InterDigital v. Lenovo

Brief

This litigation, filed in the High Court of Justice, Business and Property Courts of England and Wales (Patents Court) was a dispute between InterDigital and Lenovo as to the royalty terms on which Lenovo should take a global license to InterDigital’s portfolio of Patents that had been declared essential (i.e. Standard Essential Patents or SEPs) to 3G, 4G and 5G cellular Standards on a Fair, Reasonable And Non-Discriminatory basis (FRAND).

HKA was instructed by Kirkland & Ellis International (UK) LLP to provide consulting and testimony services on behalf of the defendant, Lenovo.

What we did

We analyzed the financial and valuation terms of approximately 30 of InterDigital’s past and current licenses and amendments that cover 3G, 4G, and 5G standard essential technology (market approach).  To determine which of the InterDigital licenses were the most comparable to the proposed license between InterDigital and Lenovo, we used a variety of economic factors resulting in six licenses being the most economically comparable to Lenovo and formed the basis of our market comparables valuation.

Further adjustments were made to allow for technical and economic comparability refinements to the license contemplated between InterDigital and Lenovo. We ultimately determined that an effective royalty rate for InterDigital’s cellular SEP portfolio reflecting the valuation results from market comparables was $0.16 per unit. We also determined that InterDigital’s offer to Lenovo of $0.498 per unit was inconsistent with, and in excess of, actual market values.

Paul Meyer provided two days of cross-examination testimony in the High Court.

Outcomes

The Court set a FRAND rate under InterDigital’s portfolio of $0.175 per-unit.  This was only slightly higher than the $0.16 per-unit rate we had determined was FRAND but was substantially lower than the $0.498 per-unit rate being sought by InterDigital.  The Court also found that InterDigital did not act as a willing Licensor, as it consistently sought Supra-FRAND rates.  The Court also made other determinations consistent with our analyses and approach, including rejecting volume discounts claimed by IDC.

Click here to view the full judgement.