InterDigital's Bill Merritt on patent trolls, standards development and
disputes with the big boys By Daniel Cooper posted Jun 14th
2012 10:00AM Interview
You probably won't know the name, but you most certainly use its technology on
a daily basis. InterDigital is a pioneering company that helped develop WCDMA, 3G and HSDPA during its 50-year history. It
counts former Apple CEO Gil Amelio as one of its directors, but the only time
you'll ever hear its name is when it's embroiled in litigation. Either because it's suing, or being sued for
licensing fees in the complex, murky world of wireless technologies, it's easy
to get the idea that InterDigital is a patent troll. A name that, both Nokia
and most recently, Huawei have barely stopped short of throwing at the company. But what's it like being painted as the
villain in the wireless business pantomime? Company president and CEO William
"Bill" Merritt took the time to answer some of our questions, talk
about what the company actually does, what's in the future and why they
definitely aren't a patent troll. Let's first talk about "patent
trolls," can you explain to our readers the distinction between yourselves
and "trolls," and how you feel about the term being applied to
InterDigital? I would say I'm
uncomfortable with creating a class system around patent holders, and over the
past few years we've seen companies that are clearly not trolls adopt more
aggressive behavior around monetizing their portfolios. Traditionally, people
see trolls as companies that don't do their own development, or don't have
products.
"It's always very trying to be lumped into that category." We're very different and, given
that description, it's always very trying for us to be lumped into that
category: we have hundreds of engineers, we participate in and often chair
standards committees, and we partner with leading operators, infrastructure
companies and solution providers to develop and test new solutions. At Mobile
World Congress this year, we demonstrated technologies – all of them developed
in-house – with partners like Alcatel-Lucent and Spectrum Bridge.
Technologies that we expect to see in the marketplace in four to five years –
that's how far ahead of the curve we often work.
Your position in the market is to wireless companies what ARM is to chip
design, in so much that you license your wares to others. Do you ever feel that
you're missing out by not producing your own hardware? I don't think we do. First of all, we do build:
every one of our development projects involves building out a complete system
so we can test our technologies. We just don't focus on getting those products
into a form factor that can be sold, because other companies are far better at
that. More broadly, I think direct concern over immediate products in the
market would possibly detract from our focus on absolute leading-edge
technologies. Our eye, and our research budget, is always on what the wireless
world will need and move towards in the future... not what it would be willing
to buy at a specific price point today. So, in a sense, not having products is
beneficial for us in our work on pioneering technologies, especially within
standards. It might give us a perspective that other standards participants,
all of whom are seeking market advantage, don't have.
To what extent are companies like InterDigital involved when a new
standard is being developed? For example, if the ITU started discussing "5G" tomorrow (for example), would you be
lobbying to handle the research or is it a race between the various parties to
patent as much technology as possible? I
think it's not so much a race as it is a competition. There are a certain
number of technical challenges that need to be solved, and engineers compete to
develop the best, clearest, most elegant and most easily implemented solution.
We compete alongside them – and again, not having products frees us to examine
all aspects of a new standard's requirements. InterDigital's key is that we
don't wait for standards bodies to launch a project to begin research: we look
at the challenges of current technology – for example, in power consumption, or
interference control, or policy control from the operator perspective – and
determine what solutions would be needed to solve those problems.
Let's talk now about the creation of the patents. Is all of your research
undertaken in-house or do you also purchase some in from universities or other
companies? So far, nearly all our development has been
done in-house. We have more than 200 engineers, and R&D facilities in Philadelphia, New York, Montreal and San
Diego. We're not against patent acquisitions. But,
mainly they align with technologies in which we've built significant in-house
portfolios, or where we intend to begin R&D efforts.
