InterDigital, Inc. (Form: 10-K, Received: 02/26/2013 06:44:09)

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K



þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2012
		OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission file number 1-33579

INTERDIGITAL, INC.

(Exact name of registrant as specified in its charter)



Pennsylvania		23-1882087
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
200 Bellevue Parkway, Suite 300 Wilmington, Delaware		19809 (Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code (302) 281-3600

_____________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Common Stock (par value $0.01 per share) (title of class)		NASDAQ (name of exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None

_____________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $1,267,153,587 as of June 30, 2012 .

The number of shares outstanding of the registrant’s common stock was 41,144,187 as of February 22, 2013.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement to be filed pursuant to Regulation 14A in connection with the registrant's 2012 annual meeting of shareholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K.

TABLE OF CONTENTS



	Page
PART I
ITEM 1. BUSINESS	3
ITEM 1A. RISK FACTORS	12
ITEM 1B. UNRESOLVED STAFF COMMENTS	21
ITEM 2. PROPERTIES	21
ITEM 3. LEGAL PROCEEDINGS	21
ITEM 4. MINE SAFETY DISCLOSURES	26
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	26
ITEM 6. SELECTED FINANCIAL DATA	29
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	86
ITEM 9A. CONTROLS AND PROCEDURES	87
ITEM 9B. OTHER INFORMATION	87
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	87
ITEM 11. EXECUTIVE COMPENSATION	88
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	88
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	88
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	88
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	88
SIGNATURES	94
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 21
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

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PART I


Item 1.	BUSINESS.

Overview

InterDigital designs and develops advanced technologies that enable and enhance wireless communications and capabilities. Since our founding in 1972, we have designed and developed a wide range of innovations that are used in digital cellular and wireless products and networks, including 2G, 3G, 4G and IEEE 802-related products and networks. We are a leading contributor of intellectual property to the wireless communications industry.

Given our long history and focus on advanced research and development, InterDigital has amassed one of the most significant patent portfolios in the wireless industry. As of December 31, 2012, InterDigital's wholly owned subsidiaries held a portfolio of over 19,000 patents and patent applications related to the fundamental technologies that enable wireless communications. In that portfolio are a number of patents and patent applications that we believe are or may be essential or may become essential to cellular and other wireless standards, including the 2G, 3G, 4G and the IEEE 802 suite of standards. That portfolio has largely been built through internal development, supplemented by joint development projects with other companies as well as select patent acquisitions. Products incorporating our patented inventions include: mobile devices, such as cellular phones, tablets, notebook computers and wireless personal digital assistants; wireless infrastructure equipment, such as base stations; and components, dongles and modules for wireless devices.

InterDigital derives revenues primarily from patent licensing and sales, technology solutions licensing and sales and engineering services. In 2012, InterDigital generated revenues of $663.1 million , an increase of $361.4 million , or 120% , from 2011. Additional information about our revenues, profits and assets, as well as additional financial data, is provided in the selected financial data in Part II, Item 6, and in the financial statements and accompanying Notes in Part II, Item 8, of this Form 10-K.

Our Strategy

Our objective is to continue to be a leading designer and developer of technology solutions and intellectual property for the wireless industry and to monetize those solutions and intellectual property through a combination of licensing, sales and other revenue opportunities.

To execute our strategy, we intend to:


•	Develop and source innovative technologies related to wireless. We intend to maintain a leading position in advanced wireless technology, by leveraging our expertise in digital cellular and wireless products to guide internal research and development capabilities and direct our efforts in partnering with leading inventors and partnering with industry players to source new technologies.

•

Establish and grow our patent-based revenue base. We intend to grow our licensing revenue base by adding licensees, expanding into adjacent technology areas that align with our intellectual property position and leveraging the continued growth of the overall mobile technology market. Those licensing efforts can be self-driven or executed in conjunction with licensing partnerships and other efforts, and may involve the vigorous defense of our intellectual property through litigation and other means. We also believe that the size and growth of our patent portfolio enable us to sell patent assets that are not essential to our core licensing programs as a sustainable revenue stream, as well as to execute patent exchanges that can strengthen our overall portfolio.

•

Maintain a collaborative relationship with key industry players and worldwide standards bodies. We intend to continue contributing to the ongoing process of defining wireless standards and other industry-wide efforts, and incorporating our inventions into those technology areas. Those efforts, and the knowledge gained through them, underpin internal development efforts and also help guide technology and intellectual property sourcing through partners and other external sources.

Strategic Alternatives Review and Expansion of Business Strategy

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expansion of our business strategy by enhancing our technology sourcing and establishing a business unit, InterDigital Solutions, dedicated to monetizing the company's market-ready technologies and research capabilities.

Technology Research and Development

As an early participant in the digital wireless market, InterDigital developed pioneering solutions for the primary cellular air interface technologies in use today, TDMA and CDMA. That early involvement, our continued development of those advanced digital wireless technologies and innovations in OFDM/OFDMA and MIMO technologies have enabled us to create our significant worldwide portfolio of patents. In conjunction with our participation in certain standards bodies, we have filed declarations stating that we have patents that we believe are or may be essential or may become essential to cellular and other wireless standards and that we agree to make such patents available for use and license on fair, reasonable and non-discriminatory terms or similar terms consistent with the requirements of the respective standards organizations.

Our capabilities in the development of advanced digital wireless technologies are based on the efforts of a highly specialized engineering team, leveraging leading-edge equipment and software platforms. As of December 31, 2012, we employed approximately 172 engineers, 43% of whom hold advanced degrees and 27% of whom hold doctorate degrees. Over the last three years, investment in development has ranged from $63.8 million to $71.5 million, and the largest portion of this expense has been personnel costs. Additional information about our development expenses is provided in the results of operations, under the heading "Operating Expenses" in Part II, Item 7, of this Form 10-K.

On October 23, 2012, we announced an enhancement to our technology sourcing strategy. The company's internal, self-funded research and development efforts were centralized under Innovation Labs, a unit that will continue to pursue research into the ever-broadening field of mobile communications. In addition, we announced the formation of Innovation Partners, a new external sourcing model based around partnerships with leading inventors and research organizations, as well as the acquisition of technology and patent portfolios that align with InterDigital's roadmap. Finally, the company announced the formation of InterDigital Solutions, with a partial mandate of securing engineering services engagements that could supplement core internal research and development.

As of December 31, 2012, our patent portfolio consisted of approximately 1,500 U.S. patents (approximately 190 of which were issued in 2012) and approximately 8,800 non-U.S. patents (approximately 1,200 of which were issued in 2012). As of the same date, we also had numerous patent applications pending worldwide, with approximately 1,200 pending applications in the United States and approximately 7,900 pending non-U.S. applications. The patents and applications comprising our portfolio relate predominantly to digital wireless radiotelephony technology (including, without limitation, 2G, 3G and 4G technologies). Issued patents expire at differing times ranging from 2013 through 2031.

Our current research efforts are focused on technology solutions to solve the industry's challenge of providing enough bandwidth for handsets and various other connected devices, such as tablets and laptops. We have taken a broad approach to solve these challenges, which includes air interface enhancements, policy-driven bandwidth management, cognitive radio and intelligent and optimized data delivery. We are developing technologies that will enable efficient multimedia content delivery across heterogeneous devices and networks, to enable richer multimedia experience with optimal data usage and radio network efficiency. From an air interface perspective, we are creating evolved system architectures that enable operation in small cells and additional frequency bands, improved cell-edge performance as well as device-to-device communications. These solutions provide interference mitigation across cells, uniform coverage and significantly improved data rates, system capacity and energy efficiency. We are also developing technologies that will optimize use of the current network resources by dynamically allocating and aggregating bandwidth across different networks and spectrum bands. With the goal of reducing the looming bandwidth supply/demand gap in mobile networks, our technologies will enable the aggregation, segregation and offload of traffic.

In the field of machine-to-machine (M2M) applications, we are developing technologies to enable seamless interconnection for multiple access types (cellular, WLAN, WPAN) and M2M service frameworks that can be managed by an operator and leveraged by a diverse set of vertical applications.

InterDigital’s Technology Position

Cellular Technologies

We have a long history of developing cellular technologies, including those related to CDMA and TDMA and, more recently, OFDM/OFDMA and MIMO. A number of our TDMA-based and CDMA-based inventions are being used in all 2G, 2.5G and 3G wireless networks and mobile terminal devices.

We led the industry in establishing TDMA-based TIA/EIA-54 as a digital wireless U.S. standard in the 1980s. We developed a substantial portfolio of TDMA-based patented inventions. These inventions include or relate to

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fundamental elements of TDMA-based systems in use around the world. Some of our TDMA inventions include or relate to:


•	The fundamental architecture of commercial TD/FDMA systems;


•	Methods of synchronizing TD/FDMA systems;


•	A flexible approach to managing system capacity through the reassignment of online subscriber units to different time slots and/or frequencies in response to system conditions;


•	The design of a multi-component base station, utilizing distributed intelligence, which allows for more robust performance; and


•	Initializing procedures that enable roaming.

We have also developed and patented innovative CDMA technology solutions. Today, we hold a significant worldwide portfolio of CDMA patents and patent applications. Similar to our TDMA inventions, we believe that a number of our CDMA inventions are or may be essential or may become essential to the implementation of CDMA systems in use today. Some of our CDMA inventions include or relate to:


•	Global pilot: The use of a common pilot channel to synchronize sub-channels in a multiple access environment;


•	Bandwidth allocation: Techniques including multi-channel and multi-code mechanisms;


•	Power control: Highly efficient schemes for controlling the transmission output power of terminal and base station devices, a vital feature in a CDMA system;


•	Joint detection and interference cancellation techniques for reducing interference;


•	Soft handover enhancement techniques between designated cells;


•	Various sub-channel access and coding techniques;


•	Packet data;


•	Fast handoff;


•	Geo-location for calculating the position of terminal users;


•	Multi-user detection;


•	High-speed packet data channel coding; and


•	High-speed packet data delivery in a mobile environment, including enhanced uplink.

The cellular industry has ongoing initiatives aimed at technology improvements. We have engineering development projects to build and enhance our technology portfolio in many of these areas, including the LTE and LTE-Advanced projects for 3GPP radio technology, further evolution of the 3GPP WCDMA Standard (including HSPA+) and continuing improvements to the legacy GSM-EDGE Radio Access Network. The common goal is to improve the user experience and reduce the cost to operators via increased capacity, reduced cost per bit, increased data rates, improved cell-edge or coverage solutions and reduced latency. Of the above technologies, LTE is the most advanced in that it uses the newer OFDMA/MIMO. Some of our LTE inventions include or relate to:


•	MIMO technologies for reducing interference and increasing data rates;


•	OFDM/OFDMA/SC-FDMA;


•	Power control;


•	Hybrid-ARQ for fast error correction;


•	Discontinuous reception for improved battery life;


•	Control channel structures for efficient signaling;


•	Advanced resource scheduling/allocation (bandwidth on-demand);


•	Security;


•	Home Node-B (femto cells);


•	Relay communications for improved cell-edge performance;

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•	LTE receiver implementations;


•	Carrier aggregation for LTE-Advanced;


•	Multi-carrier HSDPA;


•	Coordinated Multi-Point Communications for LTE-Advanced; and


•	Machine Type Communications (“MTC”).

Other Wireless Technologies

Our strong wireless background includes engineering and corporate development activities that focus on solutions that apply to other wireless market segments. These segments primarily fall within the continually expanding scope of the IEEE 802, IETF and ETSI standards. We are building a portfolio of technology related to WLAN, Wi-Fi, WMAN and the digital cellular area that includes, for example, improvements to the IEEE 802.11 PHY and MAC to increase peak data rates (i.e., IEEE 802.11n, 802.11ac, 802.11ad and future variants), handover among radio access technologies (IEEE 802.21), mesh networks (IEEE 802.11s), radio resource measurements (IEEE 802.11k), wireless network management (IEEE 802.11v), wireless network security and broadband wireless (IEEE 802.16, including WiMAX wireless technology). We are actively developing technology for newer Wi-Fi and WLAN standards focused on fast initial link setup (802.11ai), hotspot operation (WFA HOTSPOT 2.0) and the use of additional spectrum bands, such as TV-Whitespace (802.11af) and sub 1 GHz (802.11ah). We also are expanding our portfolio of technologies in areas such as M2M or MTC, mobility, spectrum management and session continuity within ETSI and IETF. In addition, we have commenced development of a portfolio related to improved video delivery, including solutions related to the ITU-T HEVC standards.

Patent-Based Revenue

We believe that companies making, importing, using or selling products compliant with the standards covered by our patent portfolio, including all manufacturers of mobile handsets, tablets and other devices, require a license under our patents and will require licenses under patents that may issue from our pending patent applications. As of the end of 2012, our licensing efforts had resulted in agreements with companies representing 63% of worldwide 3G device shipments, with an additional 22% of that market the subject of pending litigation. In 2012, we began the process of securing licensing agreements with companies shipping 4G products. We have successfully entered into licensing agreements with many of the leading mobile communications companies globally, including Apple Inc., HTC Corporation, BlackBerry and Samsung Electronics Co., Ltd., among others.

Most of our patent license agreements are structured on a royalty-bearing basis, while others are structured on a paid-up basis or a combination thereof. Upon entering into a new patent license agreement, the licensee typically agrees to pay consideration for sales made prior to the effective date of the license agreement (i.e., past sales) and also agrees to pay royalties or license fees on licensed products sold during the term of the agreement. We expect that, for the most part, new license agreements will follow this model. Almost all of our patent license agreements provide for the payment of royalties based on sales of licensed products designed to operate in accordance with particular standards (convenience-based licenses), as opposed to the payment of royalties if the manufacture, sale or use of the licensed product infringes one of our patents (infringement-based licenses).

In most cases, we recognize the revenue from per-unit royalties in the period when we receive royalty reports from licensees. In circumstances where we receive consideration for past sales, we recognize such payments as revenue in the period in which the patent license agreement is signed. Some of these patent license agreements provide for the non-refundable prepayment of royalties that are usually made in exchange for prepayment discounts. As the licensee reports sales of covered products, the royalties are calculated and either applied against any prepayment or become payable in cash or other consideration. Additionally, royalties on sales of licensed products under the license agreement become payable or applied against prepayments based on the royalty formula applicable to the particular license agreement. These formulas include flat dollar rates per unit, a percentage of sales, a percentage of sales with a per-unit cap and other similar measures. The formulas can also vary by other factors, including territory, covered standards, quantity and dates sold.

Some of our patent licenses are paid up, requiring no additional payments relating to designated sales under agreed upon conditions. Those conditions can include paid-up licenses for a period of time, for a class of products, for a number of products sold, under certain patents or patent claims, for sales in certain countries or a combination thereof. Licenses have become paid-up based on the payment of fixed amounts or after the payment of royalties for a term. With the exception of amounts allocated to past sales, we recognize revenues related to fixed amounts on a straight-line basis. Our license agreements typically contain provisions that give us the right to audit our licensees' books and records to ensure compliance with the licensees' reporting and payment obligations under those agreements. From time to time, these audits reveal underreporting or

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underpayments under the applicable agreements. In such cases, we seek payment for the amount owed and enter into negotiations with the licensee to resolve the discrepancy.

On January 23, 2012, we announced that the company would be adding targeted sales of portions of its large and growing patent portfolio as a revenue stream. This strategy is based on the expectation that the company's portfolio and its growth rate extend well beyond the requirements for a successful licensing program. In addition, the strategy leverages the desire from new entrants in the mobile technology space to build strong intellectual property positions to support their businesses.

In 2012, we executed two patent sales for total revenues of $384.0 million . The major part of those revenues included a $375.0 million patent transaction with Intel Corporation, involving approximately 1,700 patents and applications related to 3G, LTE and 802.11 technologies. The transaction represented approximately 8% of InterDigital's total portfolio of patents and applications at the time.

Other Potential Revenue Sources

The company's strong technology expertise and research and development team also form the basis for other potential revenue opportunities, focused around such areas as engineering services, research joint ventures and the continued development, commercialization and licensing of research and development projects that have progressed to a pre-commercial or commercial phase.

On October 23, 2012, the company announced the formation of InterDigital Solutions. This unit is focused on commercializing market-ready technologies. These include: the company's Smart Access Manager, a standards-based bandwidth management solution for operators, infrastructure companies and device manufacturers, M2M communications technology; and other advanced technologies. InterDigital Solutions' mission adds a component to leverage InterDigital's technology and team to engage in strategic engineering services engagements that supplement the company's core research while acting as new sources of revenue.

During 2012, InterDigital completed the formation of a joint venture with Sony Corporation of America. Called Convida Wireless, the joint venture combines InterDigital's advanced M2M research capabilities with Sony's consumer electronics expertise. The agreement also includes a patent license from InterDigital for Sony's sale of 3G and 4G products. The formation of Convida Wireless will provide an outlet for driving new research in the growing M2M wireless communications field.

Wireless Communications Industry Overview

The wireless communications industry continues to experience rapid growth worldwide, as well as an expansion of device types entering the market. IHS iSuppli estimates that just over 1.5 billion handsets and tablets alone were shipped in 2012—a number that is expected to grow to more than 2 billion devices yearly in 2016 (source: IHS iSuppli, Market Data Tracker, 2012). In addition, the rate of uptake of the latest 4G technologies has been very rapid, with global LTE subscriber growth increasing 334% in 2012 over 2011 ( IHS iSuppli Consumer and Communications Market Tracker Report, August 2012 ).

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Global Mobile Device Shipments

Worldwide shipments of mobile handsets, PCs and tablets, 2006-2016 ('000s). Source: IHS iSuppli Connected Devices Database, Q3 2012.

Global LTE Handset Shipments

Worldwide shipments of LTE handsets, 2010-2016 ('000s). Source: IHS iSuppli Design Forecast - Mobile Handsets, H2 2012.

To achieve economies of scale and support interoperability among different participants, products for the wireless industry have typically been designed to operate in accordance with certain standards. Wireless communications standards are formal guidelines for engineers, designers, manufacturers and service providers that regulate and define the use of the radio frequency spectrum in conjunction with providing detailed specifications for wireless communications products. A primary goal of the standards is to ensure interoperability of products marketed by multiple companies. A large number of international and regional wireless Standards Development Organizations (“SDOs”), including the ITU, ETSI, TIA (USA), IEEE, ATIS (USA), TTA (Korea), ARIB (Japan) and ANSI, have responsibility for the development and administration of wireless

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communications standards. New standards are typically adopted with each new generation of products, are often compatible with previous generations and are defined to ensure equipment interoperability and regulatory compliance.

Standards have evolved in response to consumer demand for services and expanded capabilities of mobile devices. Cellular standards have evolved from voice-oriented services to multimedia services that exploit the higher speeds offered by newer technologies, such as 3G or, most recently, LTE (Long Term Evolution). The wireless communications industry has also made significant advances in non-cellular wireless technologies. In particular, IEEE 802.11 WLAN has gained momentum in recent years as a wireless broadband solution in the home, office and select public areas. IEEE 802.11 technology offers high-speed data connectivity through unlicensed spectra within a relatively modest operating range. The IEEE wireless standards bodies are creating sets of standards to enable higher data rates, provide coverage over longer distances, enable roaming and integrate more fully with cellular networks.

SDOs typically ask participating companies to declare formally whether they believe they hold patents or patent applications essential to a particular standard and whether they are willing to license those patents on either a royalty-bearing basis on fair, reasonable and nondiscriminatory terms or on a royalty-free basis. To manufacture, have made, sell, offer to sell or use such products on a non-infringing basis, a manufacturer or other entity doing so must first obtain a license from the holder of essential patent rights. The SDOs do not have enforcement authority against entities that fail to obtain required licenses, nor do they have the ability to protect the intellectual property rights of holders of essential patents.

InterDigital often publicly characterizes its business, including license agreements and development projects, as pertaining to standards generally characterized as 2G, 3G and/or 4G. In doing this, we generally rely on the positions of the applicable standards-setting organizations in defining the relevant standards. However, the definitions may evolve or change over time, including after we have characterized certain transactions.

Business Activities

2012 Patent Sales

On June 18, 2012, we announced that certain of our subsidiaries had entered into a definitive agreement to sell approximately 1,700 patents and patent applications, including approximately 160 issued U.S. patents and approximately 40 U.S. patent applications, to Intel Corporation for $375.0 million. The sale agreement involved patents primarily related to 3G, LTE and 802.11 technologies. Upon completion of the transaction in third quarter 2012, we recognized $375.0 million as patent sales revenue and $15.6 million as patent sales expense, which was recorded within the patent administration and licensing line on our Consolidated Statements of Income. Included in the patent sales expense was the remaining net book value of the patents sold, as well as commissions and legal and accounting services fees paid in conjunction with the sale.

We intend to pursue additional patent sale opportunities as part of our expanded strategy. However, we are unable to predict the timing and magnitude of any such sales due to the unpredictable nature of the sales cycle for such transactions.

2012 Patent Licensing Activity

I n first quarter 2012, we entered into a worldwide, non-exclusive, royalty-bearing patent license agreement with u-blox AG, headquartered in Switzerland. The agreement covers various products, including wireless modules for consumer electronics and M2M devices which are designed to operate in accordance with 2G, 3G and 4G wireless technologies, including LTE and LTE-Advanced. U-blox is a leading fabless semiconductor provider of embedded position and wireless communications solutions for the consumer, industrial and automotive markets.

Also in first quarter 2012, we entered into an amendment to our worldwide, non-exclusive, royalty-bearing patent license agreement with Cinterion Wireless Modules GmbH, headquartered in Munich, Germany. This amendment expanded the scope of our existing agreement with Cinterion to include products designed to operate in accordance with 4G wireless technologies, including LTE, LTE-Advanced and WiMax standards, in addition to 2G and 3G wireless technologies. We also expanded the patent license, which previously provided coverage for M2M and PC cards, to cover modules for use in certain consumer electronic devices, such as personal computers, tablets and gaming devices. Cinterion is one of the world's leading suppliers of cellular M2M communication modules.

In first quarter 2012, we also entered into an amendment to our worldwide, non-exclusive, royalty-bearing patent license agreement with Sierra Wireless, Inc. to include a license for products designed to operate in accordance with 4G wireless technologies, including LTE, LTE-Advanced and WiMax. Based in Richmond, Canada, Sierra Wireless is a leading supplier of hardware, software and connected services for mobile lifestyles and M2M communications.

In second quarter 2012, we entered into amendments to our worldwide, non-exclusive, royalty-bearing patent license agreements with each of Acer, Inc. and Pantech Co. Ltd. The license agreements as amended include patent coverage for

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products not previously covered, including tablets. Both of the original license agreements covered 2G, 3G and 4G technologies when signed in 2009 (Pantech) and 2011 (Acer).

In third quarter 2012, we entered into a worldwide, non-exclusive, royalty-bearing patent license agreement with Wistron Corporation, a Taiwanese corporation. The agreement covers various products, including handsets, wireless modules, computers, tablets and other consumer electronic devices, designed to operate in accordance with 2G, 3G and 4G wireless standards, including LTE and LTE-Advanced. Wistron is a leading original design manufacturer in the laptop market.

In fourth quarter 2012, we entered into agreements that amend the terms of our worldwide, non-exclusive, royalty-bearing patent license agreements with BlackBerry and Quanta Computers, Inc., in each case to add coverage for 4G products, including LTE, LTE-Advanced and WiMax products.

Also in fourth quarter 2012, we entered into a patent license agreement with Sony Corporation of America that covers Sony's sale of 3G and 4G products.

Customers Generating Revenues Exceeding 10% of Total 2012 Revenues

Intel and Samsung comprised approximately 57% and 15% of our total 2012 revenues, respectively.

In 2009, we entered into a patent license agreement with Samsung Electronics Co., Ltd. (the “2009 Samsung PLA”) covering Samsung's affiliates, including Samsung Electronics America, Inc. Under the terms of the 2009 Samsung PLA, we granted Samsung a non-exclusive, worldwide, fixed-fee royalty-bearing license covering the sale of single-mode terminal units and infrastructure designed to operate in accordance with TDMA-based 2G standards that became paid-up in 2010 and a non-exclusive, worldwide, fixed-fee royalty-bearing license covering the sale of terminal units and infrastructure designed to operate in accordance with 3G standards through 2012. The 2009 Samsung PLA superseded a binding term sheet signed in November 2008 by such parties and terminated a patent license agreement entered into between us and Samsung in 1996. The 2009 Samsung PLA also ended all litigation and arbitration proceedings then ongoing between the parties. Pursuant to the 2009 Samsung PLA, Samsung paid InterDigital $400.0 million in four equal installments over an 18-month period. Samsung paid the first two $100.0 million installments in 2009. We received the third and fourth $100.0 million installments in January 2010 and July 2010, respectively. We recognized revenue associated with the 2009 Samsung PLA on a straight-line basis over the life of the agreement. During 2012 , we recognized $102.7 million of revenue associated with the 2009 Samsung PLA.

Patent Infringement and Declaratory Judgment Proceedings

From time to time, if we believe any party is required to license our patents in order to manufacture and sell certain products and such party refuses to do so, we may institute legal action against them. This legal action typically takes the form of a patent infringement lawsuit or an administrative proceeding such as a Section 337 proceeding before the United States International Trade Commission (“USITC” or the "Commission"). In a patent infringement lawsuit, we would typically seek damages for past infringement and an injunction against future infringement. In a USITC proceeding, we would seek an exclusion order to bar infringing goods from entry into the United States, as well as a cease and desist order to bar further sales of infringing goods that have already been imported into the United States. The response from the subject party can come in the form of challenges to the validity, enforceability, essentiality and/or applicability of our patents to their products. In addition, a party might file a declaratory judgment action to seek a court's declaration that our patents are invalid, unenforceable, not infringed by the other party's products or are not essential. Our response to such a declaratory judgment action may include claims of infringement. When we include claims of infringement in a patent infringement lawsuit, a favorable ruling for the company can result in the payment of damages for past sales, the setting of a royalty for future sales or issuance by the court of an injunction enjoining the manufacturer from manufacturing and/or selling the infringing product.

Contractual Arbitration Proceedings

We and our customers, in the normal course of business, may have disagreements as to the rights and obligations of the parties under the applicable agreement. For example, we could have a disagreement with a licensee as to the amount of reported sales and royalties. Our license agreements typically provide for audit rights as well as private arbitration as the mechanism for resolving disputes. Arbitration proceedings can be resolved through an award rendered by the arbitrators or by settlement between the parties. Parties to arbitration might have the right to have the award reviewed in a court of competent jurisdiction. However, based on public policy favoring the use of arbitration, it is generally difficult to have arbitration awards vacated or modified. The party securing an arbitration award may seek to have that award converted into a judgment through an enforcement proceeding. The purpose of such a proceeding is to secure a judgment that can be used for, if need be, seizing assets of the other party.

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Competition

With respect to our technology development activities, we face competition from in-house development teams at other wireless device companies and semiconductor companies and wireless operators that participate in the wireless standards bodies, whose competing solutions could be adopted into the standards instead of the solutions that we set forth into the standards-setting arena.

Due to the exclusionary nature of patent rights, we do not compete, in a traditional sense, with other patent holders for licensing relationships or sale transactions. Other patent holders do not have the same rights to the inventions and technologies encompassed by our patent portfolio. In any device or piece of equipment that contains intellectual property, the manufacturer may need to obtain licenses from multiple holders of intellectual property. In licensing our patent portfolio, we compete with other patent holders for a share of the royalties, which may face practical limitations. We believe that licenses under a number of our patents are required to manufacture and sell 2G, 3G and 4G products. However, numerous companies also claim that they hold 2G, 3G and 4G patents that are or may be essential or may become essential to cellular and other wireless standards. To the extent that multiple parties all seek royalties on the same product, the manufacturers could claim to have difficulty in meeting the financial requirements of each patent holder. In the past, certain manufacturers have sought antitrust exemptions to act collectively on a voluntary basis. In addition, certain manufacturers have sought to limit aggregate licensing fees or rates for essential patents. Similarly, potential purchasers of our patents often amass patent portfolios for defensive and/or cross-licensing purposes and could choose to acquire patent assets within the same general technology space from other patent holders.

In the last several years, intellectual property has emerged as a strategically important asset class and a number of large patent acquisition transactions have taken place. As new participants have entered the wireless communications industry, the market for intellectual property has become increasingly competitive, with many large, well capitalized companies pursuing wireless patent portfolios. As we enhance our technology sourcing by supplementing our internal research and development efforts with acquisitions of intellectual property assets, we compete with such other companies over available wireless assets.

Employees

As of December 31, 2012 , we had approximately 290 employees. None of our employees are represented by a collective bargaining unit.

Geographic Concentrations

We have one reportable segment. During 2012 , the majority of our revenue was derived from the previously discussed patent sale to Intel, which is headquartered in the United States. The remainder of our 2012 revenue derived from a limited number of licensees based outside of the United States, primarily in Asia. These revenues were paid in U.S. dollars and were not subject to any substantial foreign exchange transaction risk. The table below lists the countries of the headquarters of our licensees and the total revenue derived from each country for the periods indicated (in thousands):



	For the Year Ended December 31,
	2012		2011		2010
United States	$	406,950	$	13,719	$	18,953
Korea	118,078		118,078		175,614
Canada	40,667		54,728		38,820
Taiwan	40,394		43,993		21,559
Japan	39,558		61,594		121,113
China	9,246		688		6,305
Germany	3,470		5,439		10,292
Other Europe	4,700		3,461		1,877
Other Asia	—		42		12
Total	$	663,063	$	301,742	$	394,545

At December 31, 2012 , 2011 and 2010 , we held $185.4 million , or nearly 100% , $146.0 million , or nearly 100% , and $138.4 million , or 99% , respectively, of our property and equipment and patents in the United States net of accumulated depreciation and amortization. At December 31, 2012 , 2011 and 2010 , we also held $0 million , $0.1 million and $0.2 million , respectively, of property and equipment, net of accumulated depreciation, in Canada.

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Corporate Information

The ultimate predecessor company of InterDigital, Inc. was incorporated in 1972 under the laws of the Commonwealth of Pennsylvania and conducted its initial public offering in November 1981. Our corporate headquarters and administrative offices are located in Wilmington, Delaware, USA. Our research and technology development centers are located in the following locations: King of Prussia, Pennsylvania, USA; Melville, New York, USA; San Diego, California, USA; and Montreal, Quebec, Canada.

Our Internet address is www.interdigital.com , where, in the “Investors” section , we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, certain other reports and filings required to be filed under the Securities Exchange Act of 1934, as amended, and all amendments to those reports or filings as soon as reasonably practicable after such material is electronically filed with or furnished to the United States Securities and Exchange Commission. The information contained on or connected to our website is not incorporated by reference into this Form 10-K.

Item 1A. RISK FACTORS.

We face a variety of risks that may affect our business, financial condition, operating results, the trading price of our common stock, or any combination thereof. You should carefully consider the following information and the other information in this Form 10-K in evaluating our business and prospects and before making an investment decision with respect to our common stock. If any of these risks were to occur, our business, financial condition, results of operations or prospects could be materially and adversely affected. In such an event, the market price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties we describe below are not the only ones facing us. Additional risks not presently known to us or that we currently deem immaterial may also affect our business.

Risks Related to Our Business

Rulings in third party legal proceedings, increased scrutiny by antitrust authorities, the outcome of potential patent legislation, USPTO rule changes and international patent rule changes may affect our strategies for patent prosecution, licensing and enforcement and may increase our costs of doing business.

The potential effect of rulings in legal proceedings among third parties may affect our strategies for patent prosecution, licensing and enforcement. In addition, domestic and foreign antitrust authorities have recently increased their scrutiny of the use of standard essential patents in the mobile wireless industry, including the enforcement of such patents against competitors. Such scrutiny may lead to an increase in antitrust inquiries and/or enforcement actions and/or impact the availability of injunctive and monetary relief, which may adversely affect our strategies for patent prosecution, licensing and enforcement and increase our costs of operation. Finally, changes to certain U.S. and international patent laws, rules and regulations may occur in the future, some or all of which may affect our costs, the scope of future patent coverage we secure and remedies we may be entitled to in patent litigation and may require us to reevaluate and modify our patent prosecution, licensing and enforcement strategies. We continue to monitor and evaluate our strategies for prosecution, licensing and enforcement with regard to these developments; however, any resulting change in such strategies may have an adverse impact on our business and financial condition.

Setbacks in defending and enforcing our patent rights could cause our revenue and cash flow to decline.

Major telecommunications equipment manufacturers have challenged, and we expect will continue to challenge, the infringement, validity and enforceability of certain of our patents. In some instances, certain of our patent claims could be substantially narrowed or declared invalid, unenforceable, not essential or not infringed. We cannot assure that the validity and enforceability of our patents will be maintained or that our patents will be determined to be applicable to any particular product or standard. Moreover, third parties could attempt to circumvent certain of our patents through design changes. Any significant adverse finding as to the validity, enforceability or scope of certain of our patents and/or any successful design-around of certain patents could result in the loss of patent licensing revenue from existing licensees, through termination or modification of agreements or otherwise and could substantially impair our ability to secure new patent licensing arrangements, either at all or on beneficial terms.

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Our recently announced plans to broaden our revenue sources through enhanced technology sourcing, commercializing our market-ready technologies and research capabilities and pursuing patent licensing partnerships and patent sales may not be successful and could cause our revenue and cash flow to decline.

On January 23, 2012, we announced that we had expanded our business plan to include patent sales and patent licensing partnerships as additional vehicles to generate revenue. On October 23, 2012, we announced a further expansion of our business strategy by enhancing our technology sourcing and establishing a business unit dedicated to monetizing the company's market-ready technologies and research capabilities. There is no guarantee that we will succeed in acquiring technology and patents or partnering with inventors and research organizations to contribute new areas to our existing portfolio of intellectual property. Also, our technology development activities may experience delays, or the markets for our technology solutions may fail to materialize to the extent or at the rate we expect, each of which could reduce our opportunities for technology sales and licensing and could materially adversely affect our long-term business, financial condition and operating results. There is no guarantee that we will succeed in our pursuit of select patent licensing partnerships or additional patent sales, and, if we are successful, there is no guarantee that the revenue and cash flow generated through such patent sales or licensing partnerships will be greater than the revenue and cash flow we would have generated if we had retained and licensed the patents ourselves. In addition, potential licensees may be reluctant to enter into new patent license agreements, and current licensees may be reluctant to renew their agreements, either at all or on terms acceptable to the company, based on the belief that we plan to sell some of the patents we are asking them to license, which could ultimately cause our revenue and cash flow to decline.

Challenges relating to our ability to enter into new license agreements could cause our revenue and cash flow to decline.

We face challenges in entering into new patent license agreements. The most significant challenge we face is that most potential licensees do not voluntarily seek to enter into license agreements with us before they commence manufacturing and/or selling devices that use our patented inventions. As a result, we must approach companies that are reluctant to take licenses and attempt to establish license agreements with them. The process of identifying potential users of our inventions and negotiating license agreements with reluctant prospective licensees requires significant time, effort and expense. Once discussions with unlicensed companies have commenced, we face the additional challenges imposed by the significant negotiation issues that arise from time to time. Given these challenges relating to our ability to enter into new license agreements, we cannot assure that all prospective licensees will be identified or, if they are identified, will be persuaded during negotiations to enter into a patent license agreement with us, either at all or on terms acceptable to us, and, as a result, our revenue and cash flow could materially decline. In addition, the length of time required to negotiate a license agreement leads to delays in the receipt of the associated revenue stream, which could also cause our revenue and cash flow to decline.

Due to the nature of our business, we could be involved in a number of costly litigation, arbitration and administrative proceedings to enforce our intellectual property rights.

While some companies seek licenses before they commence manufacturing and/or selling devices that use our patented inventions, most do not. Consequently, we approach companies and seek to establish license agreements for using our inventions. We expend significant time and effort identifying potential users of our inventions and negotiating license agreements with companies that may be reluctant to take licenses. However, if we believe that a third party is required to take a license to our patents in order to manufacture, sell, offer for sale, import, or use products, we may commence legal or administrative action against the third party if they refuse to enter into a license agreement with us. In turn, we could face counterclaims that challenge the essential nature of our patents, that our patents are invalid, unenforceable or not infringed or that our royalty rates are other than fair, reasonable and nondiscriminatory. As a result of enforcing our patents, we could be subject to significant legal fees and costs, including the costs and fees of opposing counsel in certain jurisdictions if we are unsuccessful. In addition, litigation, arbitration and administrative proceedings require significant key employee involvement for significant periods of time, which could divert these employees from other business activities.

In addition, the cost of enforcing and defending our intellectual property has been and may continue to be significant. Litigation may be required to enforce our intellectual property rights, protect our trade secrets, enforce patent license and confidentiality agreements or determine the validity, enforceability and scope of proprietary rights of others. In addition, third parties could commence litigation against us seeking to invalidate our patents or obtain a determination that our patents are not infringed, are not essential, are invalid or are unenforceable. As a result of any such litigation, we could lose our proprietary rights or incur substantial unexpected operating costs. Any action we take to protect our intellectual property rights could be costly and could require significant amounts of time by key members of executive management and other personnel.

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Our revenue may be affected by the deployment of 4G or other technologies in place of 2G and 3G technologies or by the need to extend or modify certain existing license agreements to cover subsequently issued patents.

Although we own a growing portfolio of issued and pending patents related to 4G and non-cellular technologies, our patent portfolio licensing program in these areas is less established and may not be as successful in generating licensing income as our 2G and 3G licensing programs. Many wireless operators have selected LTE (or, to a lesser extent, WiMAX) as next-generation technologies for deployment in existing or future spectrum bands as complementary to their existing 2G or 3G networks. Although we believe that certain of our technology is, may be or may become essential to LTE and WiMAX standards, we may not be as successful in licensing 4G products as we have been in licensing 2G and 3G products or we may not achieve a level of royalty revenues on such 4G products that is comparable to that we have historically received on 2G and 3G products.

The licenses that we grant under our patent license agreements typically only cover products designated to operate in accordance with specified cellular technologies and that were manufactured or deployed or soon to be manufactured or deployed at the time of entry into the agreement. As a result, most of our current patent license agreements cover products designed to operate in accordance with 2G and/or 3G Standards but do not cover products designed to operate in accordance with 4G Standards. Also, we have patent license agreements with licensees that now offer for sale types of products that were not sold by such licensees at the time the patent license agreements were entered into and, thus, are not licensed by us. We do not derive patent licensing revenue from the sale of products by our licensees that are not covered by a patent license agreement. In order to grant a patent license for any such products, we will need to extend or modify our patent license agreements or enter into new license agreements with such licensees. We may not be able to modify these license agreements on financial terms acceptable to us, without affecting the other material terms and conditions of our license agreements with such licensees or at all. Further, such modifications may adversely affect our revenue on the sale of products covered by the license prior to modification.

Our revenue and cash flow are dependent upon our licensees' sales and market conditions and other factors that are beyond our control or are difficult to forecast.

A significant portion of our licensing revenues are running royalty-based and dependent on sales by our licensees that are outside our control and that could be negatively affected by a variety of factors, including global and/or country-specific economic conditions, country-specific natural disasters impacting licensee manufacturing and sales, buying patterns of end users, competition for our licensees' products and any decline in the sale prices our licensees receive for their covered products. In addition, our operating results also could be affected by general economic and other conditions that cause a downturn in the market for the licensees of our products or technologies. Our revenue and cash flow also could be affected by (i) the unwillingness of any licensee to satisfy all of their royalty obligations on the terms or within the timeframe we expect or a decline in the financial condition of any licensee or (ii) the failure of sales to meet market forecasts due to global economic conditions, political instability, natural disasters, competitive technologies or otherwise. It is also difficult to predict the timing and amount of licensing revenue associated with past infringement and new licenses and the timing, nature or amount of revenues associated with strategic relationships. The foregoing factors are difficult to forecast and could adversely affect both our quarterly and annual operating results and financial condition. In addition, some of our patent license agreements provide for fixed payments or prepayments that cover our licensees' future sales for a specified period and reduce future cash receipts from those licensees. As a result, our cash flow has historically fluctuated from period to period. Depending upon the payment structure of any new patent license agreements into which we may enter, such cash flow fluctuations may continue in the future.

Royalty rates could decrease for future license agreements.

Royalty payments to us under future license agreements could be lower than anticipated. Certain licensees and others in the wireless industry, individually and collectively, are demanding that royalty rates for patents be lower than historic royalty rates. There is also increasing downward pricing pressure on certain products, including handsets, that we believe implement our patented inventions and some of our royalty rates are tied to the pricing of handsets. In addition, a number of other companies also claim to hold patents that are essential with respect to products for the cellular market. The increasing pricing pressure, as well as the number of patent holders seeking royalties on their cellular technologies, could result in a decrease in the royalty rates we receive for use of our patented inventions, thereby decreasing future revenue and cash flow.

Our revenues are derived primarily from a limited number of licensees or customers.

The mobile device market is very concentrated. As a result, we earn a significant amount of our revenues from a limited number of licensees or customers, and we expect that a significant portion of our revenues will continue to come from a limited number of licensees for the foreseeable future. For example, in 2012 , Intel and Samsung comprised approximately 57% and 15% of our total revenues, respectively. In the event that one or more of our significant licensees or customers fail to meet

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their payment or reporting obligations under their respective license agreements, we are unable to renew one or more of such license agreements upon expiration or our revenues from these licensees significantly decline, our future revenue and cash flow could be materially adversely affected.

We depend on key senior management, engineering, patent and licensing resources.

Our future success depends largely upon the continued service of our directors, executive officers and other key management and technical personnel. Our success also depends on our ability to continue to attract, retain and motivate qualified personnel with specialized patent, licensing, engineering and other skills. The market for such talent in our industry is extremely competitive. In particular, competition exists for qualified individuals with expertise in patents and in licensing and with significant engineering experience in cellular and air interface technologies. Our ability to attract and retain qualified personnel could be affected by any adverse decisions in any litigation or arbitration, by our ability to offer competitive cash and equity compensation and work environment conditions and by the geographic location of our various offices. The failure to attract and retain such persons with relevant and appropriate experience could interfere with our ability to enter into new license agreements and undertake additional technology and product development efforts, as well as our ability to meet our strategic objectives.

Delays in renewing or an inability to renew existing license agreements could cause our revenue and cash flow to decline.

Many of our license agreements have fixed terms. We endeavor to renew license agreements with fixed terms prior to the expiration of the license agreements and, due to various factors, including the technology and business needs and competitive positions of our licensees and, at times, reluctance on the part of our licensees to participate in renewal discussions, we may not be able to renegotiate the license agreements on acceptable terms before the expiration of the license agreement, on acceptable terms after the expiration of the license agreement, or at all. If there is a delay in renegotiating and renewing a license agreement prior to its expiration, there could be a gap in time during which we may be unable to recognize revenue from that licensee or we may be forced to renegotiate and renew the license agreement on terms that are more favorable to such licensee, and, as a result, our revenue and cash flow could be materially adversely affected. In addition, if we fail to renegotiate and renew our license agreements at all, we could lose existing licensees, and our revenue and cash flow could be materially adversely affected. For example, the 3G portion of our patent license agreement with Samsung expired at the end of 2012. If we are unable to renew this agreement at all or on acceptable terms, our revenue would be adversely affected.

Changes to our tax assets or liabilities could have an adverse effect on our consolidated financial condition or results of operations.

The calculation of tax assets and liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. We are subject to examinations by the Internal Revenue Service (IRS) and other taxing jurisdictions on various tax matters, including challenges to various positions we assert in our filings and foreign tax liability and withholding. With our January 1, 2007 adoption of the guidance for accounting for uncertainty in income taxes, certain tax contingencies are recognized when they are determined to be more likely than not to occur. Although we believe we have adequately recorded tax assets and accrued for tax contingencies that meet this criterion, we may not fully recover our tax assets or may be required to pay taxes in excess of the amounts we have accrued. As of December 31, 2012 and 2011, there were certain tax contingencies that did not meet the applicable criteria to record an accrual. In the event that the IRS or another taxing jurisdiction levies an assessment in the future, it is possible the assessment could have an adverse effect on our consolidated financial condition or results of operations.

Our technologies may not be become patented, adopted by wireless standards or widely deployed.

We invest significant resources in the development of advanced wireless technology and related solutions. However, certain of our inventions that we believe will be employed in current and future products, including 4G products, are the subject of patent applications where no patent has been issued to us yet by the relevant patent issuing authorities. There is no assurance that these applications will issue as patents, either at all or with claims that would be required by products in the market currently or in the future. Our investments may not be recoverable or may not result in meaningful revenue if a sufficient number of our technologies are not patented and adopted by the relevant Standards or if products based on the technologies in which we invest are not widely deployed. Competing digital wireless technologies could reduce the opportunities for the adoption or deployment of technologies we develop. If the technologies in which we invest do not become patented or are not adopted by the relevant Standards or deployed in the mainstream markets, at all or at the rate or within time periods we expect, or if we are unable to secure partner support for our technologies, our business, financial condition and operating results could be adversely affected.

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It can be difficult for us to verify royalty amounts owed to us under our licensing agreements, and this may cause us to lose potential revenue.

The standard terms of our license agreements require our licensees to document the sale of licensed products and report this data to us on a quarterly basis. Although our standard license terms give us the right to audit books and records of our licensees to verify this information, audits can be expensive, time consuming, incomplete and subject to dispute. From time to time, we audit certain of our licensees to verify independently the accuracy of the information contained in their royalty reports in an effort to decrease the likelihood that we will not receive the royalty revenues to which we are entitled under the terms of our license agreements, but we cannot give assurances that these audits will be numerous enough and/or effective to that end.

Consolidation in the wireless communications industry could adversely affect our business.

The wireless communications industry has experienced consolidation of participants and sales of participants or their businesses, and these trends may continue. Any concentration or sale within the wireless industry may reduce the number of licensing opportunities or, in some instances, result in the reduction, loss or elimination of existing royalty obligations. Further, if wireless carriers consolidate with companies that utilize technologies that are competitive with our technologies or that are not covered by our patents, we could lose market opportunities, which could negatively impact our revenues and financial condition.

We face risks from doing business in international markets.

A significant portion of our licensees are international, and our licensees sell their products to markets throughout the world. Accordingly, we could be subject to the effects of a variety of uncontrollable and changing factors, including, but not limited to: difficulty in protecting our intellectual property in foreign jurisdictions; enforcing contractual commitments in foreign jurisdictions or against foreign corporations; government regulations, tariffs and other applicable trade barriers; currency control regulations and variability in the value of the U.S. dollar against foreign currency; social, economic and political instability; natural disasters, acts of terrorism, widespread illness and war; potentially adverse tax consequences; and general delays in remittance of and difficulties collecting non-U.S. payments. In addition, we also are subject to risks specific to the individual countries in which we and our licensees do business.

Our industry is subject to rapid technological change, uncertainty and shifting market opportunities.

Our success depends, in part, on our ability to define and keep pace with changes in industry standards, technological developments and varying customer requirements. Changes in industry standards and needs could adversely affect the development of, and demand for, our technology, rendering our technology currently under development obsolete and unmarketable. The patents and applications comprising our portfolio have fixed terms, and, if we fail to anticipate or respond adequately to these changes through the development or acquisition of new patentable inventions, patents or other technology, we could miss a critical market opportunity, reducing or eliminating our ability to capitalize on our patents, technology solutions or both.

The high amount of capital required to obtain radio frequency licenses, deploy and expand wireless networks and obtain new subscribers could slow the growth of the wireless communications industry and adversely affect our business.

Our growth is dependent upon the increased use of wireless communications services that utilize our technology. In order to provide wireless communications services, wireless operators must obtain rights to use specific radio frequencies. The allocation of frequencies is regulated in the United States and other countries throughout the world, and limited spectrum space is allocated to wireless communications services. Industry growth may be affected by the amount of capital required to obtain licenses to use new frequencies, deploy wireless networks to offer voice and data services, expand wireless networks to grow voice and data services and obtain new subscribers. The significant cost of licenses, wireless networks and subscriber additions may slow the growth of the industry if wireless operators are unable to obtain or service the additional capital necessary to implement or expand advanced wireless networks. The growth of our business could be adversely affected if this occurs.

Market projections and data are forward-looking in nature.

Our strategy is based on our own projections and on analyst, industry observer and expert projections, which are forward-looking in nature and are inherently subject to risks and uncertainties. The validity of their and our assumptions, the timing and scope of wireless markets, economic conditions, customer buying patterns, timeliness of equipment development, pricing of products, growth in wireless telecommunications services that would be delivered on wireless devices and availability of capital for infrastructure improvements could affect these predictions. In addition, market data upon which we

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rely is based on third party reports that may be inaccurate. The inaccuracy of any of these projections and/or market data could adversely affect our operating results and financial condition.

The markets for our technology solutions may fail to materialize in the manner we expect.

We are positioning our current development projects for the evolving advanced digital wireless markets. Certain of these markets may continue to develop at a slower rate or pace than we expect and may be of a smaller size than we expect. In addition, there could be fewer applications for our technology and products than we expect. The development of advanced wireless markets also could be affected by general economic conditions, customer buying patterns, timeliness of equipment development, pricing of advanced wireless infrastructure and mobile devices, rate of growth in telecommunications services and the availability of capital for, and the high cost of, radio frequency licenses and infrastructure improvements. Failure of the markets for our technologies and/or our products to materialize to the extent or at the rate we expect could reduce our opportunities for sales and licensing and could materially adversely affect our long-term business, financial condition and operating results.

We face competition from companies developing other or similar technologies.

We face competition from companies, including the in-house development teams at wireless device and semiconductor manufacturing companies and operators, developing other and similar technologies that are competitive with our solutions that we may set forth into the standards-setting arena. Due to competing solutions, our solutions may not be adopted by the relevant standards. In addition, in licensing our patent portfolio, we may compete with other companies, many of whom also claim to hold essential patents, for a share of the available royalties. In any device or piece of equipment that contains intellectual property, the manufacturer may need to obtain a license from multiple holders of intellectual property. To the extent that multiple parties all seek royalties on the same product, the manufacturers could claim to have difficulty in meeting the financial requirements of each patent holder.

