Item 1. Business
Item 1. BUSINESS.
Overview
InterDigital, Inc. ("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, 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 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. In 2023 and 2022, our total revenues were $549.6 million and $457.8 million, respectively. 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
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:
• Grow and enhance our patent portfolio through continued investment in advanced research and development. We intend to grow and enhance our worldwide patent portfolio in advanced wireless technology, video coding, AI, and other related technology areas by growing our investment in our industry-leading research and development organization, actively participating in SDOs and other industry consortia, and partnering with leading inventors and industry players to source and develop new technologies. We intend to protect our investment in this innovation by seeking patent coverage in countries around the world for the technologies we develop.
• Maintain a collaborative relationship with key industry players and worldwide standards bodies. We intend to continue contributing to the ongoing process of defining wireless, video and other standards and other industry-wide efforts and incorporating our inventions into those technology areas. Those efforts, and the knowledge gained through them, provide direction for internal development efforts and help guide technology and intellectual property sourcing through partners and other external sources.
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• Grow our patent-based revenue. 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 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. In addition, as part of our ongoing research and development efforts, InterDigital may develop proprietary solutions that may be most valuable when incorporated into commercial products or services offered by others. As an example, we believe that our advanced capabilities in visual technologies will continue to result in developing solutions that can be implemented in adjacent industries, such as content production, gaming, and other areas. 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
InterDigital R&I
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 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. 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. 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
We have a long history of developing cellular technologies, including those related to CDMA and TDMA and OFDM/OFDMA and MIMO. Many of our inventions are being used in all 2G, 3G, 4G and 5G wireless networks and mobile terminal devices. 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 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. 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, security, and terminal mobility for edge services.
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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. 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; 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, 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. 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"), 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.
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, 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. Almost all of our patent license agreements provide for the payment of royalties based on sales of licensed products designed to operate in accordance with particular standards (convenience-based licenses), as opposed to the payment of royalties if the manufacture, sale or use of the licensed product infringes one of our patents (infringement-based licenses).
Our variable royalty license agreements typically contain provisions that give us the right to audit our licensees' books and records to ensure compliance with the licensees' reporting and payment obligations under those agreements. From time to time, these audits reveal underreporting or underpayments under the applicable agreements. In such cases, we seek payment for the amount owed and enter into negotiations with the licensee to resolve the discrepancy.
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For a discussion of our revenue recognition policies with respect to patent license agreements, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview - Critical Accounting Policies and Estimates - Revenue Recognition - Patent License Agreements .”
Licensing Through Platforms
As part of the Technicolor Patent Acquisition, we assumed Technicolor's rights and obligations under a joint licensing program with Sony relating to digital televisions ("DTVs") and standalone computer display monitors ("CDMs") (such program, the "Madison Arrangement"), including Technicolor's role as exclusive licensing agent. Under the Madison Arrangement, Technicolor and Sony combined portions of their respective DTV and CDM patent portfolios and created a combined licensing opportunity for DTV and CDM manufacturers. As licensing agent for the Madison Arrangement, we are responsible for making decisions regarding the prosecution and maintenance of the combined patent portfolio and the licensing and enforcement of the combined patent portfolio in the field of use of DTVs and CDMs. Refer to Note 10, " Obligations ," within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information about the Madison Arrangement.
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, 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 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. After smartphones, televisions represent one of the largest markets with more than 200 million units shipped globally. Other key consumer electronics device categories include tablets and personal computers, set-top-boxes and streaming media players, gaming consoles, wearables and smart home products.
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 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 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. The consumer electronics industry also implements many of the same standards, including standards related to Wi-Fi and increasingly, cellular technologies, as well as a broad range of video coding standards that enable the efficient transmission and rendering of video content.
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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 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.
InterDigital often publicly characterizes aspects of its business, including license agreements and development projects, as pertaining to industry standardized technologies such as, for example, 3G, 4G, 5G, Wi-Fi, HEVC, and VVC. In doing this, we generally rely on the positions of the applicable SDOs in defining the relevant standards. However, the definitions may evolve or change over time, including after we have characterized certain transactions.
Business Activities
2023 Patent Licensing Activity
During 2023, we entered into eight patent license agreements as discussed below.
Direct Licenses
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 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.
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 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 and extends through December 31, 2025.
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Patent Infringement and Declaratory Judgment Proceedings
From time to time, if we believe a party is required to license our patents in order to manufacture, use and/or sell certain products and such party refuses to do so, we may agree with such party to have royalty rates, or other terms, set by third party adjudicators (such as arbitrators) or, in certain circumstances, we may institute legal action against them. 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 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.