Are you continuing to add to your patent portfolio, and if so, what
direction have those patents taken? What's the next big innovation in the
space? As we always have, we're continuing to develop
new technologies and find new solutions to issues, standards-based or
otherwise, and as a result we're continuing to add to our patent portfolio, at
a rate of over 1,000 patents and applications per year. From a business
perspective, it's essential. The market for patents has changed, and as a
public company we're focused on growing our value. One of the ways we're
seeking to do this is through patent portfolio sales, and selling patents
implies relying on our ability to develop new ones. So we are, absolutely: it's
how we expect to draw the maximum value from our strong engineering team. "The market for patents has
changed." In terms of next big innovation, some of the key technologies
we're working on right now involve bandwidth management – aggregating,
segmenting and managing bandwidth, from both the device and the operator
perspective. We're also doing tremendous work in spectrum aggregation,
integrating TV white space and various other spectrum resources, licensed and
unlicensed, into a comprehensive system. Both these technologies are rooted in
our sense of a migration from fixed to dynamic networks. We're also doing work
in standards-based machine-to-machine communications. We see that, and the
impact standards have on driving down costs and expanding capability, as being
a huge milestone in the development of wireless and the internet of things.
Who do you work with when developing your patents? Do you have much input
from the Apple & RIMs of this world? We
partner with a number of companies during the research and testing phases, so
we constantly get input. And we attend more than 100 engineering and academic
conferences a year, submitting contributions, presenting – we recently
presented our roadmap through 2020 at the LTE World Summit in Barcelona. Whether it's standards work or efforts
that we hope will underpin the wireless technologies of the future, we're in
constant discussion with the wireless engineering community.
As standards are becoming more universal, is there a greater need for
licenses to be negotiated centrally rather than individually to prevent new
entrants to the wireless market becoming bogged down in disputes? One of the beautiful aspects of the wireless
industry is the constant change and emergence of new products, companies,
business models. Similarly, there are many, many ways to license a technology,
depending on the market position of the licensee, their product, their revenue
model, etc. I think companies need the freedom to talk to each other, and craft
their own solutions.
"Sometimes, disputes cannot be avoided." And bear in mind, the vast
majority of our license agreements are reached quietly, with mutual agreement
and minimal fanfare. I know disputes are messy, and that the engineering world
looks down on them. But sometimes disputes cannot be avoided, and I personally
think that companies need to maintain the independence to govern themselves the
way they choose.
How do you calculate the worth of your patents? Is there a flat rate per
handset or are there multipliers based upon the profitability and quantity of
handsets in the market? Is there a different set of fees based on tablets and
broadband dongles compares to phones? As I
mentioned before, there is a broad range of types of agreements, depending on
product type, fixed payments vs. percentage royalties, and many other
variables. Our basic practice is to achieve what we feel is a fair value for
our contributions, but also to put the licensee in a position to be successful.
No one would gain, including us, if the royalties on a product made the product
unsuccessful.
Huawei made a complaint to the European Union, alleging that you were
demanding too much money for a standards-essential patent -- echoing a claim
that Nokia has made previously. Under FRAND terms, how much room is there for
negotiation or do you offer a flat price for every company? I obviously can't say a great deal about
ongoing discussions with specific companies. I can only repeat what we said in
our response to the announcement of Huawei's complaint: standards bodies
specify commitments that participating companies should uphold, and
InterDigital takes those commitments very seriously. Again, we've signed over
50 licensing agreements, the vast majority with no dispute and great mutual
understanding.
More Info Huawei
files EU antitrust complaint against InterDigital InterDigital files ITC
complaint against Nokia, Huawei, and ZTE for 3G patent infringement Apple licenses InterDigital
tech, presumably for 3G iPhone One
website petitioned for company insiders to leak details about your business
dealings. Given that you largely operate "behind the scenes," has the
increased attention of the internet been a boon or a burden to your day to day
lives? I think that, in the way you're
asking, it's been neither – it's just the ongoing reality that all public
companies must operate under. But the internet has been a boon to InterDigital,
definitely, because it's driving the demand for data, and the technological
struggle to provide it! Technology is about limitations – data rate, power supply,
spectrum, processing – and as long as the ecosystem makes it desirable to
exceed those limitations, offering great applications and new capabilities,
InterDigital will be in business.