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Item 1. Business

2024-02-15 compared with 2023-02-15 · 150 added, 118 removed, 157 unchanged (63% of the section changed)

InterDigital, Inc.

("InterDigital") is a global research and development company focused primarily on wireless, visual and related technologies.

We design and develop advanced technologies that enable connected, immersive experiences in a broad range of communications and entertainment products and services.

We license or intend to license our innovations worldwide to companies providing such products and services, including wireless communications, consumer electronics, personal computer, and automotive, as well as cloud-based services such as video streaming.

Since our founding in 1972, our engineers have designed and developed a wide range of innovations that are used in wireless products and networks, from the earliest digital cellular systems to 5G.

With the acquisitions of the patent licensing business (the "Technicolor Patent Acquisition") and research and innovation unit of visual technology industry leader Technicolor SA ("Technicolor") (together, the "Technicolor Acquisitions"), we are a leader in video processing, encoding/decoding, and display technology, with a significant Artificial Intelligence ("AI") research effort that intersects with both wireless and visual technologies.

("InterDigital") is a global research and development company focused primarily on wireless, video, artificial intelligence ("AI"), and related technologies.

We design and develop foundational technologies that enable connected, immersive experiences in a broad range of communications and entertainment products and services.

We license our innovations worldwide to companies providing such products and services, including makers of wireless communications devices, consumer electronics, IoT devices, cars and other motor vehicles and providers of cloud-based services such as video streaming.

As a leader in wireless technology, our engineers have designed and developed a wide range of innovations that are used in wireless products and networks, from the earliest digital cellular systems to 5G and today's most advanced Wi-Fi technologies.

We are also a leader in video processing and video encoding/decoding technology, with a significant AI research effort that intersects with both wireless and video technologies.

InterDigital is one of the largest pure research and development and licensing companies in the world, with one of the most significant patent portfolios of fundamental wireless and video technologies.

As of December 31, 2022, InterDigital's wholly owned subsidiaries held a portfolio of approximately 28,800 patents and patent applications related to wireless communications, video coding, display technology, and other areas relevant to communications and entertainment products and services.

Our portfolio includes numerous patents and patent applications that we believe are or may be essential or may become essential to standards established by many Standards Development Organizations ("SDOs"), including cellular and other wireless communications and video technology standards.

Those wireless standards include 3G, 4G and the IEEE 802 suite of standards, as well as patents and patent applications that we believe are or may become essential to 5G standards that currently exist or are under development.

Our video technology portfolio includes patents and applications relating to standards established by ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET), among others.

As of December 31, 2023, InterDigital's wholly owned subsidiaries held a portfolio of more than 30,000 patents and patent applications related to wireless communications, video coding, display technology, and other areas relevant to communications and entertainment products and services.

Our portfolio includes numerous patents and patent applications that we believe are or may be essential to existing standards, or may become essential to future standards, established by many Standards Development Organizations ("SDOs").

We have contributed technology to wireless standards including the 3G, 4G, and 5G cellular standards and the IEEE 802 suite of standards.

We have contributed technology to video standards including standards established by ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET), among others.

Our wireless portfolio has largely been built through internal development, supplemented by joint development projects with other companies, and select acquisitions of patents and companies.

Our video technology portfolio combines patents and applications that InterDigital obtained through the Technicolor Acquisitions and patents and applications created by internal development.

Our patented inventions have been implemented in a wide variety of products and services, including smartphones, other wireless communication devices and infrastructure equipment, such as tablets, and base stations, consumer electronics and Internet of Things ("IoT") products, such as televisions, laptops, gaming consoles, set-top boxes, streaming devices and connected automobiles.

Our video technology portfolio combines patents and applications that InterDigital obtained through the acquisitions of the patent licensing business and research and innovation unit of visual technology industry leader Technicolor SA and patents and applications created by internal development.

Our patented inventions have been implemented in a wide variety of products, including smartphones, other wireless communication devices and infrastructure equipment, such as tablets, and base stations, consumer electronics and Internet of Things ("IoT") products, such as televisions, laptops, gaming consoles, set-top boxes, streaming devices and connected automobiles.

In addition, our patented inventions have been implemented in a wide variety of services, such as video streaming and other cloud-based services.

InterDigital derives revenues primarily from licensing our patented innovations.

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Additional information about our revenues, profits and assets, as well as additional financial data, is provided in the Consolidated Financial Statements and accompanying Notes in Part II, Item 8, of this Form 10-K.

Our strategy is to continue to be a leading innovator, designer and developer of fundamental, horizontal technologies and to monetize our patented innovations primarily through licensing the products and services that implement them across vertical markets.

Our strategy is to continue to be a leading innovator, designer and developer of fundamental, horizontal technologies and to receive fair compensation from the companies that implement our patented innovations in their products and services across licensing programs.

To execute our strategy, we intend to:

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• Grow our patent-based revenue.

We intend to grow our licensing revenue base by adding licensees in the wireless communications, consumer electronics, personal computer and automotive industries, and by expanding our licensing activities into additional product and services markets that utilize our innovations.

We intend to grow our licensing revenue base by adding licensees in the existing product markets that we serve, and by expanding our licensing activities into video streaming and other cloud-based services.

These licensing efforts may be direct or executed in conjunction with licensing partnerships and other efforts, and may require the enforcement and defense of our intellectual property through litigation and other means.

• Pursue strategic partnerships with other technology companies.

• Pursue strategic research partnerships with other technology companies.

We have in the past and we expect to continue to pursue partnerships to jointly develop technology with other companies in our industries.

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We will seek to bring such technologies, as well as other technologies we may develop or acquire, to market through various methods including technology licensing, joint ventures and partnerships.

• Attract and retain top talent in wireless, video and AI research, patent portfolio creation, and licensing.

Our business success is dependent on our ability to attract, grow, and retain top talent, such as specialized engineering and other technical talent.

Technology Research and Development

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InterDigital operates a diversified research and development operation, InterDigital Research & Innovation ("InterDigital R&I").

As an early and ongoing participant in the digital wireless market, InterDigital developed pioneering solutions for the cellular and Wi-Fi technologies in use today.

As an early and ongoing participant in the digital wireless market, InterDigital has developed pioneering solutions for the cellular and Wi-Fi technologies that enable wireless transmission of voice, data and multimedia content in use today.

That early involvement and our continued development of advanced digital wireless technologies have enabled us to create our significant worldwide portfolio of patents.

In addition, InterDigital was among the first companies to participate in standardization and platform development efforts related to Machine-to-Machine ("M2M") communications and IoT technology.

InterDigital R&I is also a leader in key video technologies, including emerging technologies such as immersive video and AI-based video coding.

InterDigital is also a leader in key video technologies, including emerging technologies such as immersive video and AI-based video coding.

Our current research efforts are focused on a variety of areas related to future technology and devices, including cellular wireless technology, advanced video coding and transmission, and AI.

The InterDigital R&I team’s technical expertise is recognized by the worldwide wireless and video standards bodies where our delegates hold key leadership positions.

Our capabilities in the development of advanced technologies are based on the efforts of a highly specialized engineering team, leveraging leading-edge equipment and software platforms.

Over the last three years, investment in research and portfolio development expense has ranged from $185.2 million to $204.4 million, and the largest portion of this expense has been personnel costs and amortization.

Additional information about our research and portfolio development expenses is provided under the heading " Operating Expenses ," in Part II, Item 7, of this Form 10-K.

In 2023, 2022, and 2021, our research and innovation costs were $78.3 million, $74.3 million, and $89.4 million, respectively, and the largest portion of this expense has been personnel costs.

Wireless Technology

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We continue to be engaged in development efforts to build and enhance our 3GPP (as defined herein) technology portfolio in the current and future generations including 5G, 5G Advanced and 6G.

The horizontal technologies we develop are essential to support a variety of uses cases across several vertical market segments that use connected devices such as automobiles, wearables, smart homes, drones and other connected consumer electronic products.

We are developing evolutionary and revolutionary solutions that enable connectivity in both licensed and unlicensed spectrum, terrestrial and non-terrestrial networks to provide ubiquitous coverage, and across a large range of frequencies up to the terahertz (THz) wave bands.

Segments outside of 3GPP primarily fall within the scope of the IEEE 802, IETF and ETSI standards.

We continue to grow a portfolio of technology related to Wi-Fi, Internet Standards, and Edge Computing, that includes, for example, improvements to the IEEE 802.11 PHY and MAC to increase peak data rates (802.11be - Extremely High Throughput), cloud gaming, and terminal mobility for edge services.

The horizontal technologies we develop are essential to support a variety of use cases across several vertical market segments that use connected devices such as automobiles and autonomous vehicles, wearables, smart factories and smart homes, robots, drones and many other connected consumer electronic products including mobile phones and tablets.

We are developing evolutionary and revolutionary solutions that enable connectivity in both licensed and unlicensed spectrum, terrestrial and non-terrestrial networks to provide ubiquitous coverage, across a large range of frequencies up to the terahertz (THz) wave bands.

Segments outside of 3GPP primarily fall within the scope of the IEEE 802 and IETF standards.

Advanced Video Coding and Transmission Technology

An important and growing segment of wireless traffic is devoted to video streaming.

We have a rich history in developing advanced technologies that address the challenges of video as it relates to mobile, and we further enhanced our capabilities in this area with the completion of the acquisition of the Technicolor R&I team.

Specifically, in the area of video research and standards, we have been actively engaged in video standards development work in the ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET).

Those efforts have focused on H.265/HEVC versions 1 to 4 and MPEG DASH, as well as development of the VCC/H.266 and the MPEG Immersive (MPEG-I) standards suite for the future.

Beyond video standards, InterDigital R&I is conducting research in groundbreaking visual technologies such as immersive video and AI based video coding.

Artificial Intelligence

The AI talent at InterDigital R&I is researching a variety of aspects of AI that can be applied to complex problems in video and wireless technologies.

We have a rich history in developing advanced technologies that address the challenges of video as it relates to mobile.

Specifically, in the area of video research, we have a long history of research and innovation in technologies that provide the basis for nearly all of the modern video codecs.

We have been actively engaged in video standards development work in the ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET).

Those efforts have focused on H.265/High Efficiency Video Coding ("HEVC") versions 1 to 4, as well as development of the VCC/H.266 and the MPEG Immersive (MPEG-I) standards suite for the future.

InterDigital R&I is now conducting research in groundbreaking technologies preparing for the next generation of video codecs beyond VVC, investigating new media coding such as point cloud compression, haptics or avatars using both traditional and AI-based techniques.

Even codecs, such as AV1/VP9, developed by non-standard groups use fundamental techniques we have been instrumental in developing.

Artificial Intelligence/Machine Learning (AI/ML)

InterDigital is using AI to drive both wireless and video standards towards the future, leveraging AI as a valuable tool to drive efficiency and new capabilities in wireless networks and in video compression and delivery systems.

We are researching a variety of aspects of AI that can be applied to complex problems in video and wireless technologies.

Those areas of research include:

energy-efficient deep learning, aimed at reducing the energy-intensive rollout of AI into specific service areas;

deep video compression, seeking to design novel video codecs based on deep learning techniques and optimized for different use cases (e.g., machine vision);

AI for dynamic wireless environments, focused on learning and optimizing wireless systems, particularly when channel characteristics are highly dynamic.

energy-efficient deep learning, aimed at reducing the energy-intensive rollout of AI;

deep video compression, seeking to design novel video codecs based on deep learning techniques and optimized for different use cases (e.g., for machine consumption);

and AI for dynamic wireless environments, which could help enhance and optimize wireless systems, particularly when channel characteristics are highly dynamic.

Patent Portfolio

As of December 31, 2022, our patent portfolio consisted of approximately 28,800 patents and patent applications worldwide.

As of December 31, 2023, our patent portfolio consisted of more than 30,000 patents and patent applications worldwide.

The patents and applications comprising our portfolio relate predominantly to cellular wireless standards, including 3G, 4G and 5G technologies, other wireless standards, including 802.11 (Wi-Fi) technology, and a variety of video technologies and standards, such as HEVC and VVC.

Our issued patents expire at differing times ranging from 2024 through 2043.

We generally receive newly issued patents on a weekly basis, which further extend the coverage of newly developed technologies and expiration dates of our patents.

Our Revenue Sources

Device-based Licensing Revenue

Companies making, importing, using or selling products compliant with the standards covered by our patent portfolio, including all manufacturers of mobile handsets, tablets and other devices, and many consumer electronics products, such as televisions, personal computers and other devices, require a license under our patents and will require licenses under patents that may issue from our pending patent applications.

We have successfully entered into patent license agreements with many of the leading mobile communications and consumer electronics companies globally, including Amazon Technologies, Inc.

("Amazon"), Apple Inc.

("Apple"), Huawei Investment & Holding Co., Ltd.

(“Huawei”), Google LLC ("Google"), LG Electronics, Inc.

("Apple"), Lenovo Group Limited ("Lenovo"), Google LLC ("Google"), LG Electronics, Inc.

("LG"), Samsung Electronics Co., Ltd.

("Samsung"), Sony Corporation of America ("Sony"), and Xiaomi Corporation ("Xiaomi"), among others.

Other Revenue Opportunities

We also believe that companies providing certain video and other cloud-based services require a license under our patents and will require licenses under patents that may issue from our pending patent applications, and we intend to seek license agreements with such companies.

Service-based Licensing Revenue Opportunities

We also believe that companies providing certain video streaming and other cloud services require a license under our patents and we intend to seek license agreements with such companies.

Overview of Patent Licenses

The majority of our revenue is generated from fixed-fee patent license agreements, with a smaller portion coming from variable royalty agreements.

Upon entering into a new patent license agreement, the licensee typically agrees to pay consideration for sales made prior to the effective date of the license agreement, to the extent the licensee was previously unlicensed (i.e., past patent royalties), and also agrees to pay royalties or license fees on licensed products sold during the term of the agreement.

Upon entering into a new patent license agreement, consideration should be paid for sales made prior to the period in which the agreement was executed, to the extent those past sales were previously unlicensed (i.e., catch-up revenues), in addition to royalties or license fees on licensed products sold during the term of the agreement.

We expect that, for the most part, new license agreements will follow this model.

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In 2016, InterDigital joined Avanci, the industry’s first marketplace for the licensing of cellular standards-essential technology for the IoT.

The licensing platform brings together many of InterDigital’s peers in standards-essential technology leadership, and makes 2G, 3G, and 4G standards-essential patents available to IoT players in specific product segments with one flat-rate license.

The licensing platform brings together many of InterDigital’s peers in standards-essential technology leadership, and makes 2G, 3G, 4G, and 5G standards-essential patents available to IoT players in specific product segments with one flat-rate license.

The Avanci licensing programs in specific product segments for the IoT industry will provide access to the entire applicable standards-essential wireless patent portfolios held by all of the platform participants, as well as any additions to their portfolios during the term of the license.

Since December 2017, Avanci has focused on the automotive market, and has signed patent license agreements with BMW Group, Audi, Porsche, Volkswagen, and Volvo Cars, among others, collectively representing over 80% of annual connected car shipments.

In 2020, Sisvel International N.A.

announced that it had launched a licensing program covering VP9 and AV1 video coding formats, which we have joined as a licensor.

In 2012, we formed a joint venture with Sony called Convida Wireless.

The joint venture combined InterDigital's advanced M2M research capabilities with Sony's consumer electronics expertise for the purpose of driving new research in IoT communications and other connectivity areas.

This joint venture was renewed in 2015 with its focus expanded to include advanced research and development into 5G and future wireless technologies, and further renewed in 2018 and again in December 2021.

As of December 31, 2022, Convida Wireless owned approximately 1,400 patents and patent applications worldwide, which expire at different times ranging from 2023 through 2043.

Convida Wireless intends to license its patented innovations to companies providing IoT products and services.

Overview of Smartphone, Consumer Electronics, and IoT Industries

The primary markets for our wireless and video technologies are the smartphone and consumer electronics and IoT/Automotive markets.

The smartphone market, with approximately 1.2 billion units projected to have shipped worldwide in 2022, is driven by several large, global brands.

The market saw a decline in 2022 mostly due to the ongoing supply chain issues arising from the COVID pandemic, as well as a broad economic slowdown in China and economic challenges globally.

The market is expected to recover beginning in the second half of 2023 due to the continued global uptake of 5G smartphones as well as the migration from feature phones to smartphones in emerging regions.

Since December 2017, Avanci has primarily focused on the automotive market, and has signed patent license agreements with BMW Group, Audi, Porsche, Volkswagen, and Volvo Cars, among others, collectively representing over 80% of annual connected car shipments.

Overview of Smartphone, Consumer Electronics, IoT, and Video Services Industries

The primary markets for our wireless and video technologies are the smartphone, consumer electronics, IoT/Automotive, and Video Services markets.

The smartphone market, with an estimated 1.2 billion units shipped worldwide in 2023, is driven by several large, global brands.

The market was relatively flat in 2023 due to a broad economic slowdown in China and economic challenges globally, but smartphone sales began to recover in the fourth calendar quarter.

The market is expected to maintain this momentum in 2024 due to the continued global uptake of 5G smartphones as well as the migration from feature phones to smartphones in emerging regions.

In addition to smartphones there is a large universe of other consumer electronic devices and ecosystems, with a mix of mature and emerging, as well as consolidated and fragmented, device segments.

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IoT/Automotive is an important and relatively new market that is expected to result in a significant increase in the number of connected devices worldwide and unlock new business capabilities.

Total global cellular IoT device shipments are expected to grow from approximately 500 million in 2022 to almost 700 million by 2027.

Total global cellular IoT device shipments are expected to grow from approximately 400 million in 2023 to approximately 700 million by 2027.

Automobiles represent a significant opportunity within the IoT market, with approximately 50 million connected vehicles shipped in 2023, which is expected to grow significantly in the future.

Video Services, a rapidly growing market, encompass a wide range of consumer video entertainment platforms, including Subscription Video on Demand (SVOD), Advertising-Based Video on Demand (AVOD), Virtual Multichannel Video Programming Distributor (vMVPD), Free Ad-Supported Streaming TV (FAST), and social media platforms.

Collectively, the Video Services market is expected to grow from $350 billion of annual revenue in 2023 to $480 billion of annual revenue by 2027.

Overview of Standardization

To achieve economies of scale and support interoperability among different participants, many wireless and consumer electronics products have been designed to operate in accordance with certain industry standards.

Wireless industry standards are formal guidelines for engineers, designers, manufacturers and service providers that regulate and define the use of the radio frequency spectrum in conjunction with providing detailed specifications for wireless communications products.

Wireless industry standards are formal requirements and guidelines for engineers, designers, manufacturers and service providers that regulate and define the use of the radio frequency spectrum in conjunction with providing detailed specifications for wireless communications products.

New wireless standards are typically adopted with each new generation of products, are often compatible with previous generations and are defined to ensure equipment interoperability and regulatory compliance.

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SDOs, which facilitate and govern the development of standards, typically ask participating companies to declare formally whether they believe they hold patents or patent applications essential or potentially essential to a particular standard and whether they are willing to license those patents on either a royalty-bearing basis on fair, reasonable and nondiscriminatory terms or on a royalty-free basis.

To manufacture, have made, sell, offer to sell or use such products on a non-infringing basis, a manufacturer or other entity doing so must first obtain a license from the holder of essential patent rights.

To manufacture, have made, sell, offer to sell or use such products on a non-infringing basis, a manufacturer or other entity doing so needs to obtain a license from the holder of essential patent rights.

The SDOs neither have enforcement authority against entities that fail to obtain required licenses, nor do they have the ability to protect the intellectual property rights of holders of essential patents.

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2023 Patent Licensing Activity

During 2022, we entered an agreement with Samsung for binding arbitration to take a new license and eight direct patent license agreements, including agreements with Apple, Amazon, Panasonic, Zebra, and LG as discussed below.

We agreed to renew our patent license agreement with Samsung and enter into binding arbitration to determine the final terms of the license, including the amount payable by Samsung under the new agreement.

During 2023, we entered into eight patent license agreements as discussed below.

Direct Licenses

During second quarter 2022, we entered into a multi-year, worldwide, non-exclusive, fee bearing patent license agreement with Amazon Technologies, Inc., covering a range of Amazon's consumer electronic devices.

We also entered into a multi-year, worldwide, non-exclusive, royalty bearing license with Zebra Technologies Corporation, under the Company’s standard essential patents related to 4G, 5G and Wi-Fi.

During third quarter 2022, we renewed a patent license agreement with Apple.

The Company expects to recognize approximately $133.7 million in revenue each year over the seven-year term of the license, which commenced on October 1, 2022.

During fourth quarter 2022, the Company entered into four licenses covering digital television and/or video patents, including with Panasonic Entertainment & Communication Co., Ltd.

and LG Electronics.

In 2023, we signed a multi-year, worldwide, non-exclusive, royalty bearing license with Lenovo, covering InterDigital’s HEVC patents (the "Lenovo HEVC PLA").

The new license resolved all related HEVC litigation at the time.

We also entered into a multi-year, worldwide, non-exclusive, royalty bearing license with TCL Communication Technology Holdings, Ltd.

covering InterDigital’s portfolio of 3G and 4G patents.

In 2023, we also entered into five other licenses covering digital televisions, set-top boxes, and/or video patents, including licenses with Humax Co., Ltd., Alps Alpine Co., Ltd., Panasonic Entertainment & Communication Co., LTD., and Funai Electronic Co., LTD.

Other Licensing Activities

On March 16, 2023, the U K’s High Court handed down its judgment in the Company’s licensing dispute with Lenovo.

The Court ruled that Lenovo should pay a total of $138.7 million for a license to InterDigital’s portfolio of 3G, 4G and 5G patents, including past sales.

On June 27, 2023, we were awarded an additional $46.2 million, increasing the total Lenovo must pay for a cellular patent license through 2023 to $184.9 million.

During 2023, we recognized a total of $150.1 million of revenue from Lenovo, including amounts received under the Lenovo HEVC PLA.

The Company will defer recognizing any additional revenue related to the UK proceedings until the appeal process progresses.

Customers Generating Revenues Exceeding 10% of Total 2023 Revenues

A small number of customers historically have accounted for a significant portion of our consolidated revenues.

In fiscal 2022, revenues (in descendin g order) from Apple, Samsung, and Xiaomi eac h comprised 10% or more of our consolidated revenues.

In fiscal 2023, revenues (in descendin g order) from Lenovo, Apple, Samsung, and Xiaomi eac h comprised 10% or more of our consolidated revenues.

Additional information regarding revenue concentrations is provided in this Annual Report in Note 4, " Geographic/Customer Concentration " in the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Form 10-K.

During third quarter 2022, we renewed a multi-year, royalty-bearing, worldwide and non-exclusive patent license agreement with Apple (the “Apple PLA”).

The agreement sets forth terms covering the sale by Apple of its products and services, including, but not limited to, its 3G, 4G and future generation cellular and wireless-enabled products.

As discussed above in 2023 Patent Licensing Activity , we recognized a total of $150.1 million of revenue from Lenovo, including amounts received under the Lenovo HEVC PLA and our UK proceedings.

The Company will defer recognizing any additional revenue related to the UK proceedings until the appeal process progresses.

In 2022, we renewed a multi-year, royalty-bearing, worldwide and non-exclusive patent license agreement with Apple (the “Apple PLA”).

The agreement sets forth terms covering the sale by Apple of its products and services, including, but not limited to, its 3G, 4G, and 5G cellular and wireless-enabled products.

The term of the Apple PLA extends through September 30, 2029.

In 2014, we entered into a patent license agreement with Samsung (the “Samsung PLA”).

The royalty-bearing license agreement set forth terms covering the sale by Samsung of 3G, 4G and certain future generation wireless products.

The Samsung PLA expired on December 31, 2022.

On December 30, 2022, we agreed to have a panel of arbitrators establish the royalties to be paid by Samsung Electronics for a worldwide license to certain of the Company’s patents, as well as any other terms to a patent license agreement on which the parties are not able to agree.

The determination by the panel will be in the form of a patent license agreement that will be final, binding, and non-appealable, subject to certain limited exceptions.

The Company expects the arbitration to conclude within approximately 18 months.

In 2022, we agreed to renew our patent license agreement with Samsung and enter into binding arbitration to determine the final terms of the license, including the amount payable by Samsung under the new agreement.

In 2023, we began recognizing revenue for Samsung at a conservative level consistent with the revenue we recognized from our patent license agreement that expired on December 31, 2022.

We believe that it is likely the arbitration award will exceed the conservative estimate and require a true-up at that time.

We expect resolution in late 2024.

In 2021, we entered into a multi-year, worldwide, non-exclusive, royalty bearing license with Xiaomi.

The license covers Xiaomi’s cellular-enabled mobile devices under our standard essential patents related to 3G, 4G, 5G, WiFi and HEVC video technology and extends through December 31, 2025.

The license covers Xiaomi’s cellular-enabled mobile devices under our standard essential patents related to 3G, 4G, 5G, WiFi and HEVC and extends through December 31, 2025.

Patent Infringement and Declaratory Judgment Proceedings

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Enforcing our intellectual property through legal action is an important alternative to bilateral negotiations with respect to licensees who engage in the pernicious practice of "holdout".

In recent years, courts in various jurisdictions have addressed “holdout” behavior, recognizing that FRAND obligations are bilateral and failure of implementers to act in a FRAND manner can result in certain penalties.

In recent years, courts in various jurisdictions have addressed “holdout” behavior, recognizing that fair, reasonable and non-discriminatory ("FRAND") obligations are bilateral and failure of implementers to act in a FRAND manner can result in certain penalties.

We welcome this development as it incentivizes potential licensees to negotiate in a timely and reasonable fashion as well as providing a necessary balance to FRAND negotiations.

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International Trade Commission ("USITC" or the "Commission").

In a patent infringement lawsuit, we would typically seek damages for past infringement and/or an injunction against future infringement.

In a patent infringement lawsuit, we would typically seek damages for past infringement, an injunction against future infringement, declaratory judgment and/or other relief.

In a USITC proceeding, we would seek an exclusion order to bar infringing goods from entry into the United States, as well as a cease and desist order to bar further sales of infringing goods that have already been imported into the United States.

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Our response to such a declaratory judgment action may include claims of infringement.

When we include claims of infringement in a patent infringement lawsuit, a favorable ruling for the Company can result in the payment of damages for past patent royalties, the setting of a royalty for future sales or issuance by the court of an injunction enjoining the infringer from manufacturing, using and/or selling the infringing product.

