In an era when lawsuits for patent infringement have repeatedly threatened to tear consumers away from their coveted mobile devices, InterDigital (NASDAQ:IDCC) and Research In Motion (NASDAQ:RIMM) nipped the problem in the bud, making sure that the latest BlackBerry devices keep flowing to consumers.
The companies announced yesterday that they've extended their license agreement through 2012, continuing Research In Motion's royalty payments to InterDigital on devices sold worldwide. The agreement was also expanded to include the faster, third-generation (3G) BlackBerry, which can download data and browse the Web at broadband speeds.
The two companies' decision to agree to terms before lawsuits started flying was a breath of fresh air for investors, and InterDigital's stock jumped 6% yesterday on the prospect of continued licensing revenue. Past disputes between Research In Motion and technology holding company NTP over licensing threatened to shut down the BlackBerry service in 2006, and made potential buyers hesitant to adopt the mobile email device.
Not every wireless device player has come around to InterDigital's way of thinking, however. The company is battling with Samsung and Nokia (NASDAQ:NOK) in front of the U.S. International Trade Commission (ITC) to ensure that both companies compensate InterDigital for its intellectual property. New to making wireless devices, Apple (NASDAQ:AAPL) struck a quick deal with InterDigital, clearing its current and future iPhones from infringement on InterDigital patents.
While InterDigital certainly has had to work hard to force licensees to pay, it hasn't had nearly as many issues peer IP licenser Qualcomm (NASDAQ:QCOM) has experienced with its customer base, particularly Broadcom (NASDAQ:BRCM). With InterDigital drawing only a little more than $50 million in royalty license revenue each quarter, compared with Qualcomm's $766 million, device manufacturers are still fairly accommodating. As InterDigital grows larger, though, it likely will face similar pressures to reduce royalty rates.
There's one key reason to be bullish about InterDigital's recent agreements. As it signs more licensees, it becomes harder for other companies to balk at payments. While signing Research In Motion and Apple doesn't guarantee success, it goes a long way toward reducing the risk of litigation facing the company, even as it enjoys a growing royalty revenue stream.
For more Foolishness:
