At almost $500,000 in profits per employee, InterDigital Inc. is one of the world’s most successful smartphone companies nobody has ever heard of.
And it’s based right here.
The firm — with a Wilmington headquarters and Conshohocken research office — licenses its 19,000-patent portfolio to Apple, Samsung and Huawei, and is now knocking on the doors of other tech companies in Asia and America that it believes use InterDigital stuff without paying for it.
And while many U.S. companies — and President Trump — complain about China ripping off American technology, Chinese companies have gone to court claiming that InterDigital has abused its wireless patent holdings with high prices, bundling of patent deals across multiple generations of products, and other anti-competitive behavior. InterDigital says it negotiates a fair price for its patents.
“It’s more than smartphones,” InterDigital’s Lawrence “Larry” Shay, chief intellectual property counsel, said of the company’s licensing. “It’s anything that has wireless capability also has our technology,” such as laptops or iPads with WiFi. Other companies that license InterDigital’s portfolio are Sharp, Toshiba, LG and Sony.
“We don’t make products so you don’t see our names on the products,” Shay added.
The Wilmington’s company’s core business model is to patent technologies upon which 3G, 4G or 5G global wireless standards are based and then license those patents to consumer product companies. In this way, smartphones from different companies can connect with each other — such as an Apple iPhone interacting with a Samsung Galaxy, and so forth. As wireless speeds have gotten faster and the technology more ubiquitous, companies have been more willing to license InterDigital’s patents.
Over roughly the last two years, the company’s stock price has finally attained the heights last reached in the dot-com bubble of the late 1990s, though it’s down over the last year. InterDigital stock closed up 95 cents to $72.95 on Monday.
InterDigital also has positioned itself to be a major patent holder for 5G wireless technology. Industry experts say that 5G could offer high-speed broadband internet services to compete with Comcast Corp. and other cable companies. Shay sees driver-less cars, robotics and home automation as future sources of growth for its patents. Wireless “has become part of the fabric of everyday life,” he said.
Founded in the early 1970s by Sherwin I. Seligsohn, who was fascinated with digital communications, InterDigital has put about $1 billion into researching wireless technology since 2000.
Seligsohn — something of a tech visionary — also founded Universal Display Corp., which develops specialized flexible flat-panel displays for smart phones and other popular electronics. The company is based in Ewing, N.J.
Several years ago, InterDigital decided against selling itself as such tech giants as Google and Intel looked to acquire wireless patent portfolios. But InterDigital wasn’t happy with the offers. So, instead, the company licenses patents itself and now claims to be one of the most profitable companies in America on a per-employee basis, making $498,000 profits for each secretary, support staffer, manager, engineer and executives in 2017, according to its 10-K annual report filing with the Securities and Exchange Commission. InterDigital has a total of 350 employees at its operations in London, Montreal, and Seoul, in addition to Wilmington and Conshohocken.
Comcast, which boasts 40 percent margins in its big Philadelphia-based cable division, produced $138,414 profits per employee last year, its annual report says. Comcast employs 164,000 total in its Cable and NBCUniversal units, including Universal theme parks.
An August 2013 story by Bloomberg cited InterDigital with the headline “America’s most profitable company per employee makes your phone work – and it’s not Apple.” The story pegged InterDigital’s profits per employee at $937,255 per worker, though they were inflated because InterDigital had sold some patents to Intel for $375 million.
InterDigital’s revenues rose to $532.9 million in 2017 from $325.4 million in 2013. Profits boomed to $174.3 million from $38.1 million over the same period. InterDigital has reached a deal to acquire an additional 21,000 patents and patent applications, mostly video-related, from French company Technicolor.
Shay, 59, was raised in Upper Darby. His father, F. Raymond, who was mayor of the town, died in 2014. The younger Shay attended St. Joseph’s University for economics and then Temple University law school. He clerked for Louis C. Bechtle, then-judge for the U.S. Court of Appeals for the Third Circuit in Philadelphia, and then joined Dilworth Paxson.
In the late 1990s, Shay jumped ship for an e-commerce company in Chester County. But venture capital dried up when the dot-com bubble popped. He moved to InterDigital as general counsel in 2001. “It was a company I had never heard of even though I had been in the area my whole life,” Shay said. He was promoted to the patent-licensing business in 2008.
Shay is retiring at the end of March. Tim Berghuis, who has been promoted to chief licensing officer and has worked with Shay for years, will replace him. “We are a much more stable company and we are in a good place,” Shay said, adding of this retirement that “it’s a good time to take a break.”