When we include claims of infringement in a patent infringement lawsuit, a favorable ruling for the Company can result in the payment of monetary damages for past manufacture, use and/or sale of the patented invention, the setting of terms and conditions for a license, issuance by the court of an injunction enjoining the infringer from manufacturing, using and/or selling infringing products and/or a declaration of FRAND compliance.

Contractual Arbitration Proceedings

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Binding arbitration to resolve the terms and conditions of a worldwide FRAND license to our relevant portfolio of SEPs is an efficient and cost-effective mechanism, as it allows the parties to avoid piecemeal litigation in multiple jurisdictions and ensures that an enforceable patent license agreement that is consistent with FRAND commitments will be in place at the end of the arbitration process.

With respect to our technology development activities and resulting commercialization efforts, we face competition from companies, including in-house development teams at other wireless and consumer electronics device companies, semiconductor companies, wireless operators, and other technology providers, developing other and similar technologies that are competitive with our technologies that we may market or set forth into the standards-setting arena.

With respect to our technology development activities and resulting commercialization efforts, we face competition from companies, including in-house development teams at other wireless and video technology companies, consumer electronics device companies, semiconductor companies, wireless operators, video streaming and cloud service companies, and other technology providers, developing other and similar technologies that are competitive with our technologies that we may market or set forth into the standards-setting arena.

Due to the exclusionary nature of patent rights, we do not compete, in a traditional sense, with other patent holders for patent licensing relationships or sale transactions.

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Environmental, Social and Governance ("ESG")

In 2020, we began our ongoing company-wide ESG materiality assessments, which represent an effort to strategically review and analyze our most significant opportunities and accomplishments under four pillars:

human capital, environmental impact, governance, and social impact.

In 2021, we began publishing an annual Corporate Sustainability Report on our corporate website which provides a summary of our related performance and goals for the future.

We plan to publish our next report the during second quarter of 2023.

The information contained in our Corporate Sustainability Report is not incorporated by reference into this Form 10-K.

We believe our innovation provides the framework for a future increasingly shaped by the profound convergence of wireless, video, and AI technologies.

As these technologies become more ubiquitous and deliver immense benefits across the global ecosystem, we believe it is important that the future we are enabling continues to be anchored by a core set of values, ethics, and principles.

Our heritage of innovation has produced technologies that fundamentally improve efficiency and power consumption across billions of devices, network infrastructure, and delivered services.

Our ESG principles continue this legacy and shape our pursuit of a more sustainable, representative, diverse, and equitable world.

Our Board of Directors has oversight over environmental, social and other sustainability matters, including diversity initiatives, in conjunction with the committees of the Board.

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We are committed to driving positive progress towards reducing the environmental footprint that the deployment of 5G, wireless networks, and other video technologies will bring.

While our business activities do not entail the same concerns related to manufacturing or raw materials sourcing and disposal, we implemented a corporate sustainability strategy to address the following:

• investing in best practices to track and reduce our carbon footprint, including environmental considerations, tracking, and reporting related to data center needs of energy and emissions efficiencies;

• establishing a goal of achieving carbon neutrality within the next four years;

• building environmental stewardship into our operations by encouraging vendors to match or exceed our commitment to the environment.

While our business activities do not entail the same concerns related to manufacturing or raw materials sourcing and disposal, our corporate sustainability strategy addresses the following:

• investing in best practices to track and reduce our carbon footprint, including environmental considerations, tracking, and reporting related to data center needs;

• implemented a hybrid work program, allowing employees to work from for home part of the week;

• investigating and reducing unnecessary energy consumption;

• selected a location for our new Rennes office that is certified by BREEM (Building Research Establishment Environmental Assessment Method), a sustainability assessment method.

InterDigital ranks among the industry leaders for ETSI-disclosed patents and applications as potentially essential to 5G standards.

5G technology is designed to efficiently use energy throughout its ecosystem and will play a significant role in promoting and attaining sustainability goals.

Last year we published white papers exploring how 5G and the emerging IoT ecosystem might shape sustainability efforts for the ICT industry.

We have published white papers exploring how 5G and the emerging IoT ecosystem might shape sustainability efforts for the ICT industry.

While the proliferation of connected devices can drive increases in energy consumption, innovative solutions can mitigate these outcomes to help lower our carbon footprint and engage more sustainably.

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We believe that the benefits to be derived from 5G are substantial and will be felt throughout society.

The foregoing discussion includes information regarding ESG matters that we believe may be of interest to our shareholders generally.

We recognize that certain other stakeholders (such as customers, employees and non-governmental organizations), as well as certain of our shareholders, may be interested in more detailed information on these topics.

We encourage you to review our most recent Corporate Sustainability Report (located on our website) for more detailed information regarding our Corporate Sustainability and ESG governance, goals, priorities, accomplishments and initiatives, as well as the Corporate Governance section of our most recent Proxy Statement, and our Corporate Governance Principles and Practices (located on our website), for additional information regarding governance matters, including Board and Committee leadership, oversight, roles and responsibilities, and Director independence, tenure, refreshment and diversity.

Nothing on our website, including the aforementioned reports and documents, or sections thereof, shall be deemed incorporated by reference into this Annual Report.

Human Capital

We strive to make InterDigital a great place to work for all employees.

We are committed to creating a workplace where employees feel valued, respected and challenged, while fostering an environment that attracts and engages a talented workforce who contribute to the company’s growth and sustained success.

