Ruling in Nokia case sends InterDigital shares lower

Shares of InterDigital Inc. were pummeled yesterday after a judge said Nokia Corp. did not violate the King of Prussia company's technology patents.

InterDigital, a developer of wireless technology for mobile phones, is seeking to block import of Nokia's newest generation of phones because the Finland-based company refused to pay patent royalties.

InterDigital said it disagreed with an administrative law judge's initial determination and would petition the full U.S. International Trade Commission to review and overturn it.

Shares of InterDigital closed down $6.98, or 23.7 percent, to $22.52. Nokia shares fell 0.58, or 4.5 percent, to $12.45.

About 50 percent of 3G - or third-generation - handsets manufactured worldwide have patent licenses with InterDigital.

The technology allows mobile-phone users to surf the Internet, download music, and do video conferencing.

BlackBerry and iPhone are among the company's customers, said InterDigital's director of marketing, Jack Indekeu.

"The majority of these deals we achieved through amicable negotiations," Indekeu said. "Once in a while, we have to resort to the courts to resolve a dispute."

InterDigital, founded in 1972, yesterday projected third-quarter revenue of $73.5 million to $75.5 million, which was below Wall Street expectations.

Analysts were expecting revenue of $76.8 million, according to Thomson Reuters.

InterDigital chief executive William J. Merritt said in a conference call that the Nokia case involved just four patents, "a small percentage of what is available for licensing."

He said the judge's decision would not affect cash flow from other handset-makers who admit they use the patents and and pay to use them. "We anticipate our current licensees will continue to pay royalties when due," the CEO said.

The vast majority of InterDigital's revenue comes from 3G mobile technology. The company said that third-quarter 3G sales were solid and that declines in global handset sales had stabilized in the second quarter, with some licensees even reporting sales increases.

"We are in very good shape financially," Merritt said. "We expect to continue to deliver good profitability and cash flow."

InterDigital employs 285 worldwide, including 150 in King of Prussia.

InterDigital's stock fell 22.6 percent on July 8, 2008, after the International Trade Commission staff recommended against the company in a patent dispute with Samsung Electronics Co.

But InterDigital ultimately prevailed. In January, Samsung agreed to pay $400 million in royalties to InterDigital to license its 2G and 3G mobile technology. The deal was reached before a judge ruled in the case.