Our technology development activities may experience delays.

We may experience technical, financial, resource or other difficulties or delays related to the further development of our technologies. Delays may have adverse financial effects and may allow competitors with comparable technology offerings to gain an advantage over us in the Standards setting arena. There can be no assurance that we will continue to have adequate staffing or that our development efforts will ultimately be successful. Moreover, certain of our technologies have not been fully tested in commercial use, and it is possible that they may not perform as expected. In such cases, our business, financial condition and operating results could be adversely affected, and our ability to secure new licensees and other business opportunities could be diminished.

We rely on relationships with third parties to develop and deploy technology solutions.

Successful exploitation of our technology solutions is partially dependent on the establishment and success of relationships with equipment producers and other industry participants. Delays or failure to enter into licensing or other relationships to facilitate technology development efforts or delays or failure to enter into technology licensing agreements to secure integration of additional functionality could impair our ability to introduce into the market portions of our technology and resulting products, cause us to miss critical market windows or impair our ability to remain competitive.

We may engage in acquisitions or other strategic transactions or make investments that could result in significant changes or management disruption and fail to enhance shareholder value.

We continue to evaluate and may acquire businesses, technology and/or intellectual property, enter into joint ventures or other strategic transactions and purchase equity and debt securities in other entities, including minority equity interests and corporate bonds/notes in publicly traded and privately held companies. In some cases, such strategic investments may serve as consideration for a license in lieu of cash royalties. Most strategic investments entail a high degree of risk and will not become liquid until more than one year from the date of investment, if at all. Acquisitions or strategic investments may not generate financial returns or result in increased adoption or continued use of our technologies. In addition, other investments may not generate financial returns or may result in losses due to market volatility, the general level of interest rates and inflation expectations. We could make strategic investments in early-stage companies, which require us to consolidate or record our share of the earnings or losses of those companies. Our share of any such losses may adversely affect our financial results until we exit from or reduce our exposure to these investments.

Achieving the anticipated benefits of acquisitions depends in part upon our ability to integrate the acquired businesses in an efficient and effective manner. The integration of acquired companies or businesses may result in significant challenges, and we may be unable to accomplish the integration smoothly or successfully. We cannot assure you that the integration of

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acquired businesses, technology and/or intellectual property with our business will result in the realization of the full benefits we anticipate to result from such acquisitions. We may not derive any commercial value from the acquired technology, products and intellectual property or from future technologies and products based on the acquired technology and/or intellectual property, and we may be subject to liabilities that are not covered by the indemnification protection we may obtain.

Changes in financial accounting standards or policies may affect our reported financial condition or results of operations.

From time to time the Financial Accounting Standards Board (the “FASB”) and the SEC change their guidance governing the form and content of our external financial statements. In addition, accounting standard setters and those who interpret U.S. generally accepted accounting principles (“GAAP”), such as the FASB and the SEC may change or even reverse their previous interpretations or positions with regard to how these standards should be applied. A change in accounting principles or their interpretation can have a significant effect on our reported results. In certain cases, the company could be required to apply new or revised guidance retroactively or apply existing guidance differently. For example, in November 2011, the FASB and International Accounting Standards Board released an updated exposure draft, Revenue from Contracts with Customers , which, if it becomes final, could significantly impact the timing of revenue recognition for new and existing contracts with licensees. This and other potential changes in reporting standards could substantially change our reporting practices in a number of areas, including revenue recognition and recording of assets and liabilities, and affect our reported financial condition or results of operations.

Currency fluctuations could negatively affect future product sales or royalty revenues or increase the U.S. dollar cost of our activities and international strategic investments.

We are exposed to risk from fluctuations in currencies, which may change over time as our business practices evolve, that could impact our operating results, liquidity and financial condition. We operate and invest globally. Adverse movements in currency exchange rates may negatively affect our business due to a number of situations, including the following:


•	If the effective price of products sold by our licensees were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for the products could fall, which in turn would reduce our royalty revenues.


•	Assets or liabilities of our consolidated subsidiaries may be subject to the effects of currency fluctuations, which may affect our reported earnings. Our exposure to foreign currencies may increase as we expand into new markets.

•

Certain of our operating and investing costs, such as foreign patent prosecution, are based in foreign currencies. If these costs are not subject to foreign exchange hedging transactions, strengthening currency values in selected regions could adversely affect our near-term operating expenses, investment costs and cash flows. In addition, continued strengthening of currency values in selected regions over an extended period of time could adversely affect our future operating expenses, investment costs and cash flows.

Our engineering services business could subject us to specific costs and risks that we might fail to manage adequately.

We derive a portion of our revenues from engineering services. Any mismanagement of, or negative development in, a number of areas, including, among others, the perceived value of our intellectual property portfolio, our ability to convince customers of the value of our engineering services and our reputation for performance under our service contracts, could cause our revenues from engineering services to decline, damage our reputation and harm our ability to attract future licensees, which would in turn harm our operating results. If we fail to deliver as required under our service contracts, we could lose revenues and become subject to liability for breach of contract. We need to monitor these services adequately in order to ensure that we do not incur significant expenses without generating corresponding revenues. Our failure to monitor these services adequately may harm our business, financial position, results of operations or cash flows.

If wireless handsets are perceived to pose health and safety risks, demand for products of our licensees could decrease.

Media reports and certain studies have suggested that radio frequency emissions from wireless handsets may be linked to health concerns, such as brain tumors, other malignancies and genetic damage to blood, and may interfere with electronic medical devices, such as pacemakers, telemetry and delicate medical equipment. Growing concerns over radio frequency emissions, even if unfounded, could discourage the use of wireless handsets and cause a decrease in demand for the products of our licensees. In addition, concerns over safety risks posed by the use of wireless handsets while driving and the effect of any resulting legislation could reduce demand for the products of our licensees.

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Risks Relating to Our Common Stock and the Notes

The price of our common stock is volatile and may decline regardless of our operating performance.

Historically, we have had large fluctuations in the price of our common stock, and such fluctuations could continue. From January 4, 2010 to February 22, 2013, the trading price of our common stock has ranged from a low of $22.30 per share to a high of $82.50 per share. The market price for our common stock is volatile and may fluctuate significantly in response to a number of factors, most of which we cannot control, including:


•	the public's response to press releases or other public announcements by us or third parties, including our filings with the SEC and announcements relating to licensing, technology development, litigation, arbitration and other legal proceedings in which we are involved and intellectual property impacting us or our business;


•	announcements concerning strategic transactions, such as spin-offs, joint ventures and acquisitions or divestitures;


•	the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;


•	changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;

• investor perceptions as to the likelihood of achievement of near-term goals;

• changes in market share of significant licensees;


•	changes in operating performance and stock market valuations of other wireless communications companies generally; and

• market conditions or trends in our industry or the economy as a whole.

In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

Our increased indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under such indebtedness.

Our total consolidated long-term debt as of December 31, 2012 was approximately $200.4 million . This level of debt could have significant consequences on our future operations, including:


•	making it more difficult for us to meet our payment and other obligations under our 2.50% senior convertible notes due 2016 (the “Notes”);


•	reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;


•	limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; and


•	placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.

Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the Notes.

Our ability to meet our payment and other obligations under the Notes depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that future borrowings will be available to us, in an amount sufficient to enable us to meet our payment obligations under the Notes and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, including the Notes, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the Notes, and this default could cause us to be in default on any other future outstanding indebtedness.

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Our stockholders may not receive the level of dividends provided for in our dividend policy or any dividend at all, and any decrease in or suspension of the dividend could cause our stock price to decline.

Our initial dividend policy, adopted and announced in December 2010, contemplates the payment of a regular quarterly cash dividend of $0.10 per share on our outstanding common stock. We expect to continue to pay quarterly cash dividends on our common stock at the rate set forth in our current dividend policy. However, the dividend policy and the payment and timing of future cash dividends under the policy are subject to the final determination each quarter by our Board of Directors that (i) the dividend will be made in compliance with laws applicable to the declaration and payment of cash dividends, including Section 1551(b) of the Pennsylvania Business Corporation Law, and (ii) the policy remains in our best interests, which determination will be based on a number of factors, including our earnings, financial condition, capital resources and capital requirements, alternative uses of capital, restrictions imposed by any existing debt, economic conditions and other factors considered relevant by the Board of Directors. Given these considerations, our Board of Directors may increase or decrease the amount of the dividend at any time and may also decide to vary the timing of or suspend or discontinue the payment of cash dividends in the future. Any decrease in the amount of the dividend, or suspension or discontinuance of payment of a dividend, could cause our stock price to decline.

If securities or industry analysts fail to continue publishing research about our business, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

The convertible note hedge transactions and warrant transactions that we entered into in connection with the offering of the Notes may affect our earnings per share and/or the market price for our common stock.

In connection with the offering of the Notes, we entered into convertible note hedge transactions with an affiliate of the initial purchaser (the “option counterparty”). We also sold warrants to the option counterparty. These transactions have been accounted for as an adjustment to our shareholders' equity. The convertible note hedge transactions are expected to reduce the potential equity dilution upon conversion of the Notes. The warrants will have a dilutive effect to the extent that the market value per common share of our common stock, as measured under the warrants, exceeds the strike price of the warrants at the time the warrants are exercisable.

In connection with establishing its initial hedge of these transactions, the option counterparty (and/or an affiliate thereof) purchased our common stock in open market transactions and/or privately negotiated transactions and/or entered various cash-settled derivative transactions with respect to our common stock concurrently with, or shortly after, the pricing of the Notes. The option counterparty (and/or an affiliate thereof) may modify its hedge positions from time to time (including during any conversion period related to a conversion of the Notes) by entering into or unwinding various derivative transactions with respect to our common stock and/or by purchasing or selling our common stock in open market transactions and/or privately negotiated transactions. The effect, if any, of any of these transactions and activities on the market price of our common stock will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the market price of our common stock.

Future sales or other dilution of our equity could depress the market price of our common stock.

Sales of our common stock in the public market, or the perception that such sales could occur, could negatively impact the market price of our common stock. We also have several institutional stockholders that own significant blocks of our common stock. If one or more of these stockholders were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of our common stock could be negatively affected.

Under certain circumstances, shares of our common stock could be issued upon conversion of the Notes, which would dilute the ownership interest of our existing stockholders. In addition, the issuance of additional common stock, or issuances of securities convertible into or exercisable for our common stock or other equity linked securities, including preferred stock or warrants, would dilute the ownership interest of our common stockholders and could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.

Approved stock repurchase programs may not result in a positive return of capital to stockholders.

Our board-approved stock repurchase program may not return value to stockholders because the market price of the stock may decline significantly below the levels at which we repurchased shares of stock. Stock repurchase programs are

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intended to deliver stockholder value over the long term, but stock price fluctuations can reduce the effectiveness of such programs.

Provisions of the Notes could discourage an acquisition of us by a third party.

Certain provisions of the Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, including the sale of all or substantially all of our assets, holders of the Notes will have the right, at their option, to require us to repurchase all of their Notes or any portion of the principal amount of such Notes. We may also be required to issue additional shares upon conversion in the event of certain fundamental change transactions. These provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock and could have the effect of discouraging delaying or preventing an acquisition of us by a third party.

We are subject to counterparty risk with respect to the convertible note hedge transactions.

The option counterparty is a financial institution or the affiliate of a financial institution, and we will be subject to the risk that the option counterparty may default or otherwise fail to perform, or may exercise certain rights to terminate their obligations, under the convertible note hedge transactions. Our exposure to the credit risk of the option counterparty will not be secured by any collateral. Recent global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If the option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the convertible note hedge transactions. Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in our common stock market price and in volatility of our common stock. In addition, upon a default by the option counterparty, we may suffer adverse tax consequences and dilution with respect to our common stock. We can provide no assurance as to the financial stability or viability of the option counterparty.


Item 1B.	UNRESOLVED STAFF COMMENTS.

None.


Item 2.	PROPERTIES.

Our research and development activities are conducted in facilities located in King of Prussia, Pennsylvania, USA, Melville, New York, USA, San Diego, California, USA, and Montreal, Quebec, Canada. We own the facility located in King of Prussia, Pennsylvania, which consists of approximately 52,000 square feet of administrative office and research space. We are a party to a lease, scheduled to expire in February 2020, for approximately 44,810 square feet of administrative office and research space in Melville, New York. In addition, we are a party to a lease, scheduled to expire in June 2016, for approximately 14,242 square feet of administrative office and research space in Montreal, Quebec. We are a party to another lease, scheduled to expire in April 2018, for approximately 11,759 square feet of administrative office and research space in San Diego, California. Finally, we are a party to a lease, scheduled to expire in November 2022, for approximately 36,182 square feet of office space in Wilmington, Delaware, which houses our corporate headquarters.


Item 3.	LEGAL PROCEEDINGS.

Samsung, Nokia, Huawei and ZTE 2013 USITC Proceeding (337-TA-868) and Related Delaware District Court Proceedings

On January 2, 2013, the company's wholly owned subsidiaries InterDigital Communications, Inc., InterDigital Technology Corporation, IPR Licensing, Inc. and InterDigital Holdings, Inc. filed a complaint with the USITC against Samsung Electronics Co., Ltd., Samsung Electronics America, Inc. and Samsung Telecommunications America, LLC, Nokia Corporation and Nokia Inc., Huawei Technologies Co., Ltd., Huawei Device USA, Inc. and FutureWei Technologies, Inc. d/b/a Huawei Technologies (USA) and ZTE Corporation and ZTE (USA) Inc. (collectively, the “337-TA-868 Respondents”), alleging violations of Section 337 of the Tariff Act of 1930 in that they engaged in unfair trade practices by selling for importation into the United States, importing into the United States and/or selling after importation into the United States certain 3G and 4G wireless devices (including WCDMA-, cdma2000- and LTE-capable mobile phones, USB sticks, mobile hotspots, laptop computers and tablets and components of such devices) that infringe one or more of up to seven of InterDigital's U.S. patents. The complaint also extends to certain WCDMA and cdma2000 devices incorporating WiFi

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functionality. InterDigital's complaint with the USITC seeks an exclusion order that would bar from entry into the United States infringing 3G or 4G wireless devices (and components), including LTE devices, that are imported by or on behalf of the 337-TA-868 Respondents, and also seeks a cease-and-desist order to bar further sales of infringing products that have already been imported into the United States. Certain of the asserted patents have been asserted against Nokia, Huawei and ZTE in earlier pending USITC proceedings (including the Nokia, Huawei and ZTE 2011 USITC Proceeding (337-TA-800) and the Nokia 2007 USITC Proceeding (337-TA-613), as set forth below) and therefore are not being asserted against those 337-TA-868 Respondents in this investigation. On February 6, 2013, the Administrative Law Judge (“ALJ”) overseeing the proceeding issued an order setting a target date of June 4, 2014 for the Commission's final determination in the investigation, with the ALJ's Initial Determination on alleged violation due on February 4, 2014. On February 21, 2013, each 337-TA-868 Respondent filed their respective responses to the complaint.

On February 21, 2013, Samsung moved for partial termination of the investigation as to six of the seven patents asserted against Samsung, alleging that Samsung was authorized to import the specific 3G or 4G devices that InterDigital relied on to form the basis of its complaint. InterDigital's opposition is due March 4, 2013.

On February 22, 2013, Huawei and ZTE moved to stay the investigation pending their respective requests to the United States District Court for the District of Delaware (described below) to set a FRAND royalty rate for a license that covers the asserted patents, or in the alternative, until a Final Determination issues in the 337-TA-800 investigation. InterDigital's opposition is due March 4, 2013.

On January 2, 2013, the company's wholly owned subsidiaries InterDigital Communications, Inc., InterDigital Technology Corporation, IPR Licensing, Inc. and InterDigital Holdings, Inc. filed four related district court actions in the United States District Court for the District of Delaware against the 337-TA-868 Respondents. These complaints allege that each of the defendants infringes the same patents with respect to the same products alleged in the complaint filed by InterDigital in USITC Proceeding (337-TA-868). The complaints seek permanent injunctions and compensatory damages in an amount to be determined, as well as enhanced damages based on willful infringement and recovery of reasonable attorneys' fees and costs. On January 24, 2013, Huawei filed its answer and counterclaims to InterDigital's complaint. Huawei asserted counterclaims for breach of contract, equitable estoppel, waiver of right to enjoin and declarations that InterDigital has not offered or granted Huawei licenses on fair, reasonable and non-discriminatory (“FRAND”) terms, declarations seeking the determination of FRAND terms and declarations of noninfringement, invalidity and unenforceability of the asserted patents. In addition to the declaratory relief specified in its counterclaims, Huawei seeks specific performance of InterDigital's purported contracts with Huawei and standards-setting organizations, appropriate damages in an amount to be determined at trial, reasonable attorneys' fees and such other relief as the court may deem appropriate. On January 31, 2013, ZTE filed its answer and counterclaims to InterDigital's complaint; ZTE asserted counterclaims for breach of contract, equitable estoppel, waiver of right to enjoin and declarations that InterDigital has not offered ZTE licenses on FRAND terms, declarations seeking the determination of FRAND terms and declarations of noninfringement, invalidity and unenforceability. Nokia and Samsung have not yet responded to the complaints against them. In addition to the declaratory relief specified in its counterclaims, ZTE seeks specific performance of InterDigital's purported contracts with ZTE and standards-setting organizations, appropriate damages in an amount to be determined at trial, reasonable attorneys' fees and such other relief as the court may deem appropriate.

On February 11, 2013, Huawei and ZTE filed motions to expedite discovery and trial on their FRAND-related counterclaims. Huawei seeks a schedule for discovery and trial on its FRAND-related counterclaims that would afford Huawei the opportunity to accept a FRAND license rate at the earliest opportunity, and in any case before December 28, 2013. ZTE seeks a trial on its FRAND-related counterclaims no later than November 2013.

Huawei Complaint to European Commission

On May 23, 2012, Huawei lodged a complaint with the European Commission alleging that InterDigital was acting in breach of Article 102 of the Treaty on the Functioning of the European Union (the "TFEU"). Huawei is claiming that InterDigital has a dominant position with respect to the alleged market for the licensing of its 3G standards-essential patents. Huawei further claims that InterDigital is acting in abuse of its alleged dominant position by allegedly seeking to force Huawei to agree to unfair purchase or selling prices and in applying dissimilar conditions to equivalent transactions contrary to the terms of Article 102 of the TFEU. The European Commission has not yet indicated whether or not it will initiate proceedings against InterDigital as a result of the complaint.

Huawei China Proceedings

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the United States in the market for the licensing of essential patents owned by InterDigital, and abused its market power by engaging in allegedly unlawful practices, including differentiated pricing, tying and refusal to deal. Huawei sought relief in the amount of 20.0 million RMB (approximately 3.2 million USD based on the current exchange rate), an order requiring InterDigital to cease the allegedly unlawful conduct and compensation for its costs associated with this matter. The second complaint names as defendants the company's wholly owned subsidiaries InterDigital Technology Corporation, InterDigital Communications, LLC (now InterDigital Communications, Inc.), InterDigital Patent Holdings, Inc. and IPR Licensing, Inc. This second complaint alleges that InterDigital is a member of certain standards-setting organization(s); that it is the practice of certain standards-setting organization(s) that owners of essential patents included in relevant standards license those patents on FRAND terms; and that InterDigital has failed to negotiate on FRAND terms with Huawei. Huawei is asking the court to determine the FRAND rate for licensing essential Chinese patents to Huawei and also seeks compensation for its costs associated with this matter.

On February 4, 2013, the Shenzhen Intermediate People's Court issued rulings in the two proceedings. With respect to the first complaint, the court decided that InterDigital had violated the Chinese Anti-Monopoly Law by (i) making proposals for royalties from Huawei that the court believed were excessive, (ii) tying the licensing of essential patents to the licensing of non-essential patents, (iii) requesting as part of its licensing proposals that Huawei provide a grant-back of certain patent rights to InterDigital and (iv) commencing a USITC action against Huawei while still in discussions with Huawei for a license. Based on these findings, the court ordered InterDigital to cease the alleged excessive pricing and alleged improper bundling of InterDigital's Chinese essential and non-essential patents, and to pay Huawei approximately 3.2 million USD in damages related to attorneys fees and other charges, without disclosing a factual basis for its determination of damages. The court dismissed Huawei's remaining allegations, including Huawei's claim that InterDigital improperly sought a worldwide license and improperly sought to bundle the licensing of essential patents on multiple generations of technologies. With respect to the second complaint, the court determined that, despite the fact that the FRAND requirement originates from ETSI's Intellectual Property Rights policy, which refers to French law, InterDigital's license offers to Huawei should be evaluated under Chinese law. Under Chinese law, the court concluded that the offers did not comply with FRAND. The court further ruled that the royalties to be paid by Huawei for InterDigital's 2G, 3G and 4G essential Chinese patents under Chinese law should not exceed 0.019% of the actual sales price of each Huawei product, without explanation as to how it arrived at this calculation. InterDigital intends to appeal both decisions.

Nokia, Huawei and ZTE 2011 USITC Proceeding (337-TA-800) and Related Delaware District Court Proceeding

On July 26, 2011, InterDigital's wholly owned subsidiaries InterDigital Communications, LLC (now InterDigital Communications, Inc.), InterDigital Technology Corporation and IPR Licensing, Inc. filed a complaint with the USITC against Nokia Corporation and Nokia Inc., Huawei Technologies Co., Ltd. and FutureWei Technologies, Inc. d/b/a Huawei Technologies (USA) and ZTE Corporation and ZTE (USA) Inc. (collectively, the “337-TA-800 Respondents”), alleging violations of Section 337 of the Tariff Act of 1930 in that they engaged in unfair trade practices by selling for importation into the United States, importing into the United States and/or selling after importation into the United States certain 3G wireless devices (including WCDMA- and cdma2000-capable mobile phones, USB sticks, mobile hotspots and tablets and components of such devices) that infringe seven of InterDigital's U.S. patents. The action also extends to certain WCDMA and cdma2000 devices incorporating WiFi functionality. InterDigital's complaint with the USITC seeks an exclusion order that would bar from entry into the United States any infringing 3G wireless devices (and components) that are imported by or on behalf of the 337-TA-800 Respondents, and also seeks a cease-and-desist order to bar further sales of infringing products that have already been imported into the United States. On October 5, 2011, InterDigital filed a motion requesting that the USITC add LG Electronics, Inc., LG Electronics U.S.A., Inc. and LG Electronics Mobilecomm U.S.A., Inc. as 337-TA-800 Respondents to the complaint and investigation, and that the Commission add an additional patent to the complaint and investigation as well. On December 5, 2011, the ALJ overseeing the proceeding granted this motion and, on December 21, 2011, the Commission determined not to review the ALJ's determination, thus adding the LG entities as 337-TA-800 Respondents and including allegations of infringement of the additional patent.

On January 6, 2012, the ALJ granted the parties' motion to extend the target date for completion of the investigation from February 28, 2013 to June 28, 2013. On March 23, 2012, the ALJ issued a new procedural schedule for the investigation, setting a trial date of October 22, 2012 to November 2, 2012.

On January 20, 2012, LG filed a motion to terminate the investigation as it relates to the LG entities, alleging that there is an arbitrable dispute. The ALJ granted LG's motion on June 4, 2012. On July 6, 2012, the Commission determined not to review the ALJ's order, and the investigation was terminated as to LG. On August 27, 2012, InterDigital filed a petition for review of the ALJ's order in the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”). On September 14, 2012, the Federal Circuit granted LG's motion to intervene. On October 23, 2012, InterDigital filed its opening brief. Responsive briefs were filed on January 22, 2013, and InterDigital's reply brief was filed on February 8, 2013. The Federal Circuit has scheduled oral argument for April 4, 2013.

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On the same date that we filed USITC Proceeding (337-TA-800), we filed a parallel action in the United States District Court for the District of Delaware against the 337-TA-800 Respondents alleging infringement of the same asserted patents identified in USITC Proceeding (337-TA-800). The Delaware District Court complaint seeks a permanent injunction and compensatory damages in an amount to be determined, as well as enhanced damages based on willful infringement, and recovery of reasonable attorneys' fees and costs. On September 23, 2011, the defendants in the Delaware District Court complaint filed a motion to stay the Delaware District Court action pending the parallel proceedings in the USITC. Because the USITC has instituted USITC Proceeding (337-TA-800), the defendants have a statutory right to a mandatory stay of the Delaware District Court proceeding pending a final determination in the USITC. On October 3, 2011, InterDigital amended the Delaware District Court complaint, adding LG as a defendant and adding the same additional patent that InterDigital requested be added to USITC Proceeding (337-TA-800). On October 11, 2011, the Delaware District Court granted the defendants' motion to stay.

