platform.”
TechInsights also provided IAM a breakdown of how each portfolio has grown over the last two decades:
“In terms of their portfolio management, InterDigital has pursued their innovations globally and with many continuations, whereas Technicolor has more than twice as many families, and has been much more active with new applications in the last five years,” Bijman states.
Key storylines in the last five years
Blackberry (at the time known as Research In Motion) and InterDigital extended their existing licensing agreement to cover 4G LTE technology at the start of January. Simultaneously, InterDigital filed an International Trade Commission (ITC) complaint against Samsung, Nokia, Huawei and ZTE, calling for import bans on their hardware. It filed its ITC complaint while simultaneously initiating litigation in the District Court for Delaware.
Immediately after, it was announced that Sony and InterDigital had teamed up to launch Convida Wireless, a joint venture focusing on driving research in the developing field of machine-to-machine wireless communications. Additionally, judges ruled in January that InterDigital’s patent licensing activities satisfied the ‘domestic industry’ requirement under Section 337 of the Tariff Act.
Also in early January, a transfer of 138 assets – namely wireless technologies – from InterDigital to Intel took place, following a deal in 2012 that saw Intel buy 1,700 of the former’s patents and related rights for $375 million in cash.
A press release issued in June announced that Boris Teksler, the former head of patent licensing and strategy at Apple, was set to join Technicolor to run its technology group, including the company’s IP and licensing function. Teksler replaced IP Hall of Famer Béatrix de Russé – a surprising move, as we previously argued, given de Russé’s prior achievements in the licensing space for Technicolor.
The month after, InterDigital saw its share price drop by 20% after it lost the first round in its 3G patent infringement case against Huawei, Nokia and ZTE at the ITC.
The Guangdong Higher People’s Court found in October that patent licensing demands InterDigital made of Huawei constituted an abuse of its market position under Chinese anti-monopoly law. It was subsequently reported that China’s National Development and Reform Commission (NDRC) had begun investigating InterDigital for violation of anti-monopoly law concerning its royalty rates. It was alleged that the company had charged Chinese telecoms firms higher royalty rates than it received from Apple and Samsung, and used unfair trade practices to force Chinese companies to accept its offer. The company’s executives postponed any visits to the country due to threats of arrest.
In December, the ITC cleared Huawei, Nokia and ZTE, finding that the telecoms companies had not infringed on patents owned by InterDigital.
Right before the New Year, InterDigital and Huawei filed a stipulation to dismiss the pending Delaware district court action and entered into a “binding settlement agreement and agreement to arbitrate”.
In February, InterDigital agreed to work with Chinese authorities with the aim of ending investigation into the firm. The wireless technology company promised to end discriminatory licensing practices against Chinese firms. China would eventually suspend its investigation in May following the firm’s pledge.
Numbers released in June from the USPTO revealed that over the previous year InterDigital was granted 184 patents. In the same month, the wireless technology firm agreed on a multi-year, royalty-bearing licensing deal with Samsung worth an estimated $500 million. The agreement put an end to the ongoing dispute between the two companies at the ITC that was set to be decided on only days before the deal was announced. Following this, InterDigital started applying pressure on Apple for a similar deal – which it would eventually secure in 2016.
A week after the announcement of the Samsung deal, InterDigital revealed that it was doubling its quarterly dividend and launching a $300 million share buyback, as the company’s share price traded at a 52-week high.
In October, InterDigital secured a win in a jury verdict before the Delaware district court; it was found that three of its patents were valid and had been infringed by ZTE. The Chinese telecoms company would be cleared of infringement of a fourth patent, though, the following year.
The following month would see Technicolor sue its largest shareholder, private equity firm Vector Capital, to terminate the governance agreement between the two. This was the latest in a series of spats the pair had been engaging in since 2012.
As part of the ongoing dispute between Vector Capital and Technicolor over the latter’s technology licensing business, the private equity firm filed a lawsuit against Technicolor at the start of the year, claiming that the French media company had manipulated shareholder voting. Their long-running dispute finally came to a close two months later when they terminated both their governance agreement and their legal actions. Vector had wanted Technicolor to sell off its products business and concentrate on licensing, while the company’s board had been strongly opposed. Eventually, Vector gave its backing to Drive 2020, a strategy revolving around IP and product development working together, in addition to the unveiling of new patent licensing models.
In February, InterDigital lost another round in a patent dispute after the US Court of Appeals for the Federal Circuit upheld the previous ITC decision and ruled that ZTE and Nokia had not infringed on its patents.