Our Compensation Committee is responsible for overseeing our policies and strategies related to culture and human capital, including diversity, equity and inclusion.

We strive to make InterDigital an exceptional place to work for all employees.

We are committed to creating a workplace where employees feel valued, respected, included, and challenged, while fostering an environment that attracts and engages a talented workforce who contribute to the company’s growth and sustained success.

Our Human Capital Committee (formerly known as the Compensation Committee) is responsible for overseeing our policies and strategies related to our culture and human capital, including diversity, equity and inclusion.

As of December 31, 2023, we had approximately 450 employees worldwide, of whom approximately 230 were based outside of the U.S, and nearly all of whom were full-time.

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None of our employees based in the United States or Canada are unionized or subject to collective bargaining agreements.

Management believes that its relations with our employees and works councils are good.

Management believes that its relations with our employees and works councils are strong and healthy.

Health, Safety & Well-Being

In order to protect the health and safety of our employees and their families during the COVID-19 pandemic, we enacted safety measures including remote work, social distancing protocols, and suspending non-essential travel.

As COVID-19 conditions improved, we implemented a phased reopening approach with a priority on health and safety.

By creating robust health and safety protocols to provide a safe working environment for those employees who voluntarily chose to work from an office.

As the year progressed, we shifted our support to helping our employees thrive in the new hybrid work environment.

As the way we live and work has evolved with the pandemic, we have been focused on creating a new work model that supports our employees.

We have been on the forefront of providing employees with the flexibility to work full time in the office, fully virtually, or a hybrid of both.

We provide holistic benefits and maintain company policies that promote a culture of wellness.

We recently increased our paid parental leave from eight to twelve weeks and have kept employees connected to volunteer opportunities that benefited both their mental health and communities through our ‘Charity Day’ paid time off program.

Compensation & Benefits

Our compensation program is rooted in market competitive base salaries and incentives that reward contributions that advance the Company’s strategy and mission.

We provide a total compensation package that is targeted to be competitive with the markets in which we compete for talent, while allowing individual pay to vary equitably based on performance, skills and experience.

Our total rewards plans include base salary, short- and long-term incentives, healthcare benefits, retirement savings plans, physical and mental well-being programs, flexible work schedules, monetary and social recognition in each of our locations around the globe.

Our total rewards plans include base salary, short- and long-term incentives, healthcare benefits, retirement savings plans, physical and mental well-being programs, hybrid-work schedules, monetary and social recognition in each of our locations around the globe.

In addition to comprehensive health benefits, depending on location, employees may also enjoy subsidized fitness programs, commuter benefits, wellness incentives, tuition reimbursement opportunities and professional development opportunities among other benefits.

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In addition, consistently evaluating our talent promotes opportunities to provide actionable learning experiences for our employees to further their career development.

Our Leadership Essentials competency development model is available to all employees and provides a library of tools and resources for growth in the areas of thought leadership, results leadership, people leadership and self-leadership.

Through ongoing dialogue with leaders, employees are encouraged to plan for their development and leverage the tools available to create meaningful and actionable development plans that drive personal and company growth.

All employees are encouraged to continually seek out and attend external development opportunities that can provide the employee with new knowledge and skills while also bringing fresh perspectives to the Company.

We endeavor to ensure that our leaders of tomorrow are members of the Company today.

Leadership capability is critical in supporting our culture of innovation, inclusion and collaboration.

As such, leaders have access to various structured development and learning experiences.

These include our Learning for Leaders series which provides an interactive learning experience on topics germane to the realities of being a leader in today’s environment.

Recent sessions included Leading Distributed Teams and R&I specific Delegate and Empower with Respect and Trust manager training.

Our Talent Acquisition philosophy is based on InterDigital’s cultural attributes and business goals.

Our talent programs are instrumental in our ability to attract the right talent to the organization by offering learning opportunities and career advancement.

Our Leadership Essentials competency development model is available to all employees and provides a comprehensive suite of tools and resources for growth across four key areas;

thought leadership, results leadership, people leadership and self-leadership.

This model has been seamlessly integrated into our organizational culture initiatives, forming an integral part of our Performance Management philosophy.

Moreover, we’ve integrated the Leadership Essentials into our recruitment strategies, incorporating these competencies into our interview guides to align with our competency model.

By encouraging an ongoing dialogue between leaders and employees, we promote proactive planning for personal development.

Our goal is to empower individuals to leverage the resources available to create meaningful and actionable development plans that not only drive personal growth but also contribute to the Company’s overall advancement.

All employees are encouraged to actively explore and participate in external development opportunities.

These experiences enhance their knowledge and skills while also bringing valuable perspectives to our Company.

The development of leadership skills is pivotal in fostering our culture of innovation, inclusivity, and collaboration.

To support this, our leaders have access to a range of structured development and learning experiences.

These include our performance management training, which guides employees and managers on integrating Leadership Essential competencies into our performance model.

Additionally, our global coaching program provides one-on-one coaching focused on career goals, leadership and performance enhancement.

Emphasis is also placed on the importance of feedback in performance, educating individuals on both requesting and delivering constructive feedback.

We continue to invest in processes to help the organization assess and develop talent, including a formalized annual performance evaluation program, an annual critical skills and potential analysis, and succession planning for the organization’s most critical and senior roles.

All employees receive an annual performance review.

We conducted a culture survey in 2022 that provided relevant insight and guidance into how we can continually align the preferences of our employees with the programs and investments we offer.

