Context: Just like litigation, binding arbitration results in an enforceable decision, and there can be a winner and a loser. Rumor has it that Samsung at least once owed it to an arbitration proceeding that it paid a far lower standard-essential patent (SEP) royalty to a major SEP holder than the other party demanded. But it can also go the other way. Part of the rich legacy of InterDigital’s former Chief Licensing Officer Eeva Hakoranta (April 7, 2025 ip fray article) is that the company avoided litigation with its two largest licensees, Apple and Samsung, when those contracts were up for renewal in recent years. InterDigital and Samsung closed a deal related to TV sets and monitors (January 16, 2024 ip fray article), but the agreement relating to Samsung’s mobile device business involved arbitration to determine the exact royalty amount (January 3, 2023 InterDigital press release). It was to some extent an agreement to agree.
What’s new: Late on Tuesday (July 29, 2025), InterDigital announced the conclusion of the arbitration proceedings and made an 8K filing with the Securities and Exchange Commission (SEC) that was required by the enormous financial significance of the news.
“The arbitration panel set the total royalties at $1.05 billion for the eight-year patent license, which commenced on January 1, 2023 and runs through December 31, 2030. Under this agreement, InterDigital will recognize approximately $131 million of recurring revenue per year, a 67% increase from the previous license agreement. In second quarter 2025, the agreement will contribute $119 million of catch-up sales in addition to $33 million of recurring revenue.” (emphases added)
Direct impact: The positive impact on InterDigital’s bottom line is self-explanatory. After hours, InterDigital (ticker symbol: IDCC) was up by more than 4%. The announcement implicitly makes it clear that Samsung is not challenging the International Chamber of Commerce arbitration on misconduct grounds, which is typically the only recourse option a party has under binding arbitration agreements. For Samsung it must be a disappointing result, given that royalties increased sharply, but its mobile device sales volume between the times of conclusion of this agreement and the prior one did not.
Wider ramifications: Samsung is currently engaging in scattershot FRAND (fair, reasonable and non-discriminatory licensing) litigation of an unprecedented scale against ZTE, and at least in the United States that strategy is not working out so far (July 9, 2025 ip fray article). Obviously, it is easier to compare two license deals over the same portfolio covering similar products than two license agreements for the same products but different portfolios. However, implementers often favor a top-down approach (total stack value apportioned to different licensors based on portfolio size), and if one applied that one here, ZTE could point to various 5G landscaping reports in order to argue that it is entitled to a far higher royalty amount than InterDigital.
Considering how big a win this arbitral award is for InterDigital, the press release as a whole and particularly the following passage are low-key, but that was presumably necessary in order to avoid friction with Samsung at deal-closing time:
“We welcome the conclusion of the arbitration process and our agreement with Samsung,” commented Julia Mattis, Interim Chief Licensing Officer, InterDigital. “Samsung is one of our longest licensees and I am delighted that we have been able to continue our long-term partnership.”
It is, of course, not known what royalty amount InterDigital would have accepted to enter into a complete agreement with Samsung (like the one it struck with Apple) instead of going into arbitration, but a 67% increase (and a comparison with the InterDigital-Apple deal) makes it rather unlikely that Samsung saved money while it is quite a possibility that Samsung could have had a significantly better deal on the basis of a negotiated royalty rate. It apparently didn’t take that deal, however, because avoiding both arbitration and litigation, which occurred between the two parties about a decado ago, would have involved at least a significant increase of the royalty rate (as explained toward the end of this article).
Whether infringement litigation would have worked out better is impossible to know because a lot would have depended on the two parties’ strategies at different stages and on factors beyond their control. In some courts, Samsung might have successfully argued that the renewal terms should be consistent with those of the prior contract. In others, it might have been enjoined nonetheless, such as on behavioral grounds.
Some people at Apple may be very happy about this outcome, given that they pay a similar royalty amount but have far higher profits than Samsung. And some of Samsung’s competitors in the Android ecosystem may also welcome that this outcome raises a rival’s costs, though when their own contracts with InterDigital are up for renewal, they will have to explain to courts or arbitrators why InterDigital’s latest contract with Samsung should not be deemed a comparable license agreement for purposes of a FRAND determination.
The $119M amount of catch-up sales due in the second quarter on top of the ongoing license fee obligations means that the parties had agreed on interim payments that, unlike the refundable ones required by UK courts, were definitive and (from an accounting point of view) recognizable.
The catch-up period spans 2.25 years (all of 2023 and 2024, plus the first quarter of 2025). Under the new agreement, the amount due for that period would have been $295M (2.25 times the annual royalty figure of $131M). Therefore, Samsung will have made definitive and recognizable payments of $176M during that period. The catch-up payment adds 67% on top of that, meaning that the parties apparently agreed on Samsung continuing to make non-refundable payments at the level of the prior agreement while entering into arbitration over whether InterDigital was entitled to more, not in the sense that Samsung conceded to the arbitration panel that InterDigital should get more, but in terms of InterDigital having no risk of Samsung paying less during the arbitration proceedings than the amount due under the old agreement.
One can deduce from those facts, with only limited uncertainty remaining, that InterDigital would most likely not have accepted to definitively renew the agreement with Samsung on the basis of an unchanged royalty rate. They wanted more (and clearly ended up receiving a lot more). The remaining uncertainty is that there might have been the possibility of a limited refund (not a complete reimbursement), but InterDigital treated it as a very unlikely event.