On March 21, 2012, InterDigital filed an unopposed motion requesting that the Commission add newly formed entity Huawei Device USA, Inc. as a 337-TA-800 Respondent. On April 11, 2012, the ALJ granted this motion and, on May 1, 2012, the Commission determined not to review the ALJ's determination, thus adding Huawei Device USA, Inc. as a 337-TA-800 Respondent.

On July 20, 2012, in an effort to streamline the evidentiary hearing and narrow the remaining issues, InterDigital voluntarily moved to withdraw certain claims from the investigation, including all of the asserted claims from U.S. Patent No. 7,349,540. By doing so, InterDigital expressly reserved all arguments regarding the infringement, validity and enforceability of those claims. On July 24, 2012, the ALJ granted the motion. On August 8, 2012, the Commission determined not to review the ALJ's Initial Determination granting the motion to terminate the investigation as to the asserted claims of the '540 patent.

On August 23, 2012, the parties jointly moved to extend the target date in view of certain outstanding discovery to be provided by the 337-TA-800 Respondents and third parties. On September 10, 2012, the ALJ granted the motion and issued an Initial Determination setting the evidentiary hearing for February 12, 2013 to February 22, 2013. The ALJ also set June 28, 2013 as the deadline for his Initial Determination as to violation and October 28, 2013 as the target date for the Commission's Final Determination in the investigation. On October 1, 2012, the Commission determined not to review the Initial Determination setting those deadlines, thereby adopting them.

On January 2, 2013, in an effort to streamline the evidentiary hearing and narrow the remaining issues, InterDigital voluntarily moved to withdraw certain additional patent claims from the investigation. By doing so, InterDigital expressly reserved all arguments regarding the infringement, validity and enforceability of those claims. On January 3, 2013, the ALJ granted the motion. On January 23, 2013, the Commission determined not to review the ALJ's Initial Determination granting the motion to terminate the investigation as to those withdrawn patent claims. InterDigital continues to assert seven U.S. patents in this investigation.

The ALJ held the evidentiary hearing from February 12, 2013 to February 21, 2013. The ALJ's final Initial Determination is due by June 28, 2013, and the target date for completion of the investigation is October 28, 2013.

LG Arbitration

On March 19, 2012, LG Electronics, Inc. filed a demand for arbitration against the company's wholly owned subsidiaries InterDigital Technology Corporation, IPR Licensing, Inc. and InterDigital Communications, LLC (now InterDigital Communications, Inc.) with the American Arbitration Association's International Centre for Dispute Resolution (“ICDR”), initiating an arbitration in Washington, D.C. LG seeks a declaration that it is licensed to certain patents owned by InterDigital, including the patents asserted against LG in USITC Proceeding (337-TA-800). On April 18, 2012, InterDigital filed an Answering Statement objecting to the jurisdiction of the ICDR on the ground that LG's claims are not arbitrable, and denying all claims made by LG in its demand for arbitration. The issue of whether LG's claim to arbitrability is wholly groundless is currently on appeal before the Federal Circuit. In January 2013, the appointment of the arbitral tribunal was completed. The tribunal has tentatively set the hearing in the arbitration for the fall of 2013.

Nokia 2007 USITC Proceeding (337-TA-613), Related Delaware District Court Proceeding and Federal Circuit Appeal

In August 2007, InterDigital filed a USITC complaint against Nokia Corporation and Nokia, Inc., alleging a violation of Section 337 of the Tariff Act of 1930 in that Nokia engaged in an unfair trade practice by selling for importation into the United States, importing into the United States and/or selling after importation into the United States certain 3G mobile handsets and components that infringe two of InterDigital's patents. In November and December 2007, a third patent and a fourth patent were added to our complaint against Nokia. The complaint seeks an exclusion order barring from entry into the United States infringing 3G mobile handsets and components that are imported by or on behalf of Nokia. Our complaint also seeks a cease-and-desist order to bar further sales of infringing Nokia products that have already been imported into the United States.

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In addition, on the same date as our filing of USITC Proceeding (337-TA-613), we also filed a complaint in the Delaware District Court alleging that Nokia's 3G mobile handsets and components infringe the same two InterDigital patents identified in the original USITC complaint. The complaint seeks a permanent injunction and damages in an amount to be determined. This Delaware action was stayed on January 10, 2008, pursuant to the mandatory, statutory stay of parallel district court proceedings at the request of a respondent in a USITC investigation. Thus, this Delaware action is stayed with respect to the patents in this case until the USITC's determination on these patents becomes final, including any appeals. The Delaware District Court permitted InterDigital to add to the stayed Delaware action the third and fourth patents InterDigital asserted against Nokia in the USITC action.

On August 14, 2009, the ALJ overseeing USITC Proceeding (337-TA-613) issued an Initial Determination finding no violation of Section 337 of the Tariff Act of 1930. The Initial Determination found that InterDigital's patents were valid and enforceable, but that Nokia did not infringe these patents. In the event that a Section 337 violation were to be found by the Commission, the ALJ recommended the issuance of a limited exclusion order barring entry into the United States of infringing Nokia 3G WCDMA handsets and components, as well as the issuance of appropriate cease-and-desist orders.

On October 16, 2009, the Commission issued a notice that it had determined to review in part the Initial Determination, and that it affirmed the ALJ's determination of no violation and terminated the investigation. The Commission determined to review the claim construction of the patent claim terms “synchronize” and “access signal” and also determined to review the ALJ's validity determinations. On review, the Commission modified the ALJ's claim construction of “access signal” and took no position with regard to the claim term “synchronize” or the validity determinations. The Commission determined not to review the remaining issues decided in the Initial Determination.

On November 30, 2009, InterDigital filed with the Federal Circuit a petition for review of certain rulings by the USITC. In the appeal, neither the construction of the term “synchronize” nor the issue of validity can be raised because the Commission took no position on these issues in its Final Determination. On December 17, 2009, Nokia filed a motion to intervene in the appeal, which was granted by the Federal Circuit on January 4, 2010. In its appeal, InterDigital seeks reversal of the Commission's claim constructions and non-infringement findings with respect to certain claim terms in U.S. Patent Nos. 7,190,966 and 7,286,847, vacatur of the Commission's determination of no Section 337 violation and a remand for further proceedings before the Commission. InterDigital is not appealing the Commission's determination of non-infringement with respect to U.S. Patent Nos. 6,973,579 and 7,117,004. On August 1, 2012, the Federal Circuit issued its decision in the appeal, holding that the Commission had erred in interpreting the claim terms at issue and reversing the Commission's finding of non-infringement. The Federal Circuit adopted InterDigital's interpretation of such claim terms and remanded the case back to the Commission for further proceedings. In addition, the Federal Circuit rejected Nokia's argument that InterDigital did not satisfy the domestic industry requirement. On September 17, 2012, Nokia filed a combined petition for rehearing by the panel or en banc with the Federal Circuit. On January 10, 2013, the Federal Circuit denied Nokia's petition. Nokia has until April 10, 2013 to petition the United States Supreme Court for a writ of certiorari.

On January 17, 2013, the Federal Circuit issued its mandate remanding USITC Proceeding (337-TA-613) to the Commission for further proceedings. On February 4, 2013, the Commission issued an order requiring the parties to submit comments regarding what further proceedings must be conducted to comply with the Federal Circuit's August 1, 2012 judgment, including whether any issues should be remanded to an ALJ to be assigned to this investigation.

Nokia Delaware Proceeding

In January 2005, Nokia filed a complaint in the Delaware District Court against InterDigital Communications Corporation (now InterDigital, Inc.) and its wholly owned subsidiary InterDigital Technology Corporation, alleging that we have used false or misleading descriptions or representations regarding our patents' scope, validity and applicability to products built to comply with 3G standards (the “Nokia Delaware Proceeding”). Nokia's amended complaint seeks declaratory relief, injunctive relief and damages, including punitive damages, in an amount to be determined. We subsequently filed counterclaims based on Nokia's licensing activities as well as Nokia's false or misleading descriptions or representations regarding Nokia's 3G patents and Nokia's undisclosed funding and direction of an allegedly independent study of the essentiality of 3G patents. Our counterclaims seek injunctive relief as well as damages, including punitive damages, in an amount to be determined.

On December 10, 2007, pursuant to a joint request by the parties, the Delaware District Court entered an order staying the proceedings pending the full and final resolution of USITC Proceeding (337-TA-613). Specifically, the full and final resolution of USITC Proceeding (337-TA-613) includes any initial or final determinations of the ALJ overseeing the proceeding, the USITC and any appeals therefrom, and any remand proceedings thereafter. Pursuant to the order, the parties and their affiliates are generally prohibited from initiating against the other parties, in any forum, any claims or counterclaims that are the same as the claims and counterclaims pending in the Nokia Delaware Proceeding, and should any of the same or similar claims or counterclaims be initiated by a party, the other parties may seek dissolution of the stay.

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Except for the Nokia Delaware Proceeding and the Nokia Arbitration Concerning Presentations (described below), the order does not affect any of the other legal proceedings between the parties.

Nokia Arbitration Concerning Presentations

In November 2006, InterDigital Communications Corporation (now InterDigital, Inc.) and its wholly owned subsidiary InterDigital Technology Corporation filed a request for arbitration with the International Chamber of Commerce against Nokia (the “Nokia Arbitration Concerning Presentations”), claiming that certain presentations Nokia has attempted to use in support of its claims in the Nokia Delaware Proceeding (described above) are confidential and, as a result, may not be used in the Nokia Delaware Proceeding pursuant to the parties' agreement.

The December 10, 2007 order entered by the Delaware District Court to stay the Nokia Delaware Proceeding also stayed the Nokia Arbitration Concerning Presentations pending the full and final resolution of USITC Proceeding (337-TA-613).

Other

We are party to certain other disputes and legal actions in the ordinary course of business. We do not believe that these matters, even if adversely adjudicated or settled, would have a material adverse effect on our financial condition, results of operations or cash flows.

Contingency related to Technology Solutions Agreement Arbitration

Our wholly owned subsidiaries InterDigital Communications LLC and InterDigital Technology Corporation are engaged in an arbitration relating to a contractual dispute concerning the scope of royalty obligations and the scope of the licenses granted under one of our technology solutions agreements. The arbitration hearing took place in late June 2012, and a decision is expected in early 2013. As of December 31, 2012 , we have deferred related revenue of $44.3 million pending the resolution of this arbitration and recorded such amount within short-term deferred revenue since we expect a decision within the next twelve months.


Item 4.	MINE SAFETY DISCLOSURES.

Not applicable.

PART II


Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

The principal market for our common stock is the NASDAQ Stock Market (“NASDAQ”). The following table sets forth the high and low sales prices of our common stock for each quarterly period in 2012 and 2011 , as reported by NASDAQ.



	High		Low
2012
First quarter	$	46.09	$	34.86
Second quarter	35.23		22.54
Third quarter	37.27		25.50
Fourth quarter	45.05		34.02



	High		Low
2011
First quarter	$	58.64	$	40.15
Second quarter	49.57		34.61
Third quarter	82.50		41.20
Fourth quarter	52.60		38.51

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Holders

As of February 22, 2013, there were 908 holders of record of our common stock.

Dividends

Prior to 2010, we had not declared any cash dividends on our shares of common stock. In fourth quarter 2010, our Board of Directors approved the company’s initial dividend policy and declared the first quarterly cash dividend of $0.10 per share. Cash dividends on the company's outstanding common stock declared in 2012 and 2011 were as follows (in thousands, except per share data):



2012	Per Share		Total		Cumulative by Fiscal Year
First quarter	$	0.10	$	4,469	$	4,469
Second quarter	0.10		4,348		8,817
Third quarter	0.10		4,095		12,912
Fourth quarter	1.60		65,643		78,555
	$	1.90	$	78,555

2011
First quarter	$	0.10	$	4,535	$	4,535
Second quarter	0.10		4,540		9,075
Third quarter	0.10		4,549		13,624
Fourth quarter	0.10		4,570		18,194
	$	0.40	$	18,194

On December 5, 2012, we announced that our Board of Directors had declared a special cash dividend of $1.50 per share on InterDigital common stock. The dividend was payable on December 28, 2012 to stockholders of record as of the close of business on December 17, 2012. We currently expect to continue to pay dividends comparable to our quarterly $0.10 cash dividends in the future; however, continued payment of cash dividends and changes in the company’s dividend policy will depend on the company’s earnings, financial condition, capital resources and capital requirements, alternative uses of capital, restrictions imposed by any existing debt, economic conditions and other factors considered relevant by our Board of Directors.

Performance Graph

The following graph compares five-year cumulative total returns of the company, the NASDAQ Composite Index and the NASDAQ Telecommunications Stock Index. The graph assumes $100 was invested in the common stock of InterDigital and each index as of December 31, 2007 and that all dividends were re-invested.

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COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN

among InterDigital, Inc., the NASDAQ Composite Index

and the NASDAQ Telecommunications Index



	12/07	12/08	12/09	12/10	12/11	12/12
InterDigital, Inc.	100.00	117.87	113.84	178.48	188.79	186.36
NASDAQ Composite	100.00	59.03	82.25	97.32	98.63	110.78
NASDAQ Telecommunications	100.00	57.58	72.97	86.05	90.3	89.62

Issuer Purchases of Equity Securities

Repurchase of Common Stock

During 2012 , we repurchased a cumulative total of 4.9 million shares of our common stock for an aggregate of $152.7 million under the 2009 Repurchase Program and the 2012 Repurchase Program, each as defined below. We made no share repurchases during 2011 or 2010.

In March 2009, our Board of Directors authorized a $100.0 million share repurchase program (the “2009 Repurchase Program”). The company repurchased shares under the 2009 Repurchase Program through pre-arranged trading plans. During 2012 , we repurchased 2.3 million s hares under the 2009 Repurchase Program for $75.0 million . The 2009 Repurchase Program was completed in second quarter 2012, bringing the cumulative repurchase total under the program to approximately approximately 3.3 million shares at a cost of $ 100.0 million .

In May 2012, our Board of Directors authorized a new share repurchase program, which was then expanded in June 2012 to increase the amount of the program from $100.0 million to $200.0 million (the "2012 Repurchase Program"). The company may repurchase shares under the 2012 Repurchase Program through open market purchases, pre-arranged trading plans or privately negotiated purchases. During 2012 , we repurchased approximately approximately 2.6 million shares under the 2012 Repurchase Program for $77.7 million .

There were no repurchases of common stock during fourth quarter 2012, or from January 1, 2013 through February 25, 2013.

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Item 6.	SELECTED FINANCIAL DATA.



	2012			2011			2010			2009			2008
	(in thousands except per share data)
Consolidated statements of operations data:
Revenues (a)	$	663,063		$	301,742		$	394,545		$	297,404		$	228,469
Income from operations (b)	$	419,030		$	134,757		$	235,873		$	113,889		$	36,533
Income tax provision (c)	$	(136,830	)	$	(35,140	)	$	(84,831	)	$	(25,447	)	$	(13,755	)
Net income applicable to common shareholders	$	271,804		$	89,468		$	153,616		$	87,256		$	26,207
Net income per common share — basic	$	6.31		$	1.97		$	3.48		$	2.02		$	0.58
Net income per common share — diluted	$	6.26		$	1.94		$	3.43		$	1.97		$	0.57
Weighted average number of common shares outstanding — basic	43,070			45,411			44,084			43,295			44,928
Weighted average number of common shares outstanding — diluted	43,396			46,014			44,824			44,327			45,964
Cash dividends declared per common share (d)	$	1.90		$	0.40		$	0.10		$	—		$	—
Consolidated balance sheets data:
Cash and cash equivalents	$	349,843		$	342,211		$	215,451		$	210,863		$	100,144
Short-term investments	227,436			335,783			326,218			198,943			41,516
Working capital	641,434			595,734			440,996			449,762			114,484
Total assets	1,056,609			996,968			874,643			908,485			405,768
Total debt	200,391			192,709			468			1,052			2,929
Total shareholders’ equity	$	518,705		$	471,682		$	353,116		$	169,537		$	87,660

_______________________________________


(a)	In 2012, our revenues included $384.0 million associated with patent sales.


(b)	Our income from operations included charges of $12.5 million and $38.6 million in 2012 and 2009, respectively, associated with actions to reposition the company’s operations.

(c)

In 2012, our income tax provision included a tax benefit of $6.7 million related to the release of valuation allowances on deferred tax assets, which we now expect to utilize. In 2011, our income tax provision included benefits of $6.8 million related to the favorable resolution of tax contingencies and $1.5 million associated with after-tax interest income on tax refunds. In 2009, our income tax provision included a net benefit of approximately $16.4 million, primarily related to the recognition of foreign tax credits. See Note 11 to the Consolidated Financial Statements for further discussion on these foreign tax credits.


(d)	On December 5, 2012, we announced that our Board of Directors had declared a special cash dividend of $1.50 per share on InterDigital common stock. The dividend was payable on December 28, 2012 to stockholders of record as of the close of business on December 17, 2012.


Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

The following discussion should be read in conjunction with the Selected Financial Data, the Consolidated Financial Statements and the Notes thereto contained in this Form 10-K.

Business

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InterDigital derives revenues primarily from patent licensing and sales, technology solutions licensing and sales and engineering services. In 2012 , 2011 and 2010 , our total revenues were $663.1 million , $301.7 million and $394.5 million , respectively. In 2012, we recorded $384.0 million of revenue related to the sale of less than ten percent of our patent portfolio. Our patent licensing revenues in 2012, 2011 and 2010 were $276.6 million , $295.3 million and $370.2 million , respectively.

In 2012 , the amortization of fixed-fee royalty payments accounted for approximately 49% of our patent licensing revenues. These fixed-fee revenues are not affected by the related licensees’ success in the market or the general economic climate. The majority of the remaining portion of our patent licensing revenue is variable in nature due to the per-unit structure of the related license agreements. Approximately 82% of this per-unit, variable portion for 2012 related to sales by two of our licensees with concentrations in the smartphone market and our collection of Japanese licensees, for whom the majority of the sales are within Japan. As a result, our per-unit, variable patent license royalties have been, and will continue to be, largely influenced by the sales performance of these licensees.

Strategic Alternatives Review and Expansion of Business Strategy

On July 19, 2011, we announced that our Board of Directors had initiated a process to explore and evaluate potential strategic alternatives for the company, including a sale or other transaction. We announced on January 23, 2012, that our Board of Directors had concluded its review of strategic alternatives for the company and determined that it was in the best interests of the company and its shareholders to execute on the company's business plan and to expand the plan to include patent sales and patent licensing partnerships as additional vehicles to generate revenue. On October 23, 2012, we announced a further expansion of our business strategy by enhancing our technology sourcing and establishing a business unit, InterDigital Solutions, dedicated to monetizing the company's market-ready technologies and research capabilities. For additional information regarding the company's business strategy, see Part I, Item 1, of this Form 10-K.

Repositioning

On October 23, 2012, we announced that, as part of our ongoing expense management, we had initiated a voluntary early retirement program ("VERP"). In connection with the VERP, we incurred a related repositioning charge of $12.5 million in 2012 . During 2012, cash payments of $1.4 million were made for severance and related costs associated with the VERP. We have accrued $11.1 million for severance and related costs at the balance sheet date. The $12.5 million charge is included within the repositioning line of our Consolidated Statements of Income. Approximately 60 employees elected to participate in the VERP across our locations, the majority of whose last day was December 15, 2012. The majority of the charge recorded in 2012 represents cash obligations associated with severance. We expect to recognize an additional $1.0 million to $2.0 million charge related to the VERP in 2013. All of the severance and related costs are scheduled to be paid within twelve months of the balance sheet date.

We did not incur any repositioning charges during 2011 or 2010 .

Patent Sales

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Patent License Agreements

In fourth quarter 2012, we entered into an agreement that extends the term of our worldwide, non-exclusive, royalty-bearing patent license agreement with BlackBerry. In addition to extending the patent license agreement for a multi-year period, the parties agreed to amend the patent license to add coverage for 4G products, including LTE and LTE-Advanced products.

Also in fourth quarter 2012, we entered into a patent license agreement with Sony that covers Sony's sale of 3G and 4G products.

Additionally, during 2012, we entered into new or expanded patent license agreements with u-blox AG, Cinterion Wireless Modules GmbH, Sierra Wireless, Inc., Acer Inc., Pantech Co. Ltd., Wistron Corporation and Quanta Computers, Inc. These agreements cover various wireless modules for consumer electronics and M2M devices, including handsets, wireless modules, computers and tablets designed to operate in accordance with 4G wireless technologies, LTE, LTE-Advanced and WiMax standards, in addition to 2G and 3G wireless technologies.

Expiration of Patent License Agreement with Samsung

In 2012, we recognized the remaining $102.7 million of revenue associated with the 2009 Samsung PLA. The 2009 Samsung PLA covered the sale of single-mode terminal units and infrastructure designed to operate in accordance with TDMA-based 2G standards, which portion of the license became paid up in 2010, and the sale of terminal units and infrastructure designed to operate in accordance with 3G standards through 2012. Pursuant to the 2009 Samsung PLA, Samsung paid InterDigital $400.0 million in four equal installments over an 18-month period. Samsung paid the first two $100.0 million installments in 2009. We received the third and fourth $100.0 million installments in January 2010 and July 2010, respectively. Upon expiration of the 2009 Samsung PLA, Samsung retained its paid-up license to sell single-mode terminal units and infrastructure designed to operate in accordance with TDMA-based 2G standards and became unlicensed as to all other products covered under the agreement.

In January 2013, we filed a complaint with the USITC against Samsung and seven other respondents, alleging that they engaged in unfair trade practices by selling for importation into the United States, importing into the United States and/or selling after importation into the United States certain 3G and 4G wireless devices that infringe up to seven of InterDigital's U.S. patents.

Patent Licensing Royalties

Patent licensing royalties in 2012 of $276.6 million decreased 6% from the prior year. This $18.7 million year-over-year decrease in patent licensing royalties was primarily driven by a decrease in royalties from our Japanese per-unit licensees and lower shipments from our per-unit licensees with concentrations in the smartphone market. Refer to "Results of Operations -- 2012 Compared with 2011 " for further discussion of our 2012 revenue.

Technology Solutions and Engineering Services

We are engaged in arbitration to determine whether royalties are owed on specific product classes pursuant to one of our technology solutions agreements. As of December 31, 2012 and December 31, 2011 , we have deferred related revenue of $44.3 million and $29.7 million , respectively. These amounts have either been collected or recorded in accounts receivable on their respective balance sheet dates.

During fourth quarter 2012, we entered into an agreement with Convida Wireless, our joint venture with Sony Corporation of America, to provide M2M research and platform development. Work under this agreement commenced during first quarter 2013.

USITC Proceedings

Samsung, Nokia, Huawei and ZTE 2013 USITC Proceeding (337-TA-868) and Related Delaware District Court Proceedings

On January 2, 2013, the company's wholly owned subsidiaries InterDigital Communications, Inc., InterDigital Technology Corporation, IPR Licensing, Inc. and InterDigital Holdings, Inc. filed a complaint with the USITC against Samsung Electronics Co., Ltd., Samsung Electronics America, Inc. and Samsung Telecommunications America, LLC, Nokia Corporation and Nokia Inc., Huawei Technologies Co., Ltd., Huawei Device USA, Inc. and FutureWei Technologies, Inc. d/b/a

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Huawei Technologies (USA) and ZTE Corporation and ZTE (USA) Inc. (collectively, the “337-TA-868 Respondents”), alleging violations of Section 337 of the Tariff Act of 1930 in that they engaged in unfair trade practices by selling for importation into the United States, importing into the United States and/or selling after importation into the United States certain 3G and 4G wireless devices (including WCDMA-, cdma2000- and LTE-capable mobile phones, USB sticks, mobile hotspots, laptop computers and tablets and components of such devices) that infringe one or more of up to seven of InterDigital's U.S. patents. The complaint also extends to certain WCDMA and cdma2000 devices incorporating WiFi functionality. InterDigital's complaint with the USITC seeks an exclusion order that would bar from entry into the United States infringing 3G or 4G wireless devices (and components), including LTE devices, that are imported by or on behalf of the 337-TA-868 Respondents, and also seeks a cease-and-desist order to bar further sales of infringing products that have already been imported into the United States. Certain of the asserted patents have been asserted against Nokia, Huawei and ZTE in earlier pending USITC proceedings (including the Nokia, Huawei and ZTE 2011 USITC Proceeding (337-TA-800) and the Nokia 2007 USITC Proceeding (337-TA-613), as set forth below) and therefore are not being asserted against those 337-TA-868 Respondents in this investigation. On February 6, 2013, the Administrative Law Judge (“ALJ”) overseeing the proceeding issued an order setting a target date of June 4, 2014 for the Commission's final determination in the investigation, with the ALJ's Initial Determination on alleged violation due on February 4, 2014. On February 21, 2013, each 337-TA-868 Respondent filed their respective responses to the complaint.

On February 22, 2013, Huawei and ZTE moved to stay the investigation pending their respective requests to the United States District Court for the District of Delaware to set a FRAND royalty rate for a license that covers the asserted patents, or in the alternative, until a Final Determination issues in the 337-TA-800 investigation. InterDigital's opposition is due March 4, 2013.