Enforcement of our patent portfolio has typically taken the form of a patent infringement lawsuit or an administrative proceeding, such as a Section 337 proceeding before the U.S. International Trade Commission ("USITC" or the "Commission"). 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. Parties may bring administrative and/or judicial challenges to the validity, enforceability, essentiality and/or applicability of our patents to their products or seek to petition a court to establish a rate and/or terms for a license to our patents. Parties may also allege that our efforts to enter into a license with that party do not comply with any obligations we may have in connection with our participation in standards-setting organizations, and therefore that we are not entitled to the relief that we seek. For example, a party may allege that we have not complied with an obligation to offer (or be prepared to offer) a license to that party for patents that are or may become standards-essential patents ("SEPs") on FRAND terms and conditions, and may also file antitrust claims or regulatory complaints on that or other bases, and may seek damages or other relief based on such claims. In addition, a party might file a declaratory judgment action to seek a court's declaration that our patents are invalid, unenforceable, not infringed by the other party's products or are not SEPs. 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 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
We and our licensees, in the normal course of business, may have disagreements as to the rights and obligations of the parties under applicable agreements. For example, we could have a disagreement with a licensee as to the amount of reported sales and royalties. Our patent license agreements typically provide for private confidential arbitration as the mechanism for resolving disputes with our licensees. In arbitration, licensees may seek to assert various claims, defenses, or counterclaims, such as claims based on waiver, promissory estoppel, breach of contract, fraudulent inducement to contract, antitrust, and unfair competition. Arbitration proceedings can be resolved through an award rendered by the arbitrators or by settlement between the parties. Parties to arbitration might have the right to have the award reviewed in a court of competent jurisdiction; however, based on public policy favoring the use of arbitration, it is generally difficult to have arbitration awards vacated or modified. The party securing an arbitration award may seek to have that award confirmed as a judgment through an enforcement proceeding. The purpose of such a proceeding is to secure a judgment that can be used for, if need be, seizing assets of the other party.
In addition, arbitration may be a particularly effective means for resolving disputes with prospective licensees concerning the appropriate FRAND terms and conditions for license agreements that include SEPs, particularly where negotiations have otherwise reached an impasse. 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.
Competition
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.
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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. Other patent holders do not have the same rights to the inventions and technologies encompassed by our patent portfolio. In any device, piece of equipment, or service that contains intellectual property, the manufacturer or implementer may need to obtain licenses from multiple holders of intellectual property. In licensing our patent portfolio, we compete with other patent holders for a share of the royalties that certain licensees may argue to be the total royalty that is supported by certain products or services, which they may argue face practical limitations. We believe that licenses under a number of our patents are required to manufacture and sell 3G, 4G, 5G and other wireless products, as well as other consumer electronics devices, and to implement certain technology services. However, numerous companies also claim that they hold patents that are or may be essential or may become essential to standards-based technology deployed on wireless products, other consumer electronics devices or services. To the extent that multiple parties all seek royalties on the same product or service, the manufacturers could claim to have difficulty in meeting the financial requirements of each patent holder. In the past, certain manufacturers have sought antitrust exemptions to act collectively on a voluntary basis. In addition, certain manufacturers have sought to limit aggregate licensing fees or rates for SEPs.
Environmental, Social and Governance ("ESG")
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. In addition, our Chief Financial Officer oversees a committee of senior executives that steers the process of setting purpose, strategies, policies and goals related to economic, environmental and social topics. We are committed to sustainable business principles, to thinking long-term, and to making strategic decisions that adhere to our mission and values. Among other things, this means supporting the United Nations Global Compact and its underlying principles around the environment, the workforce, anti-corruption, and human rights.
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, 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; and
• 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. 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. In fact, one of our reports found that by 2030, IoT deployment and its subsequent disruption of various industries is projected to save more than eight times the energy it consumes – which could help to save up to 230 billion cubic meters of water and eliminate up to one gigaton of CO2 emissions. Additionally, 5G technology has significant potential societal benefits, including promoting productivity-led economic growth, increasing medical diagnostic capabilities, creating more sustainable cities and communities, improving remote education, and reducing inequalities in education and income. We believe that the benefits to be derived from 5G are substantial and will be felt throughout society.
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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
Overview
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. Our employees based in France are represented by works councils and subject to collective bargaining agreements. 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 strong and healthy.
Health, Safety & Well-Being
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, 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. We routinely review our total rewards programs to ensure they are competitive, allowing us to recruit and retain the diverse talent we need to be successful.
Talent and Culture
Research, learning and growth are fundamental to executing our promise to the world to invent the technologies that make life boundless. In addition, consistently evaluating our talent promotes opportunities to provide actionable learning experiences for our employees to further their career development. 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.
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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 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, 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.
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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 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 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
See Note 4, " Geographic/Customer Concentration ," in the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Form 10-K for financial information about geographic areas for the last three years.
Corporate Information
The ultimate predecessor company of InterDigital, Inc. was incorporated in 1972 under the laws of the Commonwealth of Pennsylvania and conducted its initial public offering in November 1981. Our headquarters are located in Wilmington, Delaware, USA. Our research and development activities are conducted primarily in facilities located in Conshohocken, Pennsylvania, USA; London, United Kingdom; Montreal, Canada; New York, New York, USA; Los Altos, California, USA; and Rennes, France. We are also a party to leases for several smaller research and/or office spaces, including in Brussels, Belgium; Espoo, Finland; Indianapolis, Indiana, USA; Melville, New York, USA; Paris, France, and Beijing, China. In addition, we own an administrative office space in Washington, District of Columbia, USA.
Our Internet address is www.interdigital.com , where, in the "Investors" section , we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, certain other reports and filings required to be filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and all amendments to those reports or filings as soon as reasonably practicable after such material is electronically filed with or furnished to the United States Securities and Exchange Commission at www.sec.gov. The information contained on or connected to our website or any other website referenced herein is not incorporated by reference into this Form 10-K.