On 30th September 2022, InterDigital renewed its patent licensing deal with Apple. InterDigital expects nearly USD 134mn in revenue each year over the next seven-year from this licensing deal which means a total of nearly USD 938mn over the seven-year period. This amount was more than 75% of InterDigital’s market cap on that day. This stat shows the importance of this deal for InterDigital. Let’s suppose a situation, where Apple decides to cease its royalty payments to InterDigital. This alone would have reduced InterDigital's revenues and cash flow by about 25%, and the company would have had to report losses. These losses would have been increased by litigation expenses because Apple might have challenged dozens of InterDigital's patents through IPR petitions with the USPTO's PTAB and/or nullity actions in Germany. Apple might have brought a FRAND rate-setting action in the US, which would have further driven up litigation costs. Therefore, this deal is of enormous significance for InterDigital.
On the other hand, this deal is also very important for Apple which is in a legal battle with Ericsson over licensing of patents after their previous deal expired earlier this year. Further, Apple’s patent licensing deal with Nokia is also due for renewal in some time. If Apple happens to eventually sign patent licensing deal with Ericsson and Nokia, the value of both these deals will be much higher than the InterDigital deal.
Considering all these scenarios, this deal is significant for InterDigital in terms of its financial stability and for Apple to avoid further legal problems.