On January 2, 2013, the company's wholly owned subsidiaries InterDigital Communications, Inc., InterDigital Technology Corporation, IPR Licensing, Inc. and InterDigital Holdings, Inc. filed four related district court actions in the Delaware District Court against the 337-TA-868 Respondents. These complaints allege that each of the defendants infringes the same patents with respect to the same products alleged in the complaint filed by InterDigital in USITC Proceeding (337-TA-868). The complaints seek permanent injunctions and compensatory damages in an amount to be determined, as well as enhanced damages based on willful infringement and recovery of reasonable attorneys' fees and costs. On January 24, 2013, Huawei filed its answer and counterclaims to InterDigital's complaint. Huawei asserted counterclaims for breach of contract, equitable estoppel, waiver of right to enjoin and declarations that InterDigital has not offered or granted Huawei licenses on FRAND terms, declarations seeking the determination of FRAND terms and declarations of noninfringement, invalidity and unenforceability of the asserted patents. In addition to the declaratory relief specified in its counterclaims, Huawei seeks specific performance of InterDigital's purported contracts with Huawei and standards-setting organizations, appropriate damages in an amount to be determined at trial, reasonable attorneys' fees and such other relief as the court may deem appropriate. On January 31, 2013, ZTE filed its answer and counterclaims to InterDigital's complaint; ZTE asserted counterclaims for breach of contract, equitable estoppel, waiver of right to enjoin and declarations that InterDigital has not offered ZTE licenses on FRAND terms, declarations seeking the determination of FRAND terms and declarations of noninfringement, invalidity and unenforceability. Nokia and Samsung have not yet responded to the complaints against them. In addition to the declaratory relief specified in its counterclaims, ZTE seeks specific performance of InterDigital's purported contracts with ZTE and standards-setting organizations, appropriate damages in an amount to be determined at trial, reasonable attorneys' fees and such other relief as the court may deem appropriate.

Nokia, Huawei and ZTE 2011 USITC Proceeding (337-TA-800) and Related Delaware District Court Proceeding

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U.S. patents. The action also extends to certain WCDMA and cdma2000 devices incorporating WiFi functionality. InterDigital's complaint with the USITC seeks an exclusion order that would bar from entry into the United States any infringing 3G wireless devices (and components) that are imported by or on behalf of the 337-TA-800 Respondents, and also seeks a cease-and-desist order to bar further sales of infringing products that have already been imported into the United States. On October 5, 2011, InterDigital filed a motion requesting that the USITC add LG Electronics, Inc., LG Electronics U.S.A., Inc. and LG Electronics Mobilecomm U.S.A., Inc. as 337-TA-800 Respondents to the complaint and investigation, and that the Commission add an additional patent to the complaint and investigation as well. On December 5, 2011, the ALJ overseeing the proceeding granted this motion and, on December 21, 2011, the Commission determined not to review the ALJ's determination, thus adding the LG entities as 337-TA-800 Respondents and including allegations of infringement of the additional patent.

On January 20, 2012, LG filed a motion to terminate the investigation as it relates to the LG entities, alleging that there is an arbitrable dispute. The ALJ granted LG's motion on June 4, 2012. On July 6, 2012, the Commission determined not to review the ALJ's order, and the investigation was terminated as to LG. On August 27, 2012, InterDigital filed a petition for review of the ALJ's order in the Federal Circuit. On September 14, 2012, the Federal Circuit granted LG's motion to intervene. On October 23, 2012, InterDigital filed its opening brief. Responsive briefs were filed on January 22, 2013, and InterDigital's reply brief was filed on February 8, 2013. The Federal Circuit has scheduled oral argument for April 4, 2013.

Nokia 2007 USITC Proceeding (337-TA-613), Related Delaware District Court Proceeding and Federal Circuit Appeal

On August 1, 2012, the Federal Circuit issued its decision in InterDigital's appeal of the USITC's Final Determination in this proceeding, holding that the Commission had erred in interpreting the claim terms at issue and reversing the

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Commission's finding of non-infringement. The Federal Circuit adopted InterDigital's interpretation of such claim terms and remanded the case back to the Commission for further proceedings. In addition, the Federal Circuit rejected Nokia's argument that InterDigital did not satisfy the domestic industry requirement. On September 17, 2012, Nokia filed a combined petition for rehearing by the panel or en banc with the Federal Circuit. On January 10, 2013, the Federal Circuit denied Nokia's petition. Nokia has until April 10, 2013 to petition the United States Supreme Court for a writ of certiorari.

Please see Part I, Item 3, of this Form 10-K for a fuller discussion of our USITC proceedings.

Cash and Short-Term Investments

At December 31, 2012 , we had $577.3 million of cash and short-term investments and an additional $291.7 million of fixed or prepayments due under agreements signed, including $169.9 million recorded in accounts receivable as it is due within twelve months of the balance sheet date. A substantial portion of this balance relates to fixed and prepaid royalty payments we have received that relate to future sales of our licensees’ products. As a result, our cash receipts from existing licenses subject to fixed and prepaid royalties will be reduced in future periods. During 2012 , we recorded $472.7 million of cash receipts related to patent licensing, technology solutions agreements and patent sales as follows (in thousands):



	Cash In
Fixed royalty payments	$	8,048
Current royalties and past sales	54,513
Prepaid royalties	12,816
Technology solutions	17,367
Patent Sales	380,000
	$	472,744

The $20.9 million of fixed-fee and prepaid royalty cash receipts, together with a $156.8 million accrual of accounts receivable related to scheduled prepaid royalties and fixed-fee payments, partially offset the $223.4 million in deferred revenue recognized, resulting in a net $19.9 million decrease in deferred revenue to $268.1 million at December 31, 2012 . Approximately $84.7 million of our $268.1 million deferred revenue balance relates to fixed royalty payments that are scheduled to amortize as follows (in thousands):



2013	$	62,031
2014	17,190
2015	2,027
2016	2,027
2017	1,459
Thereafter	—
	$	84,734

The remaining $183.4 million of deferred revenue primarily relates to prepaid royalties that will be recorded as revenue as our licensees report their sales of covered products and prepaid royalties that may be recorded as revenue upon the resolution of the arbitration related to one of our technology solutions agreements.

Repurchase of Common Stock

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was completed in second quarter 2012, bringing the cumulative repurchase total under the program to approximately 3.3 million shares at a cost of $ 100.0 million .

In May 2012, our Board of Directors authorized a new share repurchase program, which was then expanded in June 2012 to increase the amount of the program from $100.0 million to $200.0 million (the "2012 Repurchase Program"). The company may repurchase shares under the 2012 Repurchase Program through open market purchases, pre-arranged trading plans or privately negotiated purchases. During 2012 , we repurchased approximately 2.6 million shares under the 2012 Repurchase Program for $77.7 million .

From January 1, 2013 through February 25, 2013, we did not make any share repurchases under the 2012 Repurchase Program.

Intellectual Property Rights Enforcement

If we believe any party is required to license our patents in order to manufacture and sell certain products and such party refuses to do so, we may institute legal action against them. This legal action typically takes the form of a patent infringement lawsuit or an administrative proceeding such as a Section 337 proceeding before the USITC. In addition, we and our licensees, in the normal course of business, might seek to resolve disagreements between the parties with respect to the rights and obligations of the parties under the applicable license agreement through arbitration or litigation.

In 2012 , our intellectual property enforcement costs increased to $52.7 million from $23.7 million and $12.1 million in 2011 and 2010 , respectively. The 2012 amount includes a $3.2 million increase to accrue for a litigation contingency related to the Huawei-China proceedings. This represented 42% of our 2012 total patent administration and licensing costs of $126.3 million . Intellectual property enforcement costs will vary depending upon activity levels, and it is likely they will continue to be a significant expense for us in the future.

Comparability of Financial Results

When comparing 2012 financial results against other periods, the following items should be taken into consideration:

• Our 2012 revenue includes:

◦ $384.0 million of revenue associated with patent sales; and

◦ $26.2 million of past sales related to a new patent license agreement with Sony, new and amended agreements signed during 2012 and revenue associated with the audits of existing licensees.

• Our 2012 operating expenses include:

◦ $16.7 million of expense related our 2012 patent sales;

◦ $12.5 million of expense associated with actions to reposition the company's operations;

◦ $4.4 million charge to increase the accrual rate under our Long-Term Compensation Program ("LTCP") for the program cycle ending December 31, 2012; and

◦ lower accrual rates as compared to 2011 for the remaining two active cycles under the LTCP;

◦ $4.5 million tax benefit for release of valuation allowances on DTA.

Critical Accounting Policies and Estimates

Our consolidated financial statements are based on the selection and application of accounting principles generally accepted in the United States of America (“GAAP”), which require us to make estimates and assumptions that affect the amounts reported in both our consolidated financial statements and the accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from these estimates and any such differences may be material to the financial statements. Our significant accounting policies are described in Note 2 to our Consolidated Financial Statements and are included in Item 8 of Part II of this Form 10-K. We believe the accounting policies that are of particular importance to the portrayal of our financial condition and results and that may involve a higher degree of complexity and judgment in their application compared to others are those relating to revenue recognition, compensation and income taxes. If different assumptions were made or different conditions existed, our financial results could have been materially different.

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Revenue Recognition

We derive the vast majority of our revenue from patent licensing. The timing and amount of revenue recognized from each licensee depends upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations. Such agreements are often complex and include multiple elements. These agreements can include, without limitation, elements related to the settlement of past patent infringement liabilities, up-front and non-refundable license fees for the use of patents and/or know-how, patent and/or know-how licensing royalties on covered products sold by licensees, cross-licensing terms between us and other parties, the compensation structure and ownership of intellectual property rights associated with contractual technology development arrangements, advanced payments and fees for service arrangements and settlement of intellectual property enforcement. For agreements entered into or materially modified prior to 2011, due to the inherent difficulty in establishing reliable, verifiable, and objectively determinable evidence of the fair value of the separate elements of these agreements, the total revenue resulting from such agreements has often been recognized over the performance period. Beginning in January 2011, all new or materially modified agreements are being accounted for under the Financial Accounting Standards Board ("FASB") revenue recognition guidance, "Revenue Arrangements with Multiple Deliverables." This guidance requires consideration to be allocated to each element of an agreement that has stand alone value using the relative fair value method. In other circumstances, such as those agreements involving consideration for past and expected future patent royalty obligations, after consideration of the particular facts and circumstances, the appropriate recording of revenue between periods may require the use of judgment. In all cases, revenue is only recognized after all of the following criteria are met: (1) written agreements have been executed; (2) delivery of technology or intellectual property rights has occurred or services have been rendered; (3) fees are fixed or determinable; and (4) collectibility of fees is reasonably assured.

We establish a receivable for payments expected to be received within twelve months from the balance sheet date based on the terms in the license. Our reporting of such payments often results in an increase to both accounts receivable and deferred revenue. Deferred revenue associated with fixed-fee royalty payments is classified on the balance sheet as short-term when it is scheduled to be amortized within twelve months from the balance sheet date. All other deferred revenue is classified as long term, as amounts to be recognized over the next twelve months are not known.

Patent License Agreements

Upon signing a patent license agreement, we provide the licensee permission to use our patented inventions in specific applications. We account for patent license agreements in accordance with the guidance for revenue arrangements with multiple deliverables and the guidance for revenue recognition. We have elected to utilize the leased-based model for revenue recognition, with revenue being recognized over the expected period of benefit to the licensee. Under our patent license agreements, we typically receive one or a combination of the following forms of payment as consideration for permitting our licensees to use our patented inventions in their applications and products:

Consideration for Past Sales: Consideration related to a licensee’s product sales from prior periods may result from a negotiated agreement with a licensee that utilized our patented inventions prior to signing a patent license agreement with us or from the resolution of a disagreement or arbitration with a licensee over the specific terms of an existing license agreement. We may also receive consideration for past sales in connection with the settlement of patent litigation where there was no prior patent license agreement. In each of these cases, we record the consideration as revenue when we have obtained a signed agreement, identified a fixed or determinable price and determined that collectibility is reasonably assured.

Fixed-Fee Royalty Payments: These are up-front, non-refundable royalty payments that fulfill the licensee’s obligations to us under a patent license agreement for a specified time period or for the term of the agreement for specified products, under certain patents or patent claims, for sales in certain countries, or a combination thereof — in each case for a specified time period (including for the life of the patents licensed under the agreement). We recognize revenues related to Fixed-Fee Royalty Payments on a straight-line basis over the effective term of the license. We utilize the straight-line method because we cannot reliably predict in which periods, within the term of a license, the licensee will benefit from the use of our patented inventions.

Prepayments: These are up-front, non-refundable royalty payments towards a licensee’s future obligations to us related to its expected sales of covered products in future periods. Our licensees’ obligations to pay royalties typically extend beyond the exhaustion of their Prepayment balance. Once a licensee exhausts its Prepayment balance, we may provide them with the opportunity to make another Prepayment toward future sales or it will be required to make Current Royalty Payments.

Current Royalty Payments: These are royalty payments covering a licensee’s obligations to us related to its sales of covered products in the current contractual reporting period.

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us. We typically receive these royalty reports subsequent to the period in which our licensees’ underlying sales occurred. As a result, it is impractical for us to recognize revenue in the period in which the underlying sales occur, and, in most cases, we recognize revenue in the period in which the royalty report is received and other revenue recognition criteria are met due to the fact that without royalty reports from our licensees, our visibility into our licensees’ sales is very limited.

The exhaustion of Prepayments and Current Royalty Payments are often calculated based on related per-unit sales of covered products. From time to time, licensees will not report revenues in the proper period, most often due to legal disputes. When this occurs, the timing and comparability of royalty revenue could be affected. In cases where we receive objective, verifiable evidence that a licensee has discontinued sales of products covered under a patent license agreement with us, we recognize any related deferred revenue balance in the period that we receive such evidence.

Patent Sales

During 2012, we expanded our business strategy of monetizing our intellectual property to include the sale of select patent assets. As patent sales executed under this expanded strategy represent a component of our ongoing major or central operations and activities, we will record the related proceeds as revenue. We will recognize the revenue when there is persuasive evidence of a sales arrangement, fees are fixed or determinable, delivery has occurred and collectibility is reasonably assured. These requirements are generally fulfilled upon closing of the patent sale transaction.

Technology Solutions and Engineering Services

Technology solutions revenue consists primarily of revenue from software licenses and engineering services. Software license revenues are recognized in accordance with the original and revised guidance for software revenue recognition. When the arrangement with a customer includes significant production, modification, or customization of the software, we recognize the related revenue using the percentage-of-completion method in accordance with the accounting guidance for construction-type and certain production-type contracts. Under this method, revenue and profit are recognized throughout the term of the contract, based on actual labor costs incurred to date as a percentage of the total estimated labor costs related to the contract. Changes in estimates for revenues, costs and profits are recognized in the period in which they are determinable. When such estimates indicate that costs will exceed future revenues and a loss on the contract exists, a provision for the entire loss is recognized at that time.

We recognize revenues associated with engineering service arrangements that are outside the scope of the accounting guidance for construction-type and certain production-type contracts on a straight-line basis, unless evidence suggests that the revenue is earned in a different pattern, over the contractual term of the arrangement or the expected period during which those specified services will be performed, whichever is longer. In such cases we often recognize revenue using proportional performance and measure the progress of our performance based on the relationship between incurred labor hours and total estimated labor hours or other measures of progress, if available. Our most significant cost has been labor and we believe both labor hours and labor cost provide a measure of the progress of our services. The effect of changes to total estimated contract costs is recognized in the period such changes are determined.

When technology solutions agreements include royalty payments, we recognize revenue from the royalty payments using the same methods described above under our policy for recognizing revenue from patent license agreements.

Sony Agreement

On December 21, 2012, we formed a joint venture with Sony Corporation of America to combine Sony's consumer electronics expertise with our wireless M2M and bandwidth management research. The joint venture, called Convida Wireless, will focus on driving new research in M2M wireless communications and other connectivity areas. Based on the terms of the agreement, the parties will contribute funding and resources for additional M2M research and platform development, which we will perform. Stephens Capital Partners LLC (“Stephens”), the principal investing affiliate of Stephens Inc., is a minority investor in Convida Wireless.

Our agreement with Sony is a multiple-element arrangement that also includes a three-year license to our patents for Sony's sale of 3G and 4G products, effective January 1, 2013, and an amount for past sales.

Under the arrangement, we expect to collect a total of $125.0 million of cash and have also acquired certain patents covering non-baseband technologies from Sony. We have estimated the value of the acquired patents to be $28.9 million . We estimated the fair value of patents by a combination of a discounted cash flow analysis (the income approach) and an analysis of comparable market transactions (the market approach). For the income approach, the inputs and assumptions used to develop this estimate were based on a market participant perspective and included estimates of projected royalties, discount rates, useful lives and income tax rates, among others. For the market approach, judgment was applied as to which market transactions were

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most comparable to this transaction. These inputs and assumptions represent our best estimates at the time of the transaction. Changes in any number of these assumptions may have had a substantial impact on the estimated value of the acquired patents.

In connection with this arrangement, we recognized $22.3 million of patent licensing revenue in fourth quarter 2012, and we expect to recognize $116.6 million of patent licensing revenue, using the straight-line method, over the three-year term of the patent license. The remaining $15.0 million represents funding toward M2M research and platform development.

Convida Wireless is a variable interest entity. Based on our provision of M2M research and platform development services to Convida Wireless, we have determined that we are the primary beneficiary for accounting purposes and must consolidate Convida Wireless. Because Convida Wireless had no operations in 2012, the consolidation of Convida Wireless had no impact on our financial statements as of December 31, 2012, and there was no income or loss to allocate to interests held by other parties.

The agreement is a multiple-element arrangement for accounting purposes. As discussed in our revenue recognition policy footnote, we identified each element of the arrangement and determined when those elements should be recognized. Using the accounting guidance from multiple-element revenue arrangements, we allocated the consideration to each element for accounting purposes using our best estimate of selling price for each element. The development of a number of these inputs and assumptions in the model requires a significant amount of management judgment and is based upon a number of factors, including the selection of industry comparables, market growth rates and other relevant factors. Changes in any number of these assumptions may have had a substantial impact on the fair value as assigned to each element for accounting purposes. These inputs and assumptions represent management's best estimates at the time of the transaction.

The impact that a five percent change in each of the following key estimates would have had on fourth quarter 2012 revenue and pretax income is summarized in the following table (in millions):



	Change in estimate
	+ 5%			- 5%
Value of patents acquired	$	1.4		$	(1.4	)
Allocation between past and future royalties	$	(7.0	)	$	7.0

Compensation Programs

We use a variety of compensation programs to both attract and retain employees, and to more closely align employee compensation with company performance. These programs include, but are not limited to, short-term incentive awards tied to performance goals and cash awards to inventors for filed patent applications and patent issuances, as well as, prior to 2010, restricted stock unit (“RSU”) awards for non-managers and the LTCP for managers, which included both time-based and performance-based RSUs and a performance-based cash incentive component. Prior to 2010, LTCP awards would alternate annually between RSU and cash cycles, each of which generally covered a three-year period and could overlap with another cycle by as many as two years.

In fourth quarter 2010, the LTCP was amended to, among other things, increase the relative proportion of performance-based compensation for executives and managers, extend participation to all employees, and eliminate alternating RSU and cash cycles. Effective with the cycle that began on January 1, 2010 through December 31, 2012, executives and managers received 25% of their LTCP participation in the form of time-based RSUs that vest in full at the end of the respective three-year cycle and the remaining 75% in the form of performance-based awards granted under the long-term incentive plan (“LTIP”) component of the LTCP. LTIP performance-based awards may be paid out in the form of cash, equity or any combination thereof, as determined by the Compensation Committee of the Board of Directors. Where the form of payment has not been determined at the beginning of the cycle, as is the case of Cycle 5, Cycle 6 and Cycle 7 (each as defined below), the LTIP payment is assumed to be 100% cash for accounting purposes. All employees below manager level received 100% of their LTCP participation in the form of time-based RSUs that vest in full at the end of the respective three-year cycle. The following LTCP cycles were active for all or some portion of the three years ended December 31, 2012 :


•	Cash Cycle 3: A long-term performance-based cash incentive covering the period January 1, 2008 through December 31, 2010;


•	RSU Cycle 4: Time-based and performance-based RSUs granted on January 1, 2009, with a target vest date of January 1, 2012;


•	Cycle 5: Time-based RSUs granted on November 1, 2010, which vested on January 1, 2013, and a long-term performance-based incentive covering the period from January 1, 2010 through December 31, 2012;

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•	Cycle 6 : Time-based RSUs granted on January 1, 2011, which vest on January 1, 2014, and a long-term performance-based incentive covering the period from January 1, 2011 through December 31, 2013; and


•	Cycle 7 : Time-based RSUs granted on January 1, 2012, which vest on January 1, 2015, and a long-term performance-based incentive covering the period from January 1, 2012 through December 31, 2014.

______________________________________

Note: The long-term performance-based incentives for each of Cycle 6 and Cycle 7 were converted into performance-based RSUs on January 18, 2013. As the conversion occurred after December 31, 2012, these cycles were accounted for as cash awards during 2011 and 2012.

We recognized share-based compensation expense of $6.5 million , $8.1 million and $5.8 million in 2012 , 2011 and 2010 , respectively. Included in 2011 is a charge of $1.3 million to increase the accrual rate for the performance-based RSU grant under RDU Cycle 4 from 0% to 31% based on the final payout associated with this grant. We also recognized $8.3 million , $1.8 million and $11.2 million of compensation expense in 2012 , 2011 and 2010 , respectively, related to the performance-based cash incentive under our LTCP.

In 2012, performance-based cash incentive cost of $8.3 million includes a charge of $4.4 million to increase the accrual rate for Cycle 5 from the previously estimated payout of 50% to the actual payout of 100%. The increase in the incentive payout from 50% to 100% was driven by the company's success in achieving a number of key goals, including the execution of strategic patent sales and the signing of new or amended 4G patent license agreements, after we had reduced the accrual rate to 50% in 2011.

In 2011, performance-based cash incentive cost of $1.8 million is net of a reduction of $5.7 million to decrease the accrual rates for Cycle 5 and Cycle 6 from 100% to 50%. This reduction was driven by the impact of our strategic alternatives review process on the timing of license agreements and includes a $1.9 million adjustment to amounts accrued through December 31, 2010.

In 2010, the performance-based cash incentive cost includes a charge of $3.3 million to increase the accrual rate for Cash Cycle 3 from the previously estimated payout of 50% to the actual payout of 86%. The increase in the incentive payout from 50% to 86% was driven by the company's success in achieving a number of key goals, including the signing of five new or amended 3G patent license agreements, after we had reduced the accrual rate to 50% in third quarter 2009.

At December 31, 2012 , accrued compensation expense associated with the LTCP’s performance-based incentives was based on estimated payouts of 100%, 50% and 0% for Cycle 5, Cycle 6 and Cycle 7, respectively. Under both the current and immediately prior versions of the program, 100% achievement of the goals set by the Compensation Committee of the Board of Directors results in a 100% payout of the performance-based incentive target amounts. For each 1% change above or below 100% achievement, the payout is adjusted by 2.5 percentage points, with a maximum payout under the current program of 200%, a maximum payout of 225% under the current program and no payout under either program for performance that falls below 80% achievement. The following table provides examples of the performance-based incentive payout that would be earned based on various levels of goal achievement:

Payout Scenarios Under Current LTCP Program

Goal Achievement	Payout
less than 80%	—	%
80%	50	%
100%	100	%
120%	150	%
140% or greater (current program maximum)	200	%
150% or greater (prior program maximum)	225	%

If we had assumed that goal achievement for Cycle 6 would be either 100% or less than 50%, we would have accrued $3.8 million more or less, respectively, of related compensation expense through December 31, 2012 .

If we had assumed that goal achievement for Cycle 7 would be 100% or 50%, we would have accrued $3.2 million or $1.6 million , respectively, of related compensation expense through December 31, 2012 .

For LTCP RSU cycles that began prior to 2010, executives received 50% of their RSU grant as performance-based RSUs and 50% as time-based RSUs, and the company’s managers received 25% of their RSU grant as performance-based RSUs and 75% as time-based RSUs.

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Under the prior LTCP program, 100% achievement of the goals set by the Compensation Committee of the Board of Directors resulted in a 100% payout of the performance-based RSU incentive target amounts. For each 1% change above or below 100% achievement, the RSU payout was adjusted by 4 percentage points, with a maximum payout of 300%. For performance that fell below 80% achievement, no payout would occur. The following table provides examples of the performance-based RSU payout that would have been earned based on various levels of goal achievement:

Payout Scenarios Under Prior LTCP Program

Goal Achievement	Payout
less than 80%	—	%
80%	20	%
100%	100	%
120%	180	%
150% or greater	300	%

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statement of Income in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if management has determined that it is more likely than not that such assets will not be realized.

In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. We are subject to examinations by the Internal Revenue Service (“IRS”) and other taxing jurisdictions on various tax matters, including challenges to various positions we assert in our filings. In the event that the IRS or another taxing jurisdiction levies an assessment in the future, it is possible the assessment could have a material adverse effect on our consolidated financial condition or results of operations.