The next month, an ITC judge ruled that Microsoft had infringed two of InterDigital’s patents covering wireless technology. The ITC would, in August, review the judge’s decision and instead find that these patents had not been infringed. However, right before that Microsoft filed an antitrust suit against InterDigital, claiming that the wireless technology firm had failed to fairly license its standards-essential patents.
Meanwhile, also in April, it was announced that Boris Teksler would be making the move from Technicolor to Unwired Planet as the NPE’s chief executive officer. Stéphane Rougeot, who was at the time the Technicolor’s chief financial officer, took over as the new head of the technology group.
In June, InterDigital entered into a settlement agreement with Arima, a Taiwanese mobile equipment manufacturer, with regard to an ongoing antitrust dispute around patent licensing.
Technicolor welcomed Arvin Patel – who was formerly the senior VP of IP and licensing at Rovi and, before that IBM’s global head of IP strategy – as its chief IP officer in September. Just shy of two years later, Patel would depart to join TiVo as its IP chief.
Barely half a year since his change of role, Stéphane Rougeot left Technicolor.
In early 2016, InterDigital attempted to stymie Microsoft’s antitrust suit, but a Delaware federal court denied its motion to dismiss in April. The Windows giant’s claims were found to be sufficient for the case to proceed.
Speaking exclusively to IAM in May, Arvin Patel pointed to a number of licensing deals Technicolor had closed in the first quarter of 2016 to demonstrate the firm’s confidence in its ability to generate value from patented technology. In particular, he noted that after a specific licensing deal related to the HEVC (high efficiency video coding) standard, the firm had decided not to participate in the HEVC Advance patent pool, opting instead to license out its relevant patents independently.
Technicolor showed a dramatic increase in income from licensing outside of its MPEG LA activities when it announced its financial results for the first half of the year. Its revenue increase had been driven mainly by large, non-exclusive deals in the video coding, digital TV and set-top box spaces.
Putting aside their differences, InterDigital and Huawei agreed on a multi-year patent licence agreement for 3G and 4G terminal unit products in September. In addition to Huawei’s transfer of patents to the wireless technology research company, the deal brought to a close the arbitration proceedings initiated back in 2013 and opened up a framework for discussions concerning joint research and development efforts. InterDigital’s particularly impressive Q3 results in 2016 was in large part due to its licensing deal with Huawei.
Also in September, InterDigital announced that it had joined Avanci, the recently launched licensing platform for cellular standards-essential technology for the Internet of Things (IoT).
At the close of the year, InterDigital announced that it had entered into a multi-year, royalty-bearing worldwide licence agreement with Apple. With deals in place with Huawei and Samsung as well, InterDigital now had agreements with three of the largest device makers in the market. These deals led to the company having an incredibly successful financial year: its revenues in 2016 rose by more than $200 million.
In the same month, InterDigital announced its acquisition of sensor motion technology company Hillcrest Labs, which owned more than 235 granted patents and pending applications.
The beginning of the year began poorly for Technicolor, which announced that it would achieve an Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of €565 million, which was a figure well below the €600-636 million that had been expected at the end of the third quarter. The day after the announcement, Technicolor’s share price fell by almost 20%. Its licensing division specifically, however, fared far better.
InterDigital announced in May that it had reached a settlement agreement with Microsoft, which resolved all ongoing disputes. The deal also saw both companies enter into a framework for future discussions concerning technology collaboration.
Following chief IP officer Arvin Patel’s departure from Technicolor in June, Deirde Leane was appointed as the French company’s chief intellectual property officer with immediate effect. Leane had joined Technicolor at the end of 2016 as its vice president of licensing.
While announcing its third quarter financial results in October, InterDigital stated that the Taiwan Fair Trade Commission (TFTC) had ended its four-year investigation of the company, having found no antitrust violations.
Near the end of the year, the Federal Circuit affirmed the Delaware jury’s 2014 verdict, in which it was found three of InterDigital’s patents had been infringed by particular ZTE wireless devices.
InterDigital signed another major multi-year patent licence agreement in early December – this time with LG Electronics. At around the same time, Technicolor told investors that it was negotiating a strategic transaction concerning its patent licensing business. As a result of this move, the French media company suspended all ongoing licence negotiations.
Technicolor’s full year 2017 financial results, released in late February, emphasised the firm’s continued difficulties, as revenue for the year dropped by 6.8% while Adjusted EBITDA fell by 17.2%.
It was announced at the beginning of this month that InterDigital would be acquiring Technicolor’s licensing business in a transaction valued at $475 million. The combined portfolio of approximately 40,000 granted patents and applications, according to the release, now represents one of the strongest in the technology industry.