We conducted an engagement survey in 2023 that provided direct insight and guidance from our employees on what our strengths in building an innovative and inclusive culture are, and how we can continue to be a winning team.

We believe that our workplace culture, values, and competitive employee compensation are critical to maintaining low levels of attrition, thereby enabling us to attract and retain talent.

For the year ended December 31, 2022, our voluntary attrition percentage was approximately 10%.

Diversity, Equity and Inclusion (DEI)

Maintaining a diverse, equitable and inclusive workforce is critical to our ability to succeed in the global marketplace.

In 2022, we launched our DE&I Taskforce, an employee-led team focused on supporting the execution of InterDigital’s DE&I strategy.

We plan to continue the journey in 2023 by hosting inclusion training events for all employees, providing forums for feedback and increasing engagement on inclusion while continuing to build on our talent processes that enable change by further expanding investment in our talent acquisition, talent development, and succession planning efforts as a means to diversify our workforce.

We have continually provided minority and female leaders the opportunity to attend targeted world-class external development programs that speak to the unique experiences these employees can face in the workplace while investing in their continued growth both personally and professionally.

In 2022, we hosted a Fireside Chat:

Women in the Workplace, where female executives and a renowned expert on gender equality led a discussion on women in the workplace.

In addition, core principles of our culture of inclusion are reflected in the mandatory all-employee training programs we offer on our policies against harassment and discrimination of any kind.

With a workforce that is approximately 70% male employees and 30% female employees, and approximately 37% self-identified as diverse within the United States, we recognize that we are on a journey and there is more yet to be done.

For the year ended December 31, 2023, our voluntary attrition percentage was less than 3%.

Diversity, Equity and Inclusion ("DE&I")

We participate in the highly competitive process to evolve and revolutionize communication, video, and AI technologies through our participation in worldwide SDOs.

We require a highly educated and specialized workforce and maintaining a diverse, equitable and inclusive workforce is critical to our ability to succeed in the global marketplace.

Since its launch in 2022, our employee-led DE&I Taskforce has focused on supporting the execution of InterDigital’s DE&I strategy.

In 2023, we designed and launched our DE&I mission under the four pillars of TEAM - Talent, Empowerment, Amplify, Membership.

Within our pillar of Talent, our talent acquisition and talent development teams evaluated and evolved their processes to optimize results for diversity and inclusion with our hiring, onboarding, and employee development.

This resulted in participation in diversity and outreach events, supporting production of internal company media with inclusive material, and the development of a plan to launch our DE&I LinkedIn Life page, which is intended to create visibility and connection to our DE&I journey for external constituents.

We empowered our workforce through education and launched a mandatory company-wide training on DE&I to create understanding of this initiative, the benefits, and the tools to create inclusive and equitable environments.

Work under the Amplify pillar focused on socializing and creating awareness of our purpose with the execution of our company DE&I branding and a company-wide townhall dedicated to providing an understanding of the taskforce's work, and insight into future actions.

As part of the Membership pillar, we established our first model for Employee Resource Groups (ERG) at InterDigital to promote employee-led groups to encourage inclusion, belonging, and camaraderie for shared interests, characteristics, experiences, or causes.

Through this Membership strategy, InterDigital committed to the creation of a global Women's Network ERG, which we plan to launch in 2024 and which is designed to offer women and their allies career development opportunities within InterDigital free from obstacles.

All of our targeted 2023 achievements occurred in addition to our foundational efforts to provide opportunity to employees from historically underrepresented groups and maintain policies that support a strong DE&I environment.

We have continually provided leaders from historically underrepresented groups the opportunity to attend targeted world-class external development programs that speak to the unique experiences these employees can face in the workplace while investing in their continued growth both personally and professionally.

We have also continued to maintain the core principles of our culture of inclusion are reflected in the mandatory all-employee training programs we offer on our policies against harassment and discrimination of any kind.

The diversity in our workforce is clear given that our approximately 450 person workforce originates from over sixty countries.

Still, with approximately 72% male employees and 28% female employees, we recognize that there is more to be done.

Our 2024 efforts will take the next step to enhance the community experience for our diverse workforce and to create better opportunities to attract a diverse workforce in the long-term with the aim to provide an inclusive environment where employees are encouraged to utilize their unique experiences and backgrounds when collaborating to develop new technologies.

We will continue our journey this year with the formal launch of our Women’s Network ERG, the growth of that global community, and the actions we take for all employees to support an environment that enables women, alongside their allies, to do their greatest work and be the greatest version of themselves.

Our DE&I Taskforce will continue to expand our actions within the TEAM pillars and support this journey.

We believe this investment will continue to better our workplace inclusion and will eventually contribute to the scientific community.

We publish our most recent Consolidated EEO-1 reports on our website to provide additional transparency into our workforce.

The foregoing discussion includes information regarding Human Capital matters that we believe may be of interest to shareholders generally.

We encourage you to review the “Workforce” section of our most recent Corporate Sustainability Report (located on our website) for more detailed information regarding our Human Capital programs and initiatives.

Nothing on our website, including our Consolidated EEO-1 reports and our Corporate Sustainability Report or sections thereof, shall be deemed incorporated by reference into this Annual Report.

Geographic Concentrations

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Espoo, Finland;

Princeton, New Jersey, USA;

Indianapolis, Indiana, USA;

and Paris, France.

Melville, New York, USA;

Paris, France, and Beijing, China.

In addition, we own an administrative office space in Washington, District of Columbia, USA.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business