The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon audit by the applicable tax authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50 percent likely of being realized upon ultimate settlement. In the event that the IRS or another taxing jurisdiction levies an assessment in the future, it is possible the assessment could have a material adverse effect on our consolidated financial condition or results of operations.

During fourth quarter 2009, we completed a study to assess the company’s ability to utilize foreign tax credit carryovers into the tax year 2006. As a result of the study, we amended our United States federal income tax returns for the periods 1999 — 2005 to reclassify $29.3 million of foreign tax payments we made during those periods from deductions to foreign tax credits. We also amended our federal tax returns for the periods 2006 - 2008 to utilize the resulting tax credits. When we completed the study, we established a basis to support amending the returns and estimated that the maximum incremental benefit would be $19.1 million . We recognized a net benefit of $16.4 million after establishing a $2.7 million reserve for related tax contingencies. In 2011, we recorded an additional tax benefit of $8.3 million to eliminate this $2.7 million reserve and other tax contingencies and recognize interest income on the associated refund.

Between 2006 and 2012, we paid approximately $145.8 million in foreign taxes for which we have claimed foreign tax credits against our U.S. tax obligations. It is possible that as a result of tax treaty procedures, the U.S. government may reach an agreement with the related foreign governments that will result in a partial refund of foreign taxes paid with a related reduction in our foreign tax credits. Due to both foreign currency fluctuations and differences in the interest rate charged by the U.S. government compared to the interest rates, if any, used by the foreign governments, any such agreement could result in interest expense and/or foreign currency gain or loss.

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New Accounting Guidance

Accounting Standards Updates: Fair Value Measurements: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS

In May 2011, the FASB issued authoritative guidance that is more closely aligned with the fair value measurement and disclosure guidance issued by the International Accounting Standards Board ("IASB"). The issuance of this standard results in global fair value measurement and disclosure guidance that minimizes the differences between U.S. GAAP and International Financial Reporting Standards. Many of the changes in the final standard represent clarifications to existing guidance, while some changes related to the valuation premise and the application of premiums and discounts and new required disclosures are more significant. This guidance is effective for interim and annual periods beginning after December 15, 2011. We adopted this guidance effective January 1, 2012; however, the adoption of this guidance does not have a significant impact on the company’s financial statements or related disclosures.

Accounting Standards Updates: Presentation of Comprehensive Income

In June 2011, the FASB issued authoritative guidance requiring most entities to present items of net income and other comprehensive income either in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive, statements of net income and other comprehensive income. The option to present items of other comprehensive income in the statement of changes in equity was eliminated. This guidance is effective for interim and annual periods beginning after December 15, 2011. We adopted this guidance effective January 1, 2012. We have chosen to present items of net income and other comprehensive income in two separate but consecutive statements.

On December 23, 2011, the FASB issued an amendment to the new standard on comprehensive income to defer the requirement to measure and present reclassification adjustments from accumulated other comprehensive income to net income by income statement line item in net income and also in other comprehensive income. The deferred requirement would have called for the measurement and presentation in net income of items previously recognized in other comprehensive income.

In February 2013, the FASB issued final guidance on the presentation of reclassifications out of other comprehensive income. The amendments require an entity to provide information about the amounts reclassified out of other comprehensive income by component. In addition, an entity is required to present, either on the face of the income statement or in a footnote, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, only if the amount reclassified is required by GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide detail about those amounts. This amendment is effective for interim and fiscal years beginning after December 15, 2012. The amended standard will not impact the Company's financial position or results of operations.

Legal Proceedings

We are routinely involved in disputes associated with enforcement and licensing activities regarding our intellectual property, including litigations and other proceedings. These litigations and other proceedings are important means to enforce our intellectual property rights. We are a party to other disputes and legal actions not related to our intellectual property, but also arising in the ordinary course of our business. Refer to Part I, Item 3, of this Form 10-K for a description of our material legal proceedings.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS

Our primary sources of liquidity are cash, cash equivalents and short-term investments, as well as cash generated from operations. We have the ability to obtain additional liquidity through debt and equity financings. Based on our past performance and current expectations, we believe our available sources of funds, including cash, cash equivalents and short-term investments and cash generated from our operations, will be sufficient to finance our operations, capital requirements, debt obligations and existing stock repurchase and dividend programs in the next twelve months.

On April 4, 2011, we completed an offering of $230.0 million in aggregate principal amount of 2.50% Senior Convertible Notes due 2016 (the "Notes"). The net proceeds from the offering were approximately $222.0 million, after deducting the initial purchaser's discount and offering expenses. A portion of the net proceeds of the offering were used to fund the cost of the convertible note hedge transactions entered into in connection with the offering of the Notes. Refer to Note 6, "Obligations," in the Notes to Condensed Consolidated Financial Statements included in Part II, Item 8, of this Form 10-K for a more detailed discussion of the Notes.

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On June 18, 2012, we announced that certain of our subsidiaries had entered into a definitive agreement to sell approximately 1,700 patents to Intel Corporation for $375.0 million in cash. Upon the closing of the transaction in third quarter 2012, we received $375.0 million of cash and recorded this amount as revenue. Driven by this transaction, we made an estimated federal tax payment of approximately $104.0 million in fourth quarter 2012.

We have and expect to continue to use the net proceeds discussed above for general corporate purposes, which may include, among other things: acquisitions of intellectual property-related assets or businesses or securities in such businesses, capital expenditures, payment of cash dividends, funding of our existing stock repurchase program and working capital.

Cash, cash equivalents and short-term investments

At December 31, 2012 and December 31, 2011 , we had the following amounts of cash, cash equivalents and short-term investments (in thousands):



	December 31, 2012		December 31, 2011		Increase / (Decrease)
Cash and cash equivalents	$	349,843	$	342,211	$	7,632
Short-term investments	227,436		335,783		(108,347		)
Total cash and cash equivalents and short-term investments	$	577,279	$	677,994	$	(100,715	)

The decrease in cash, cash equivalents and short-term investments was primarily attributable to the cost of repurchasing of common stock of $152.7 million , dividend payments of $83.1 million and $47.4 million in capital investments, which were partially offset by $177.6 million of cash provided by operating activities.

Cash flows from operations

We generated or used the following cash flows from our operating activities in 2012 and 2011 (in thousands):



	For the Year Ended December 31,
	2012		2011			Increase / (Decrease)
Cash flows provided (used in) by operating activities	$	177,608	$	(34,338	)	$	211,946

The positive operating cash flow during 2012 was derived principally from cash receipts of $472.7 million from patent sales and patent license and technology solutions agreements. We received $380.0 million of patent sales payments, $67.3 million of per-unit royalty payments, including past sales, current royalties and prepayments, from existing customers and new licensees and $8.0 million of fixed-fee payments. Cash receipts from our technology solutions agreements totaled $17.4 million , primarily related to royalties and other license fees associated with our SlimChip modem core. These cash receipts and other changes in working capital were partially offset by cash operating expenses (operating expenses less depreciation of fixed assets, amortization of patents, non-cash cost of patent sales, non-cash compensation, accretion of debt discount and amortization of financing costs) of $191.5 million , cash payments for short-term and long-term incentive compensation of $10.3 million, estimated federal tax payments of $110.5 million and cash payments for foreign source withholding taxes of $3.6 million .

Cash used in operating activities during 2011 included cash operating expenses (operating expenses less depreciation of fixed assets, amortization of patents, non-cash compensation, accretion of debt discount, impairment of long-term investments and amortization of financing costs) of $126.9 million, cash payments for short-term and long-term incentive compensation accrued in prior periods of $20.1 million and tax payments of $36.6 million. These items were partially offset by $128.3 million of cash receipts from patent license and technology solutions agreements, tax refunds and other changes in working capital. We received $34.0 million of fixed-fee payments and $65.4 million of per-unit royalty payments, including past sales and prepayments, from existing licensees and a new licensee. Cash receipts from our technology solutions agreements totaled $28.9 million, primarily related to royalties and other license fees associated with our SlimChip modem core. In addition, we received $19.5 million in tax refunds, including interest income, as a result of amendments of previously filed tax returns.

Working capital

We believe that working capital, adjusted to exclude cash, cash equivalents, short-term investments and current deferred revenue provides additional information about non-cash assets and liabilities that might affect our near-term liquidity.

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While we believe cash and short-term investments are important measures of our liquidity, the remaining components of our current assets and current liabilities, with the exception of deferred revenue, could affect our near-term liquidity and/or cash flow. We have no material obligations associated with our deferred revenue, and the amortization of deferred revenue has no impact on our future liquidity and or cash flow. Our adjusted working capital, a non-GAAP financial measure, reconciles to working capital, the most directly comparable GAAP financial measure, at December 31, 2012 and December 31, 2011 (in thousands) as follows:



	December 31, 2012		December 31, 2011		Increase / (Decrease)
Current assets	$	814,347	$	768,887	$	45,460
Less : current liabilities	172,913		173,153		(240		)
Working capital	641,434		595,734		45,700
Subtract:
Cash and cash equivalents	349,843		342,211		7,632
Short-term investments	227,436		335,783		(108,347		)
Add:
Current deferred revenue	106,305		134,087		(27,782		)
Adjusted working capital	$	170,460	$	51,827	$	118,633

The $118.6 million increase in adjusted working capital in 2012 compared to 2011 is primarily attributable to a $132.8 million increase in accounts receivable related to new and recently renewed its patent license agreements and a $21.4 million increase in prepaid expenses and other current assets primarily related to tax receivables. These increases were partially offset by increases to accrued compensation and other accrued expenses, primarily due to the LTCP performance cycle that ended December 31, 2012 and the accrued repositioning charge, respectively. Additionally, a decrease in deferred tax assets of $17.0 million primarily related to timing differences in the recognition of deferred revenue for book and tax purposes helped offset the increases discussed above.

Cash used in or provided by investing and financing activities

We generated net cash in investing activities of $63.0 million in 2012 and used $41.2 million in 2011 . We sold $110.4 million of short-term marketable securities, net of purchases in 2012 , and we purchased $10.1 million of short-term marketable securities, net of sales, in 2011 . This increase in net sales was driven by higher cash needs primarily associated with our stock repurchase program and our cash dividends. Purchases of property and equipment decreased to $3.6 million in 2012 from $3.8 million in 2011 primarily due to a lower level of investments in new and existing facilities. Investment costs associated with capitalized patent costs and acquisition of patent costs increased to $43.8 million in 2012 from $27.2 million in 2011, primarily due to investments in patent acquisitions in 2012.

Net cash used in financing activities decrease d by $435.2 million in 2012 primarily due to our issuance of the Notes and related transactions in second quarter 2011 as well as our repurchases of common stock of $152.7 million and dividends paid of $83.1 million in 2012.

Other

Our combined short-term and long-term deferred revenue balance at December 31, 2012 was approximately $268.1 million , a decrease of $19.9 million from December 31, 2011 . We have no material obligations associated with such deferred revenue. The decrease in deferred revenue was primarily due to $223.4 million of deferred revenue recognized, partially offset by a gross increase in deferred revenue of $174.6 million . This deferred revenue recognized was comprised of $135.1 million of amortized fixed-fee royalty payments and $88.4 million in past sales and per-unit exhaustion of prepaid royalties (based upon royalty reports provided by our licensees). The gross increase in deferred revenue of $174.6 million primarily related to cash received or due from patent licensees and technology solutions customers. Of the $174.6 million , $14.5 million relates to the technology solutions agreement arbitration discussed above in the "Overview" section.

Based on current license agreements, we expect the amortization of fixed-fee royalty payments to reduce the December 31, 2012 deferred revenue balance of $268.1 million by $62.0 million over the next twelve months. Additional reductions to deferred revenue will be dependent upon the level of per-unit royalties our licensees report against prepaid balances or arbitration rulings.

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Contractual Obligations

On April 4, 2011, InterDigital entered into an indenture (the “Indenture”), by and between the company and The Bank of New York Mellon Trust Company, N.A., as trustee, pursuant to which the $230.0 million in Notes were issued. The Notes bear interest at a rate of 2.50% per year, payable in cash on March 15 and September 15 of each year, commencing September 15, 2011. The Notes will mature on March 15, 2016, unless earlier converted or repurchased.

For more information on the Notes, see Note 6, “ Obligations ,” in the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Form 10-K.

The following table summarizes our contractual obligations as of December 31, 2012 (in millions):



	Payments Due by Period
	Total		Less Than 1 year		1-3 Years		3-5 Years		Thereafter
2.50% Senior Convertible Notes due 2016	$	230.0	$	—	$	—	$	230.0	$	—
Contractual interest payments on Notes	20.2		5.8		11.5		2.9		—
Operating lease obligations	16.9		2.4		4.5		3.9		6.1
Purchase obligations (a)	11.3		11.3		—		—		—
Total contractual obligations	$	278.4	$	19.5	$	16.0	$	236.8	$	6.1

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(a)	Purchase obligations consist of agreements to purchase good and services that are legally binding on us, as well as accounts payable.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K.

RESULTS OF OPERATIONS

2012 Compared with 2011

Revenues

The following table compares 2012 revenues to 2011 revenues (in millions):



	For the Year Ended December 31,
	2012		2011		(Decrease)/Increase
Per-unit royalty revenue	$	115.3	$	146.5	$	(31.2	)	(21	)%
Fixed-fee amortized royalty revenue	135.1		135.2		(0.1		)	—	%
Current patent royalties	250.4		281.7		(31.3		)	(11	)%
Past sales	26.2		13.6		12.6			93	%
Total patent licensing royalties	276.6		295.3		(18.7		)	(6	)%
Patent Sales	384.0		—		384.0			100	%
Technology solutions revenue	2.5		6.4		(3.9		)	(61	)%
Total revenue	$	663.1	$	301.7	$	361.4		120	%

Total revenue increased $361.4 million in 2012, primarily attributable to patent sales. Not including patent sales revenue, total revenue decreased $22.6 million . This decrease is primarily attributable to a $31.3 million decrease in current patent licensing royalties, which was partially offset by a $12.6 million increase in past sales revenue. Per-unit royalty revenue decrease d $31.2 million , the majority of which wa s due to lower shipments from our Japanese per-unit licensees and our licensees with concentrations in the smartphone market. Royalties from past sales totaled $26.2 million in 2012 , primarily related to the signing of new or amended license agreements and the resolution of audits of existing licensees. Royalties from

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past sales totaled $13.6 million in 2011 , primarily related to the resolution of audits of existing licensees. The decrease in technology solutions revenue was due to lower royalties recognized in connection with our SlimChip modem IP business.

In 2012 and 2011 , 72% and 59% of our total revenues, respectively, were attributable to companies that individually accounted for 10% or more of our total revenues. In 2012 and 2011 , the following customers accounted for 10% or more of our total revenues:



	For the Year Ended December 31,
	2012	2011
Intel Corporation	57%	< 10%
Samsung Electronics Company, Ltd.	15%	34%
BlackBerry	< 10%	14%
HTC Corporation	< 10%	11%

Operating Expenses

The following table summarizes the change in operating expenses by category (in millions):



	For the Year Ended December 31,
	2012		2011		Increase/(Decrease)
Patent administration and licensing	$	126.3	$	71.7	$	54.6	76	%
Development	67.9		63.8		4.1		6	%
Selling, general and administrative	37.4		31.5		5.9		19	%
Repositioning	12.5		—		12.5		100	%
Total operating expenses	$	244.1	$	167.0	$	77.1	46	%

Operating expenses increased 46% to $244.1 million in 2012 from $167.0 million in 2011 . Not including $12.5 million in repositioning charges in 2012 , operating expenses would have increased 39% . The $77.1 million increase in total operating expenses was primarily due to increases/(decreases) in the following items (in millions):



	Increase/ (Decrease)
Intellectual property enforcement and non-patent litigation	$	31.2
Cost of patent sales	16.7
Personnel-related costs	6.8
Long-term compensation	5.0
Litigation contingency	3.2
Depreciation and amortization	2.6
Patent maintenance and evaluation	1.4
Other	(0.8		)
Strategic alternatives evaluation process costs	(1.5		)
Total increase in operating expenses excluding repositioning charges	64.6
Repositioning charge	12.5
Total increase in operating expenses	$	77.1

Intellectual property enforcement and non-patent litigation costs increased $31.2 million primarily due to costs associated with the USITC actions initiated in second half 2011 and January 2013, the ongoing arbitration proceeding related to one of our technology solutions agreements, and various arbitrations with our existing licensees. We recognized $16.7 million of expense associated with patent sales. Included in this amount was the remaining net book value of patents sold, as well as commissions and legal and accounting services fees paid in conjunction with the sales. Personnel-related costs grew $6.8 million primarily due to increased personnel levels and merit increases. Long-term compensation increased $5.0 million , primarily due to a $4.4 million charge to increase the accrual rate on our LTCP cycle ended December 31, 2012, and a net $4.4

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million reduction to the accrual rates on our active cycles in 2011. This increase was partially offset by lower accrual rates on the remaining two active cycles under the LTCP in 2012 as compared to 2011. In 2012 we recorded a litigation contingency related to our Huawei China proceedings. Patent amortization increased $3.1 million due to increases in the number of patent applications filed in recent years and patent acquisitions made during 2012, and was partially offset by decreases in depreciation of $0.5 million . The increase in patent maintenance and patent evaluation costs was primarily related to due diligence associated with both patent acquisition and patent sale opportunities. Costs associated with our strategic alternatives evaluation process decreased $1.5 million due to the company exiting the process in first quarter 2012.

Development expense: The increase in development expense was primarily attributable to the above-noted increase in personnel-related costs and long-term compensation.

Selling, general and administrative expense: The increase in selling, general and administrative expense was primarily attributable to the above-noted increases in non-patent litigation, personnel-related costs and long-term compensation. These increases were partially offset by the above-noted decrease in costs associated with the strategic alternatives process.

Repositioning expense: As part of our ongoing expense management, we initiated a voluntary early retirement program ("VERP") in September 2012. Approximately 60 employees elected to participate in the VERP across our 5 locations. We incurred a charge of $12.5 million in 2012.

Other (Expense) Income

The following table compares 2012 other (expense) income to 2011 other (expense) income (in millions):



	For the Year Ended December 31,
	2012			2011			(Decrease)/Increase
Interest expense	$	(14.9	)	$	(10.9	)	$	(4.0	)	37	%
Other	(0.2		)	(1.8		)	1.6			(89	)%
Investment income	4.7			2.6			2.1			81	%
	$	(10.4	)	$	(10.1	)	$	(0.3	)	3	%

The change between periods primarily resulted from the recognition of an additional $3.7 million of interest expense associated with the Notes, due to the Notes being outstanding for the full year in 2012 compared to only nine months in 2011. This change was partially offset by higher returns on our investment balances in 2012 and a decrease in other expense due to $1.6 million of investment impairments recorded in 2011.

Income Taxes

In 2012 , our effective tax rate was approximately 33.5% based on the statutory federal tax rate net of discrete foreign taxes and a $6.7 million benefit related to the reversal of a valuation allowances against deferred taxes. During 2011 , our effective tax rate was approximately 28.2% based on the statutory federal tax rate net of discrete foreign taxes, a $6.8 million benefit related to the reversal of a previously accrued liability for tax contingencies and its related interest and $1.5 million of after-tax interest income related to a tax refund.

2011 Compared with 2010

Revenues

The following table compares 2011 revenues to 2010 revenues (in millions):

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	For the Year Ended December 31,
	2011		2010		Increase/ (Decrease)
Fixed-fee amortized royalty revenue	$	135.2	$	195.8	$	(60.6	)	(31	)%
Per-unit royalty revenue	146.5		133.1		13.4			10	%
Current patent royalties	281.7		328.9		(47.2		)	(14	)%
Past sales	13.6		41.3		(27.7		)	(67	)%
Total patent licensing royalties	295.3		370.2		(74.9		)	(20	)%
Technology solutions revenue	6.4		24.3		(17.9		)	(74	)%
Total revenue	$	301.7	$	394.5	$	(92.8	)	(24	)%

The $92.8 million decrease in total revenue was primarily attributable to a $74.9 million decrease in patent licensing royalties. Of this decrease in patent licensing royalties, $60.6 million was attributable to a decrease in fixed-fee amortized royalty revenue. This decrease was primarily driven by the expiration of the 3G portion of our patent license agreement with LG at the end of 2010. The $27.7 million decrease in past sales revenue was due to the signing of a patent license agreement with Casio Hitachi Mobile Communications Co., Ltd., the resolution of a routine audit and the renewal of a patent license agreement, each in 2010. Royalties from past sales totaled $13.6 million in 2011, primarily related to the resolution of audits of existing licensees. Per-unit royalty revenue increased $25.6 million due to strong sales from licensees with concentrations in smartphones, partly offset by a $12.7 million decrease in royalties from our Japanese licensees as a result of lower shipments. The decrease in technology solutions revenue was due to the elimination of $14.1 million of revenue under technology solutions agreements that concluded in 2010. The remaining decrease was due to lower royalties recognized in connection with our SlimChip modem IP as a result of the ongoing arbitration proceeding related to one of our technology solutions agreements.

In 2011 and 2010, 59% and 41% of our total revenues, respectively, were attributable to companies that individually accounted for 10% or more of our total revenues. In 2011 and 2010, the following licensees accounted for 10% or more of our total revenues:



	For the Year Ended December 31,
	2011	2010
Samsung Electronics Company, Ltd.	34%	26%
BlackBerry	14%	< 10%
HTC Corporation	11%	< 10%
LG Electronics, Inc.	0%	15%

Operating Expenses

The following table summarizes the change in operating expenses by category (in millions):



	For the Year Ended December 31,
	2011		2010		Increase/(Decrease)
Patent administration and licensing	$	71.7	$	58.9	$	12.8		22	%
Development	63.8		71.5		(7.7		)	(11	)%
Selling, general and administrative	31.5		28.3		3.2			11	%
Repositioning	—		—		—			—	%
Total operating expenses	$	167.0	$	158.7	$	8.3		5	%

The $8.3 million increase in operating expenses was primarily due to net changes in the following items (in millions):

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	Increase/ (Decrease)
Intellectual property enforcement and non-patent litigation	$	14.0
Personnel-related costs	6.0
Strategic alternatives evaluation process costs	2.1
Depreciation and amortization	1.6
Consulting services	1.3
Other	0.6
Engineering software, equipment and maintenance	0.5
Sublicense fees	(7.5		)
Long-term compensation	(7.0		)
Commissions	(3.3		)
Total increase in operating expenses	$	8.3

Intellectual property enforcement and non-patent litigation costs increased $14.0 million primarily due to costs associated with USITC Proceeding (337-TA-868). Personnel-related costs grew $6.0 million primarily due to increased personnel levels within our patents, licensing and advanced research groups. Costs associated with our strategic alternatives evaluation process contributed $2.1 million to the operating expense increase. Depreciation and patent amortization increased $1.6 million due to higher levels of capitalized patent costs in recent years. Consulting services and engineering software, equipment and maintenance increased $1.8 million primarily due to the initiation of new development projects in 2011. The decrease in sublicense fees was as a result of technology solutions agreements that concluded in 2010. The $7.0 million decrease in long-term compensation was primarily due to a $5.7 million reduction to the accrual rates on Cycles 5 and 6 of the LTCP in 2011, a $1.3 million increase to the accrual rate on RSU Cycle 4 in 2011 and a $3.3 million charge, in 2010, to increase our accrual rate for Cash Cycle 3. The $3.3 million decrease in commission expense was primarily driven by the decline in revenue in 2011.

Patent administration and licensing expense: The increase in patent administration and licensing expense primarily resulted from the above-noted increases in intellectual property enforcement, personnel-related costs and patent amortization. These increases were partially offset by the above-noted decrease in commissions, as well as a decrease in consulting services due to lower levels of patent due diligence. The decrease in long-term compensation costs further offset the previously mentioned increases.

Development expense: The decrease in development expense was primarily attributable to the above-noted decreases in sublicense fees related to technology solutions agreements that concluded in 2010 and long-term compensation costs. These decreases were partially offset by the above-noted increases in personnel-related costs, as well as increases in consulting services and engineering software, equipment and maintenance attributable to the initiation of new research and development projects in 2011.

Selling, general and administrative expense: The increase in selling, general and administrative expense was primarily attributable to the above-noted increases in costs associated with our strategic alternatives evaluation process and non-patent litigation costs, which was related to the previously discussed arbitration proceeding related to one of our technology solutions agreements. These increases were partially offset by a decrease in long-term compensation costs.

Other (Expense) Income

The following table compares 2011 other (expense) income to 2010 other (expense) income (in millions):



	For the Year Ended December 31,
	2011			2010			(Decrease)/Increase
Interest expense	$	(10.9	)	$	(0.1	)	$	(10.8	)	10,800	%
Other	(1.8		)	0.3			(2.1		)	(700	)%
Investment income	2.6			2.4			0.2			8	%
	$	(10.1	)	$	2.6		$	(12.7	)	(488	)%

The change between periods primarily resulted from the recognition of $10.9 million of interest expense associated with the Notes and the recognition of a $1.6 million charge for investment impairment in 2011.

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Income Taxes

In 2011, our effective tax rate was approximately 28.2% based on the statutory federal tax rate net of discrete foreign taxes, a $6.8 million benefit related to the reversal of a previously accrued liability for tax contingencies and its related interest and $1.5 million of after-tax interest income related to a tax refund. During 2010, our effective tax rate was approximately 35.6% based on the statutory federal tax rate net of discrete foreign taxes.

STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 - FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include certain information in “Part I, Item 1. Business” and “Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” and other information regarding our current beliefs, plans and expectations, including without limitation the matters set forth below. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “forecast,” “believe,” “could,” “would,” “should,” “if,” “may,” “might,” “future,” “target,” “goal,” “trend,” “seek to,” “will continue,” “predict,” “likely,” “in the event,” variations of any such words or similar expressions contained herein are intended to identify such forward-looking statements. Forward-looking statements in this Annual Report on Form 10-K include, without limitation, statements regarding:

(i) Our expectation that the technologies in which we are engaged in advanced research will improve the wireless user's experience and enable the delivery of a broad array of information and services;

(ii) Our objective to continue to be a leading designer and developer of technology solutions for the wireless industry;

(iii) Our plans for executing on our business strategy, including our plans to pursue additional patent sales and patent licensing partnerships, enhance our technology sourcing and commercialize our market-ready technologies and research capabilities;

(iv) Our belief that our portfolio includes a number of patents and patent applications that are or may be essential or may become essential to cellular and other wireless standards, including 2G, 3G, 4G and the IEEE 802 suite of standards, and that companies making, importing, using or selling products compliant with these standards require a license under our patents and will require licenses under patents that may issue from our pending patent applications;

(v) The anticipated continued growth in sales of advanced wireless products and services and continued proliferation of converged devices;

(vi) The predicted increases in global wireless subscriptions, worldwide handset shipments, including shipments of 3G and 4G phones, shipments of media tablets with wireless connectivity and IEEE 802.11 semiconductor shipments over the next several years;

(vii) Factors driving the continued growth of advanced wireless products and services sales over the next five years;

(viii) The types of licensing arrangements and various royalty structure models that we anticipate using under our future license agreements;

(ix) The possible outcome of audits of our license agreements when underreporting or underpayment is revealed;

(x) Our plan to continue to pay a quarterly cash dividend on our common stock at the rate set forth in our current dividend policy;

(xi) Our current plans to preserve a significant portion of our cash, cash equivalents and short-term investments to finance our business in the near future;

(xii) Our ability to obtain additional liquidity through debt and equity financings;

(xiii) Our belief that our available sources of funds will be sufficient to finance our operations, capital requirements, debt obligations and existing stock repurchase and dividend programs in the next twelve months;

(xiv) The potential effects of new accounting standards on our financial statements or results of operations;

(xv) The expected amortization of fixed-fee royalty payments over the next twelve months to reduce our deferred revenue balance;

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(xvi) The expected timing, outcome and impact of our various litigation and administrative matters; and

(xii) Our belief that it is more likely than not that the company will successfully sustain its separate company reporting in connection with our New York State audit described in Note 11 to the Consolidated Financial Statements.

Although the forward-looking statements in this Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements concerning our business, results of operations and financial condition are inherently subject to risks and uncertainties. We caution readers that actual results and outcomes could differ materially from those expressed in or anticipated by such forward-looking statements due to a variety of factors, including, without limitation, the following:

(i) unanticipated difficulties or delays related to the further development of our technologies;

(ii) the failure of the markets for our technologies to materialize to the extent or at the rate that we expect;

(iii) changes in the company's plans, strategy or initiatives;

(iv) the challenges related to entering into new and renewed patent license agreements and unanticipated delays, difficulties or acceleration in the negotiation and execution of patent license agreements;

(v) our ability to leverage our strategic relationships and secure new patent license and technology solutions agreements on acceptable terms;

(vi) the impact of current trends in the industry that could result in reductions in and/or caps on royalty rates under new patent license agreements;

(vii) changes in the market share and sales performance of our primary licensees, delays in product shipments of our licensees and timely receipt and final reviews of quarterly royalty reports from our customers and related matters;

(viii) the timing and/or outcome of our various litigation, arbitration or administrative proceedings, including any awards or judgments relating to such proceedings, additional legal proceedings, changes in the schedules or costs associated with legal proceedings or adverse rulings in such legal proceedings;

(ix) the impact of potential patent legislation, USPTO rule changes and international patent rule changes on our patent prosecution and licensing strategies;

(x) the timing and/or outcome of any state or federal tax examinations or audits, changes in tax laws and the resulting impact on our tax assets and liabilities;

(xi) the effects of any dispositions, acquisitions or other strategic transactions by the company;

(xii) decreased liquidity in the capital markets; and

(xiii) unanticipated increases in the company's cash needs or decreases in available cash.

You should carefully consider these factors as well as the risks and uncertainties outlined in greater detail in Part I, Item 1A, in this Form 10-K before making any investment decision with respect to our common stock. These factors, individually or in the aggregate, may cause our actual results to differ materially from our expected and historical results. You should understand that it is not possible to predict or identify all such factors. In addition, you should not place undue reliance on the forward-looking statements contained herein, which are made only as of the date of this Form 10-K. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.


Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Cash Equivalents and Investments

The primary objectives of our investment activities are to preserve principal and maintain liquidity while at the same time capturing a market rate of return. To achieve these objectives, we maintain our portfolio of cash and cash equivalents, and short-term and long-term investments in a variety of securities, including government obligations, corporate bonds and commercial paper.

Interest Rate Risk — We invest our cash in a number of diversified high quality investment-grade fixed and floating rate securities with a fair value of $577.3 million at December 31, 2012 . Our exposure to interest rate risks is not significant due to the short average maturity, quality and diversification of our holdings. We do not hold any derivative, derivative commodity instruments or other similar financial instruments in our portfolio. The risk associated with fluctuating interest rates is generally

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limited to our investment portfolio. We believe that a hypothetical 10% change in period-end interest rates would not have a significant impact on our results of operations or cash flows.

The following table provides information about our interest-bearing securities that are sensitive to changes in interest rates as of December 31, 2012 . The table presents principal cash flows, weighted-average yield at cost and contractual maturity dates. Additionally, we have assumed that these securities are similar enough within the specified categories to aggregate these securities for presentation purposes.

Interest Rate Sensitivity

Principal Amount by Expected Maturity

Average Interest Rates

(in millions)



	2013			2014			2015			2016			2017			Thereafter			Total
Money market and demand accounts	$	261.9		$	—		$	—		$	—		$	—		$	—		$	261.9
Cash equivalents	$	87.9		$	—		$	—		$	—		$	—		$	—		$	87.9
Short-term investments	$	207.4		$	11.9		$	6.2		$	0.2		$	1.0		$	0.8		$	227.5
Interest rate	2.0		%	1.6		%	1.0		%	0.8		%	2.2		%	0.7		%	0.7		%

Cash and cash equivalents and available-for-sale securities are recorded at fair value.

Bank Liquidity Risk — As of December 31, 2012 we had approximately $261.9 million in operating accounts and money market funds that are held with domestic and international financial institutions. The majority of these balances are held with domestic financial institutions. While we monitor daily cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be lost or become inaccessible if the underlying financial institutions fail or if they are unable to meet the liquidity requirements of their depositors. Notwithstanding, we have not incurred any losses and have had full access to our operating accounts to date.

Foreign Currency Exchange Rate Risk — We are exposed to risk from fluctuations in currencies, which might change over time as our business practices evolve, that could impact our operating results, liquidity and financial condition. We operate and invest globally. Adverse movements in currency exchange rates might negatively affect our business due to a number of situations. Currently, our international licensing agreements are typically made in U.S. dollars and are generally not subject to foreign currency exchange rate risk. We do not engage in foreign exchange hedging transactions at this time.

Investment Risk — We are exposed to market risk as it relates to changes in the market value of our short-term and long-term investments in addition to the liquidity and creditworthiness of the underlying issuers of our investments. We hold a diversified investment portfolio, which includes, fixed and floating-rate, investment-grade marketable securities, mortgage and asset-backed securities and U.S. government and other securities. The instruments included in our portfolio meet high credit quality standards, as specified in our investment policy guidelines. This policy also limits our amount of credit exposure to any one issue, issuer and type of instrument. Given that the guidelines of our investment policy prohibit us from investing in anything but highly rated instruments, our investments are not subject to significant fluctuations in fair value due to the volatility of the credit markets and prevailing interest rates for such securities. Our marketable securities, consisting of government obligations, corporate bonds and commercial paper, are classified as available-for-sale with a fair value of $227.5 million as of December 31, 2012 .

Equity Risk — We are exposed to changes in the market-traded price of our common stock as it influences the calculation of earnings per share. In connection with the offering of the Notes, we entered into convertible note hedge transactions with an affiliate of the initial purchaser (the “option counterparty”). We also sold warrants to the option counterparty. These transactions have been accounted for as an adjustment to our shareholders' equity. The convertible note hedge transactions are expected to reduce the potential equity dilution upon conversion of the Notes. The warrants along with any shares issuable upon conversion of the Notes will have a dilutive effect on our earnings per share to the extent that the average market price of our common

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stock for a given reporting period exceeds the applicable strike price or conversion price of the warrants or convertible Notes, respectively.


Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



	PAGE NUMBER
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm	53
Consolidated Balance Sheets as of December 31, 2012 and 201 1	54
Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 20 10	55
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the years ended December 31, 2012, 2011 and 20 10	57
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 20 10	58
Notes to Consolidated Financial Statements	59
SCHEDULES:
Schedule II — Valuation and Qualifying Accounts	88

All other schedules are omitted because they are either not required or applicable or equivalent information has been included in the financial statements and notes thereto.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of InterDigital, Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of InterDigital, Inc. and its subsidiaries at December 31, 2012 and December 31, 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in “Management's Annual Report on Internal Control Over Financial Reporting” appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 25, 2013

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INTERDIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)



	DECEMBER 31, 2012		DECEMBER 31, 2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	349,843	$	342,211
Short-term investments	227,436		335,783
Accounts receivable, less allowances of $1,750	169,874		28,079
Deferred tax assets	36,997		53,990
Prepaid and other current assets	30,197		8,824
Total current assets	814,347		768,887
PROPERTY AND EQUIPMENT, NET	7,824		7,997
PATENTS, NET	177,557		137,963
DEFERRED TAX ASSETS	30,687		54,110
OTHER NON-CURRENT ASSETS	26,194		28,011
	242,262		228,081
TOTAL ASSETS	$	1,056,609	$	996,968

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	—	$	180
Accounts payable	9,600		7,110
Accrued compensation and related expenses	20,661		14,129
Deferred revenue	106,305		134,087
Taxes payable	3,960		3,265
Dividend payable	—		4,570
Other accrued expenses	32,387		9,812
Total current liabilities	172,913		173,153
LONG-TERM DEBT	200,391		192,529
LONG-TERM DEFERRED REVENUE	161,820		153,953
OTHER LONG-TERM LIABILITIES	2,780		5,651

TOTAL LIABILITIES	537,904		525,286

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:
Preferred Stock, $0.10 par value, 14,399 shares authorized, 0 shares issued and outstanding	—		—
Common Stock, $0.01 par value, 100,000 shares authorized, 69,459 and 69,118 shares issued and 41,050 and 45,548 shares outstanding	695		691
Additional paid-in capital	579,852		573,950
Retained earnings	659,235		466,727
Accumulated other comprehensive income (loss)	864		(439		)
	1,240,646		1,040,929
Treasury stock, 28,409 and 23,570 shares of common held at cost	721,941		569,247
Total shareholders’ equity	518,705		471,682
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,056,609	$	996,968

The accompanying notes are an integral part of these statements.

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INTERDIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)



	FOR THE YEAR ENDED DECEMBER 31,
	2012			2011			2010
REVENUES
Patent licensing royalties	$	276,547		$	295,372		$	370,231
Patent sales	384,000			—			—
Technology solutions	2,516			6,370			24,314
	663,063			301,742			394,545

OPERATING EXPENSES:
Patent administration and licensing	126,284			71,736			58,907
Development	67,862			63,763			71,464
Selling, general and administrative	37,351			31,486			28,301
Repositioning	12,536			—			—
	244,033			166,985			158,672

Income from operations	419,030			134,757			235,873

OTHER (EXPENSE) INCOME	(10,396		)	(10,149		)	2,574
Income before income taxes	408,634			124,608			238,447
INCOME TAX PROVISION	(136,830		)	(35,140		)	(84,831		)
NET INCOME	$	271,804		$	89,468		$	153,616
NET INCOME PER COMMON SHARE — BASIC	$	6.31		$	1.97		$	3.48
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC	43,070			45,411			44,084
NET INCOME PER COMMON SHARE — DILUTED	$	6.26		$	1.94		$	3.43
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED	43,396			46,014			44,824
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	1.90		$	0.40		$	0.10

The accompanying notes are an integral part of these statements.

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INTERDIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)



	For the Year Ended December 31,
	2012		2011			2010
Net income	$	271,804	$	89,468		$	153,616
Unrealized gain (loss) investments, net of tax	1,303		(550		)	(166		)
Total comprehensive income	$	273,107	$	88,918		$	153,450

The accompanying notes are an integral part of these statements.

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INTERDIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except per share data)



	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock				Total Shareholders' Equity
	Shares	Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Shares	Amount			Total Shareholders' Equity

BALANCE, DECEMBER 31, 2009	66,831	$	668	$	491,068		$	246,771		$	277		23,570	$	(569,247	)	$	169,537
Net income	—	—		—			153,616			—			—	—			153,616
Net change in unrealized gain on short-term investments	—	—		—			—			(166		)	—	—			(166		)
Dividends declared	—	—		62			(4,588		)	—			—	—			(4,526		)
Exercise of Common Stock options	1,491	15		21,505			—			—			—	—			21,520
Issuance of Common Stock, net	280	3		(316		)	—			—			—	—			(313		)
Tax benefit from exercise of stock options	—	—		7,653			—			—			—	—			7,653
Amortization of unearned compensation	—	—		5,795			—			—			—	—			5,795
BALANCE, DECEMBER 31, 2010	68,602	$	686	$	525,767		$	395,799		$	111		23,570	$	(569,247	)	$	353,116
Net income	—	—		—			89,468			—			—	—			89,468
Net change in unrealized gain on short-term investments	—	—		—			—			(550		)	—	—			(550		)
Dividends declared	—	—		347			(18,540		)	—			—	—			(18,193		)
Exercise of Common Stock options	333	3		4,494			—			—			—	—			4,497
Issuance of Common Stock, net	183	2		(385		)	—			—			—	—			(383		)
Tax benefit from exercise of stock options	—	—		5,131			—			—			—	—			5,131
Amortization of unearned compensation	—	—		8,115			—			—			—	—			8,115
Convertible note hedge transactions, net of tax	—	—		(27,519		)	—			—			—	—			(27,519		)
Warrant transactions	—	—		31,740			—			—			—	—			31,740
Equity component of the Notes, net of tax	—	—		27,760			—			—			—	—			27,760
Deferred financing costs allocated to equity	—	—		(1,500		)	—			—			—	—			(1,500		)
BALANCE, DECEMBER 31, 2011	69,118	$	691	$	573,950		$	466,727		$	(439	)	23,570	$	(569,247	)	$	471,682
Net income	—	—		—			271,804			—			—	—			271,804
Net change in unrealized gain on short-term investments	—	—		—			—			1,303			—	—			1,303
Dividends declared	—	—		789			(79,296		)	—			—	—			(78,507		)
Exercise of Common Stock options	132	2		2,109			—			—			—	—			2,111
Issuance of Common Stock, net	209	2		(4,389		)	—			—			—	—			(4,387		)
Tax benefit from exercise of stock options	—	—		898			—			—			—	—			898
Amortization of unearned compensation	—	—		6,495			—			—			—	—			6,495
Repurchase of Common Stock	—	—		—			—			—			4,839	(152,694		)	(152,694		)
BALANCE, DECEMBER 31, 2012	69,459	$	695	$	579,852		$	659,235		$	864		28,409	$	(721,941	)	$	518,705

The accompanying notes are an integral part of these statements

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INTERDIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



	FOR THE YEAR ENDED DECEMBER 31,
	2012			2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	271,804		$	89,468		$	153,616
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	26,248			23,805			22,125
Amortization of deferred financing fees and accretion of debt discount	9,165			6,544			—
Deferred revenue recognized	(223,419		)	(235,513		)	(283,012		)
Increase in deferred revenue	174,604			56,575			81,737
Deferred income taxes	40,416			(1,210		)	(6,738		)
Share-based compensation	6,495			8,115			5,801
Impairment of long-term investment	—			1,616			—
Non-cash cost of patent sales	10,654			—			—
Other	90			(238		)	80
(Increase) decrease in assets:
Receivables	(141,795		)	5,553			179,273
Deferred charges and other assets	(21,651		)	21,025			2,319
Increase (decrease) in liabilities:
Accounts payable	2,453			(571		)	417
Accrued compensation and other expenses	21,849			(2,322		)	8,130
Accrued taxes payable and other tax contingencies	695			(7,185		)	(29,825		)
Net cash provided by (used in) operating activities	177,608			(34,338		)	133,923
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments	(331,828		)	(713,683		)	(696,478		)
Sales of short-term investments	442,182			703,538			568,888
Purchases of property and equipment	(3,621		)	(3,835		)	(2,520		)
Capitalized patent costs	(28,317		)	(27,172		)	(27,814		)
Acquisition of patents	(15,450		)	—			—
Net cash provided by (used in) investing activities	62,966			(41,152		)	(157,924		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of stock options	2,111			4,497			21,520
Payments on long-term debt, including capital lease obligations	(180		)	(288		)	(584		)
Proceeds from issuance of convertible senior notes	—			230,000			—
Purchase of convertible bond hedge	—			(42,665		)	—
Proceeds from issuance of warrants	—			31,740			—
Payments of debt issuance costs	—			(8,015		)	—
Dividends paid	(83,077		)	(18,150		)	—
Tax benefit from share-based compensation	898			5,131			7,653
Repurchase of common stock	(152,694		)	—			—
Net cash (used in) provided by financing activities	(232,942		)	202,250			28,589
NET INCREASE IN CASH AND CASH EQUIVALENTS	7,632			126,760			4,588
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	342,211			215,451			210,863
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	349,843		$	342,211		$	215,451
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid	5,754			2,600			51
Income taxes paid, including foreign witholding taxes	116,871			36,593			113,820
Non-cash investing and financing activities:
Dividend payable	—			4,570			4,526
Non-cash acquisition of patents	28,900			—			—
Accrued capitalized patent costs	(286		)	(105		)	(538		)
Accrued purchases of property, plant and equipment	—			(4		)	(333		)

The accompanying notes are an integral part of these statements.

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INTERDIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012


1.	BACKGROUND

Repositioning

We did not incur any repositioning charges during 2011 or 2010 .


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include all of our accounts and all entities which we have a controlling interest, which are required to be consolidated in accordance with the Generally Accepted Accounting Principles in the United States (“GAAP”). All significant intercompany accounts and transactions have been eliminated in consolidation.

In determining whether we are the primary beneficiary of an entity and therefore required to consolidate, we apply a qualitative approach that determines whether we have both the power to direct the economically significant activities of the entity and the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. These considerations impact the way we account for our existing collaborative relationships and other arrangements. We continuously assess whether we are the primary beneficiary of a variable interest entity as changes to existing relationships or future transactions may result in us consolidating or deconsolidating our partner(s) to collaborations and other arrangements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. We believe the accounting policies that are of particular importance to the portrayal of our financial condition and results, and that may involve a higher degree of complexity and judgment in their application compared to others, are those relating to revenue recognition, compensation and income taxes. If different assumptions were made or different conditions had existed, our financial results could have been materially different.

Cash and Cash Equivalents

We classify all highly liquid investment securities with original maturities of three months or less at date of purchase as cash equivalents. Our investments are comprised of mutual and exchange traded funds, commercial paper, United States and municipal government obligations and corporate securities. Management determines the appropriate classification of our investments at the time of acquisition and re-evaluates such determination at each balance sheet date.

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Cash and cash equivalents at December 31, 2012 and 2011 consisted of the following (in thousands):



	December 31,
	2012		2011
Money market and demand accounts	$	261,899	$	338,211
Commercial paper	87,944		4,000
	$	349,843	$	342,211

Short-Term Investments

At December 31, 2012 and 2011 , all marketable securities have been classified as available-for-sale and are carried at fair value, with unrealized gains and losses reported net-of-tax as a separate component of shareholders’ equity. None of our marketable securities are deemed impaired as of December 31, 2012 , as substantially all of our investments are investment grade government and corporate debt securities that have maturities of less than 3 years, and we have both the ability and intent to hold the investments until maturity. Net unrealized gain on short-term investments was $1.3 million million at December 31, 2012 . Realized gains and losses for 2012 , 2011 and 2010 were as follows (in thousands):



Year	Gains		Losses			Net
2012	$	14	$	(249	)	$	(235	)
2011	$	37	$	(274	)	$	(237	)
2010	$	64	$	(234	)	$	(170	)

Short-term investments as of December 31, 2012 and 2011 consisted of the following (in thousands):



	December 31,
	2012		2011
Commercial paper	$	62,924	$	156,574
U.S. government agency instruments	50,560		66,647
Corporate bonds and asset backed securities	13,270		16,432
Mutual and exchange traded funds	100,682		96,130
	$	227,436	$	335,783

At December 31, 2012 and 2011 , $207.4 million and $212.3 million respectively, of our short-term investments had contractual maturities within one year. The remaining portions of our short-term investments had contractual maturities primarily within two to five years.

Concentration of Credit Risk and Fair Value of Financial Instruments

Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash equivalents, short-term investments and accounts receivable. We place our cash equivalents and short-term investments only in highly rated financial instruments and in United States government instruments.

Our accounts receivable are derived principally from patent license and technology solutions agreements. At December 31, 2012 , four licensees comprised 96% of our net accounts receivable balance. At December 31, 2011 , three licensees represented 97% of our net accounts receivable balance. We perform ongoing credit evaluations of our licensees, who generally include large, multinational, wireless telecommunications equipment manufacturers. We believe that the book values of our financial instruments approximate their fair values.

Fair Value Measurements

Effective January 1, 2008, we adopted the provisions of the FASB fair value measurement guidance that relate to our financial assets and financial liabilities. We adopted the guidance related to non-financial assets and liabilities as of January 1, 2009. We use various valuation techniques and assumptions when measuring fair value of our assets and liabilities. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. This guidance established a hierarchy that prioritizes fair value measurements based on the types of input used for the various valuation techniques (market approach, income approach and cost approach). The levels of the hierarchy are described below:

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Level 1 Inputs — Level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets.

Level 2 Inputs — Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transactions (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data, including market interest rate curves, referenced credit spreads and pre-payment rates.

Level 3 Inputs — Level 3 includes financial instruments for which fair value is derived from valuation techniques including pricing models and discounted cash flow models in which one or more significant inputs are unobservable, including the company’s own assumptions. The pricing models incorporate transaction details such as contractual terms, maturity and, in certain instances, timing and amount of future cash flows, as well as assumptions related to liquidity and credit valuation adjustments of marketplace participants.

Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. We use quoted market prices for similar assets to estimate the fair value of our Level 2 investments. Our financial assets are included within short-term investments on our consolidated balance sheets, unless otherwise indicated. Our financial assets that are accounted for at fair value on a recurring basis are presented in the tables below as of December 31, 2012 and December 31, 2011 (in thousands):



	Fair Value as of December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Money market and demand accounts (a)	$	261,899	$	—	$	—	$	261,899
Mutual and exchange traded funds	100,682		—		—		100,682
Commercial paper (b)	—		150,868		—		150,868
U.S. government securities	—		50,560		—		50,560
Corporate bonds and asset backed securities	—		13,270		—		13,270
	$	362,581	$	214,698	$	—	$	577,279

______________________________


(a)	Included within cash and cash equivalents.


(b)	Includes $87.9 million of commercial paper that is included within cash and cash equivalents.



	Fair Value as of December 31, 2011
	Level 1		Level 2		Level 3		Total
Assets:
Money market and demand accounts (a)	$	338,211	$	—	$	—	$	338,211
Mutual and exchange traded funds	96,130		—		—		96,130
Commercial paper (b)	—		160,574		—		160,574
U.S. government securities	—		66,647		—		66,647
Corporate bonds and asset backed securities	—		16,432		—		16,432
	$	434,341	$	243,653	$	—	$	677,994

______________________________


(a)	Included within cash and cash equivalents.


(b)	Includes $4.0 million of commercial paper that is included within cash and cash equivalents.

The carrying amount of long-term debt reported in the consolidated balance sheet as of December 31, 2012 and December 31, 2011 was $200.4 million and $192.5 million , respectively. Using inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data, which were obtained from independent pricing vendors, quoted market prices or other sources, we determined the fair value of the Notes (as defined in Note 6, Obligations ) to be $245.2 million and $240.9 million as of December 31, 2012 and December 31, 2011 .

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Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization of property and equipment are provided using the straight-line method. The estimated useful lives for computer equipment, computer software, engineering and test equipment and furniture and fixtures are generally three to five years. Leasehold improvements are amortized over the lesser of their estimated useful lives or their respective lease terms, which are generally five to ten years. Buildings are being depreciated over twenty-five years. Expenditures for major improvements and betterments are capitalized, while minor repairs and maintenance are charged to expense as incurred. Leases meeting certain capital lease criteria are capitalized and the net present value of the related lease payments is recorded as a liability. Amortization of capital leased assets is recorded using the straight-line method over the lesser of the estimated useful lives or the lease terms.

Upon the retirement or disposition of property, plant and equipment, the related cost and accumulated depreciation or amortization are removed, and a gain or loss is recorded.

Internal-Use Software Costs

We capitalize costs associated with software developed for internal use that are incurred during the software development stage. Such costs are limited to expenses incurred after management authorizes and commits to a computer software project, believes that it is more likely than not that the project will be completed, the software will be used to perform the intended function with an estimated service life of two years or more, and the completion of conceptual formulation, design and testing of possible software project alternatives (the preliminary design stage). Costs incurred after final acceptance testing has been successfully completed are expensed. Capitalized computer software costs are amortized over their estimated useful life of three years.

All computer software costs capitalized to date relate to the purchase, development and implementation of engineering, accounting and other enterprise software.

Other-than-Temporary Impairments

We review our investment portfolio during each reporting period to determine whether there are identified events or circumstances that would indicate there is a decline in the fair value that is considered to be other-than-temporary. For non-public investments, if there are no identified events or circumstances that would have a significant adverse effect on the fair value of the investment, then the fair value is not estimated. If an investment is deemed to have experienced an other-than-temporary decline below its cost basis, we reduce the carrying amount of the investment to its quoted or estimated fair value, as applicable, and establish a new cost basis for the investment. For cost method investments we charge the impairment to Other (Expense) Income line of our Consolidated Statements of Income.

Investments in Other Entities

We may make strategic investments in companies that have developed or are developing technologies that are complementary to our business. We account for our investments using either the cost or equity method of accounting. Under the cost method, we do not adjust our investment balance when the investee reports profit or loss but monitor the investment for an other-than-temporary decline in value. On a quarterly basis, we monitor our investment’s financial position and performance to assess whether there are any triggering events or indicators present that would be indicative of an other-than-temporary impairment of our investment. When assessing whether an other-than-temporary decline in value has occurred, we consider such factors as the valuation placed on the investee in subsequent rounds of financing, the performance of the investee relative to its own performance targets and business plan, and the investee’s revenue and cost trends, liquidity and cash position, including its cash burn rate, and updated forecasts. Under the equity method of accounting, we initially record our investment in the stock of an investee at cost, and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee after the date of acquisition. The amount of the adjustment is included in the determination of net income, and such amount reflects adjustments similar to those made in preparing consolidated statements including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between our cost and underlying equity in net assets of the investee at the date of investment. The investment is also adjusted to reflect our share of changes in the investee’s capital. Dividends received from an investee reduce the carrying amount of the investment. When there are a series of operating losses by the investee or when other factors indicate that a decrease in value of the investment has occurred which is other than temporary, we recognize an impairment equal to the difference between the fair value and the carrying amount of our investment. The carrying costs of our investments are included within Other Non-Current Assets on our Consolidated Balance Sheets.

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In September 2009, we entered into a worldwide patent licensing agreement with Pantech Co., Ltd. (“Pantech”) (formally known separately as Pantech Co., Ltd. and Pantech & Curitel Communications, Inc.). In exchange for granting Pantech the license, we received cash consideration and a minority equity interest in both Pantech Co., Ltd. and Pantech & Curitel Communications, Inc. Simultaneous with the execution of the patent license agreement, we executed a stock agreement to acquire a minority stake in Pantech using the Korean Won provided by Pantech with no participation at the board level or in management. Given that there are no observable inputs relevant to our investment in Pantech, we assessed pertinent risk factors, and reviewed a third-party valuation that used the discounted cash flow method, and incorporated illiquidity discounts in order to assign a fair market value to our investment. After consideration of the aforementioned factors, we valued our non-controlling equity interest in Pantech at $21.7 million . We are accounting for this investment using the cost method of accounting.

During 2007, we made a $5.0 million investment for a non-controlling interest in Kineto Wireless (“Kineto”). Due to the fact that we do not have significant influence over Kineto, we are accounting for this investment using the cost method of accounting. In first quarter 2008, we wrote down this investment by $0.7 million based on a lower valuation of Kineto. Early in second quarter 2008, we participated in a new round of financing that included several other investors, investing an additional $0.7 million in Kineto. This second investment both maintained our ownership position and preserved certain liquidation preferences. During 2009, we reassessed our investment in Kineto and concluded that, given their financial position at the time, it was necessary to record an impairment of $3.9 million , which reduced our carrying amount of our investment in Kineto to approximately $1.0 million at December 31, 2009. During 2010, we reassessed our investment in Kineto and concluded that there was no evidence of an other-than-temporary impairment. As of December 31, 2010, the carrying amount of our investment in Kineto was $1.0 million . During 2011, we reassessed our investment in Kineto and concluded that given their financial position at the time, it was necessary to record an impairment of $1.0 million which reduced our carrying amount of our investment to zero as of December 31, 2011.

On December 17, 2009, we announced a multi-faceted collaboration agreement with Attila Technologies LLC (“Attila”). We will collaborate on the development and marketing of bandwidth aggregation technologies and related multi-network innovations. In addition, we paid approximately $0.7 million to acquire a 7% minority stake. No other amounts were paid or are payable to Attila for the period ended December 31, 2009. Certain terms of the agreement afford us the ability to exercise significant influence over Attila; therefore we are accounting for this investment using the equity method of accounting. During 2010, we reassessed our investment in Attila and concluded that there was no evidence of an other-than-temporary impairment. As of December 31, 2010, the carrying amount of our investment in Attila was $0.7 million . During 2011, we reassessed our investment in Attila and concluded that given their financial position at the time, it was necessary to record an impairment of $0.7 million which reduced our carrying amount of our investment to zero as of December 31, 2011.

Patents

We capitalize external costs, such as filing fees and associated attorney fees, incurred to obtain issued patents and patent license rights. We expense costs associated with maintaining and defending patents subsequent to their issuance in the period incurred. We amortize capitalized patent costs for internally generated patents on a straight-line basis over ten years, which represents the estimated useful lives of the patents. The ten year estimated useful life for internally generated patents is based on our assessment of such factors as: the integrated nature of the portfolios being licensed, the overall makeup of the portfolio over time, and the length of license agreements for such patents. The estimated useful lives of acquired patents and patent rights, however, have been and will continue to be based on separate analysis related to each acquisition and may differ from the estimated useful lives of internally generated patents. The average estimated useful life of acquired patents thus far has been twelve years. We assess the potential impairment to all capitalized net patent costs when events or changes in circumstances indicate that the carrying amount of our patent portfolio may not be recoverable.

Patents consisted of the following (in thousands, except for useful life data):



	December 31,
	2012			2011
Weighted average estimated useful life (years)	10.3			10.7
Gross patents	$	300,174		$	245,999
Accumulated amortization	(122,617		)	(108,036		)
Patents, net	$	177,557		$	137,963

Amortization expense related to capitalized patent costs was $22.7 million , $19.6 million and $17.2 million in 2012 , 2011 and 2010 , respectively. These amounts are recorded within Patent administration and licensing line of our Consolidated Statements of Income.

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The estimated aggregate amortization expense for the next five years related to our patents balance as of December 31, 2012 is as follows (in thousands):



2013	$	26,777
2014	25,916
2015	24,734
2016	23,308
2017	20,727

Intangible Assets

We capitalize the cost of technology solutions and platforms we acquire or license from third parties when they have a future benefit and the development of these solutions and platforms is substantially complete at the time they are acquired or licensed.

Revenue Recognition

Patent License Agreements

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Current Royalty Payments: These are royalty payments covering a licensee’s obligations to us related to its sales of covered products in the current contractual reporting period.

Licensees that either owe us Current Royalty Payments or have Prepayment balances are obligated to provide us with quarterly or semi-annual royalty reports that summarize their sales of covered products and their related royalty obligations to us. We typically receive these royalty reports subsequent to the period in which our licensees’ underlying sales occurred. As a result, it is impractical for us to recognize revenue in the period in which the underlying sales occur, and, in most cases, we recognize revenue in the period in which the royalty report is received and other revenue recognition criteria are met due to the fact that without royalty reports from our licensees, our visibility into our licensees’ sales is very limited.

In cases where we receive objective, verifiable evidence that a licensee has discontinued sales of products covered under a patent license agreement with us, we recognize any related deferred revenue balance in the period that we receive such evidence.

Patent Sales

Technology Solutions and Engineering Services

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Deferred Charges

From time to time, we use sales agents to assist us in our licensing activities. In such cases, we may pay a commission. The commission rate varies from agreement to agreement. Commissions are normally paid shortly after our receipt of cash payments associated with the patent license agreements. We defer recognition of commission expense related to both prepayments and fixed-fee royalty payments and amortize these expenses in proportion to our recognition of the related revenue. In 2012 , 2011 and 2010 , we paid cash commissions of approximately $4.7 million , $0.1 million and $0.6 million , respectively.

Incremental direct costs incurred related to acquisition or origination of a customer contract in a transaction that results in the deferral of revenue may be either expensed as incurred or capitalized. The only eligible costs for deferral are those costs directly related to a particular revenue arrangement. We capitalize those direct costs incurred for the acquisition of a contract through the date of signing, and amortize them on a straight-line basis over the life of the patent license agreement. We paid approximately $0.6 million of direct contract origination costs in 2009 in relation to our patent licensing agreement with Pantech. There were no direct contract origination costs incurred during 2012 , 2011 , or 2010.

Incremental direct costs incurred related to a debt financing transaction may be capitalized. In connection with our Notes offering, discussed in detail within Note 6, Obligations , the company incurred $8.0 million of directly related costs. The initial purchaser's transaction fees and related offering expenses were allocated to the liability and equity components of the debt in proportion to the allocation of proceeds and accounted for as debt issuance costs. We allocated $6.5 million of debt issuance costs to the liability component of the debt, which were capitalized as deferred financing costs. These costs are being amortized to interest expense over the term of the debt using the effective interest method. The remaining $1.5 million of costs allocated to the equity component of the debt were recorded as a reduction of the equity component of the debt. There were no debt issuance costs incurred in 2012 or 2010.

Deferred charges are recorded in our Consolidated Balance Sheets within the following captions (in thousands):



	December 31,
	2012		2011
Prepaid and other current assets
Deferred commission expense	$	289	$	289
Deferred contract origination costs	79		79
Deferred financing costs	1,303		1,303
Other non-current assets
Deferred commission expense	1,061		1,406
Deferred contract origination costs	237		316
Deferred financing costs	2,932		4,235

Commission expense was approximately $5.0 million , $0.4 million and $3.7 million in 2012 , 2011 and 2010 , respectively. Commission expense is included within the Patent administration and licensing line of our Consolidated Statements of Income. Deferred contract origination expense recognized in 2012 , 2011 and 2010 was less than $0.1 million in each period and is included within Patent administration and licensing line of our Consolidated Statements of Income. Deferred financing expense was $1.3 million in 2012 and $1.0 million in 2011. There was no deferred financing expense incurred in 2010. Deferred financing expense is included within the Other (Expense) Income line of our Consolidated Statements of Income.

Research and Development

Research and development expenditures are expensed in the period incurred, except certain software development costs which are capitalized between the point in time that technological feasibility of the software is established and the product is available for general release to customers. We did not have any such capitalized software costs in any period presented. Research, development and other related costs were approximately $67.9 million , $63.8 million and $71.5 million in 2012 , 2011 and 2010 , respectively.

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Compensation Programs

We account for compensation costs associated with share-based transactions based on the fair value of the instruments issued, net of any estimated award forfeitures. At December 31, 2012 , 2011 and 2010 , we have estimated the forfeiture rates for outstanding RSUs to be between 0% and 25% over their lives of one to three years, depending upon the type of grant and the specific terms of the award issued.

In 2006, we adopted the short-cut method to establish the historical additional paid-in-capital pool (“APIC Pool”) related to the tax effects of employee share-based compensation. Any positive balance would be available to absorb tax shortfalls (which occur when the tax deductions resulting from share-based compensation are less than the related book expense) recognized subsequent to the adoption of the stock-based compensation guidance. We did not incur any net tax shortfalls in 2012 , 2011 , or 2010 .

In all periods, our policy has been to set the value of RSU and restricted stock awards equal to the value of our underlying common stock on the date of measurement. For grants made prior to 2010 with graded vesting, we amortize the associated unrecognized compensation cost using an accelerated method. For grants made in 2012 , 2011 and 2010 that cliff vest, we expect to amortize the associated unrecognized compensation cost at December 31, 2012 on a straight-line basis over a three-year period.

Impairment of Long-Lived Assets

We evaluate long-lived and intangible assets for impairment when factors indicate that the carrying value of an asset may not be recoverable. When factors indicate that such assets should be evaluated for possible impairment, we review whether we will be able to realize our long-lived assets by analyzing the projected undiscounted cash flows in measuring whether the asset is recoverable. We did not have any long-lived asset impairments in 2012 , 2011, or 2010.

Income Taxes

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reduction in our foreign tax credits. Due to both foreign currency fluctuations and differences in the interest rate charged by the U.S. government compared to the interest rates, if any, used by the foreign governments, any such agreement could result in interest expense and/or foreign currency gain or loss.

Net Income Per Common Share

Basic Earnings Per Share ("EPS") is calculated by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if options or other securities with features that could result in the issuance of common stock were exercised or converted to common stock. The following table reconciles the numerator and the denominator of the basic and diluted net income per share computation (in thousands, except for per share data):



	For the Year Ended December 31,
	2012					2011					2010
	Basic		Diluted			Basic		Diluted			Basic		Diluted
Numerator:
Net income applicable to common shareholders	$	271,804	$	271,804		$	89,468	$	89,468		$	153,616	$	153,616
Denominator:
Weighted-average shares outstanding: Basic	43,070		43,070			45,411		45,411			44,084		44,084
Dilutive effect of stock options, RSUs and convertible securities			326					603					740
Weighted-average shares outstanding: Diluted			43,396					46,014					44,824
Earnings Per Share:
Net income: Basic	$	6.31	6.31			$	1.97	1.97			$	3.48	3.48
Dilutive effect of stock options, RSUs and convertible securities			(0.05		)			(0.03		)			(0.05		)
Net income: Diluted			$	6.26				$	1.94				$	3.43

For the years ended December 31, 2012 , December 31, 2011 and December 31, 2010, options to purchase zero , zero and less than 0.1 million shares of common stock, respectively, were excluded from the computation of diluted EPS because their effect would have been anti-dilutive.

For the years ended December 31, 2012 and December 31, 2011, 4.0 million and 3.9 million shares of common stock issuable under convertible securities were excluded from the computation of diluted EPS because their effect would have been anti-dilutive. For the years ended December 31, 2012 and December 31, 2011, 4.0 million shares of common stock issuable under warrants were excluded from the computation of diluted EPS because their effect would have been anti-dilutive. There were no warrants or convertible securities outstanding for the year ended December 31, 2010 .

New Accounting Guidance

Accounting Standards Updates: Fair Value Measurements: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS

Accounting Standards Updates: Presentation of Comprehensive Income

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separate, but consecutive, statements of net income and other comprehensive income. The option to present items of other comprehensive income in the statement of changes in equity was eliminated. This guidance is effective for interim and annual periods beginning after December 15, 2011. We adopted this guidance effective January 1, 2012. We have chosen to present items of net income and other comprehensive income in two separate but consecutive statements.


3.	SIGNIFICANT AGREEMENTS

Sony Agreement

Under the arrangement, we expect to collect a total of $125.0 million of cash and have also acquired certain patents from Sony. We have estimated the value of the acquired patents to be $28.9 million . We estimated the fair value of patents by a combination of a discounted cash flow analysis (the income approach) and an analysis of comparable market transactions (the market approach). For the income approach, the inputs and assumptions used to develop this estimate were based on a market participant perspective and included estimates of projected royalties, discount rates, useful lives and income tax rates, among others. For the market approach, judgment was applied as to which market transactions were most comparable to this transaction. These inputs and assumptions represent our best estimates at the time of the transaction. Changes in any number of these assumptions may have had a substantial impact on the estimated value of the acquired patents.


4.	GEOGRAPHIC / CUSTOMER CONCENTRATION

We have one reportable segment. As of December 31, 2012 , a large portion of our revenue was derived from $375.0 million in patent sales to Intel Corporation, a U.S. company. Our remaining revenues were primarily derived from a limited number of licensees based outside of the United States, primarily in Asia. These revenues were paid in U.S. dollars and were not subject to any substantial foreign exchange transaction risk. The table below lists the countries of the headquarters of our licensees and the total revenue derived from each country for the periods indicated (in thousands):

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	For the Year Ended December 31,
	2012		2011		2010
United States	$	406,950	$	13,719	$	18,953
Korea	118,078		118,078		175,614
Canada	40,667		54,728		38,820
Taiwan	40,394		43,993		21,559
Japan	39,558		61,594		121,113
China	9,246		688		6,305
Other Europe	4,700		3,461		1,877
Germany	3,470		5,439		10,292
Other Asia	—		42		12
Total	$	663,063	$	301,742	$	394,545

During 2012 , 2011 and 2010 , the following licensees or customers accounted for 10% or more of total revenues:



	2012	2011	2010
Intel Corporation	57%	< 10%	< 10%
Samsung Electronics Co., Ltd.	15%	34%	26%
BlackBerry	< 10%	14%	< 10%
HTC Corporation	< 10%	11%	< 10%
LG Electronics	—%	—%	15%

At December 31, 2012 , 2011 and 2010 , we held $185.4 million , or nearly 100% , $146.0 million , or nearly 100% , and $138.4 million , or 99% , respectively, of our property and equipment and patents in the United States net of accumulated depreciation and amortization. At December 31, 2012 , 2011 and 2010 , we also held zero , $0.1 million and $0.2 million , respectively, of property and equipment, net of accumulated depreciation, in Canada.

5. PROPERTY AND EQUIPMENT



	December 31,
	2012			2011
Land	$	695		$	695
Building and improvements	7,800			7,763
Engineering and test equipment	11,604			11,021
Computer equipment and software	28,143			25,738
Furniture and fixtures	1,578			1,357
Leasehold improvements	4,655			4,530
Property and equipment, gross	54,475			51,104
Less: accumulated depreciation	(46,651		)	(43,107		)
Property and equipment, net	$	7,824		$	7,997

Depreciation expense was $3.6 million , $4.2 million and $4.9 million in 2012 , 2011 and 2010 , respectively. Depreciation expense included depreciation of computer software costs of $1.0 million , $1.2 million and $1.8 million in 2012 , 2011 and 2010 , respectively. Accumulated depreciation related to computer software costs was $15.7 million and $14.7 million at December 31, 2012 and 2011 , respectively. The net book value of our computer software was $1.7 million and $1.6 million at December 31, 2012 and 2011 , respectively.

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6.	OBLIGATIONS



	December 31,
	2012			2011
Mortgage debt	$	—		$	180
2.50% Senior Convertible Notes due 2016	230,000			230,000
Unamortized interest discount	(29,609		)	(37,471		)
Total debt obligations	200,391			192,709
Less: Current portion	—			180
Long-term debt obligations	$	200,391		$	192,529

During 1996, we purchased our King of Prussia, Pennsylvania, facility for $3.7 million , including cash of $0.9 million and a 16-year mortgage of $2.8 million with interest payable at a rate of 8.28% per annum. We have no obligations associated with our King of Prussia, Pennsylvania, facility as of December 31, 2012. The carrying amount of the land and office building in King of Prussia was $2.3 million as of December 31, 2012 .

There were no capital leases remaining at December 31, 2012 and December 31, 2011.

Maturities of principal of the long-term debt obligations of the company as of December 31, 2012 are as follows (in thousands):



2013	$	—
2014	—
2015	—
2016	230,000
2017	—
Thereafter	—
	$	230,000

Senior Convertible Note, Note Hedge and Warrant Transactions

On April 4, 2011, InterDigital issued $230.0 million in aggregate principal amount of its 2.50% Senior Convertible Notes due 2016 (the “Notes”) pursuant to an indenture (the “Indenture”), dated as of April 4, 2011, by and between the company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Notes bear interest at a rate of 2.50% per year, payable in cash on March 15 and September 15 of each year, commencing September 15, 2011. The Notes will mature on March 15, 2016, unless earlier converted or repurchased. The Notes are the company's senior unsecured obligations and rank equally in right of payment with any of the company's future senior unsecured indebtedness, and the Notes are structurally subordinated to the company's future secured indebtedness to the extent of the value of the related collateral and to the indebtedness and other liabilities, including trade payables, of the company's subsidiaries, except with respect to any subsidiaries that become guarantors pursuant to the terms of the Indenture.

The Notes will be convertible into cash and, if applicable, shares of the company's common stock at a conversion rate of 17.958 shares of common stock per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $55.69 per share), as adjusted for the special dividend paid December 28, 2012. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances, including in connection with conversions made following certain fundamental changes and under other circumstances as set forth in the Indenture.

Prior to 5:00 p.m., New York City time, on the business day immediately preceding December 15, 2015, the Notes will be convertible only under certain circumstances as set forth in the Indenture. Commencing on December 15, 2015, the Notes will be convertible in multiples of $1,000 principal amount, at any time prior to 5:00 p.m., New York City time, on the business day immediately preceding the maturity date of the Notes. Upon any conversion, the conversion obligation will be settled in cash up to, and including, the principal amount and, to the extent of any excess over the principal amount, in shares of common stock.

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If a fundamental change (as defined in the Indenture) occurs, holders may require the company to purchase all or a portion of their Notes for cash at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The company may not redeem the Notes prior to their maturity date.

On March 29 and March 30, 2011, in connection with the offering of the Notes, InterDigital entered into convertible note hedge transactions with respect to its common stock with Barclays Bank PLC, through its agent, Barclays Capital Inc. The two convertible note hedge transactions cover, subject to customary anti-dilution adjustments, approximately 3.5 million and approximately 0.5 million shares of common stock, respectively, at a strike price that corresponds to the initial conversion price of the Notes, also subject to adjustment, and are exercisable upon conversion of the Notes.

On April 4, 2011, the company paid $37.1 million and $5.6 million for the convertible note hedge transactions entered into on March 29 and March 30, 2011, respectively. The aggregate cost of the convertible note hedge transactions was $42.7 million . As described in more detail below, this cost was partially offset by the proceeds from the sale of the warrants in separate transactions.

The convertible note hedge transactions are intended generally to reduce the potential dilution to the common stock upon conversion of the Notes in the event that the market price per share of the common stock is greater than the strike price.

The convertible note hedge transactions are separate transactions and are not part of the terms of the Notes. Holders of the Notes have no rights with respect to the convertible note hedge transactions.

On March 29 and March 30, 2011, InterDigital also entered into privately-negotiated warrant transactions with Barclays Bank PLC, through its agent, Barclays Capital Inc., whereby InterDigital sold warrants to acquire, subject to customary anti-dilution adjustments, approximately 3.5 million shares and approximately 0.5 million shares, respectively, of common stock at a strike price of $64.09 per share, as adjusted for the special dividend paid December 28, 2012. The warrants become exercisable in tranches starting in June 2016. As consideration for the warrants issued on March 29 and March 30, 2011, the company received, on April 4, 2011, $27.6 million and $4.1 million , respectively.

If the market value per share of the common stock, as measured under the warrants, exceeds the strike price of the warrants at the time the warrants are exercisable, the warrants will have a dilutive effect on the company's earnings per share.

Accounting Treatment of the Senior Convertible Note, Convertible Note Hedge and Warrant Transactions

The offering of the Notes on March 29, 2011 was for $200.0 million and included an overallotment option that allowed the initial purchaser to purchase up to an additional $30.0 million aggregate principal amount of Notes. The initial purchaser exercised its overallotment option on March 30, 2011, bringing the total amount of Notes issued on April 4, 2011 to $230.0 million .

In connection with the offering of the Notes, as discussed above, InterDigital entered into convertible note hedge transactions with respect to its common stock. The $42.7 million cost of the convertible note hedge transactions was partially offset by the proceeds from the sale of the warrants described above, resulting in a net cost of $10.9 million .

Existing accounting guidance provides that the March 29, 2011 convertible note hedge and warrant contracts be treated as derivative instruments for the period during which the initial purchaser's overallotment option was outstanding. Once the overallotment provision was exercised on March 30, 2011, the March 29 convertible note hedge and warrant contracts were reclassified to equity, as the settlement terms of the company's note hedge and warrant contracts both provide for net share settlement. There was no material net change in the value of these convertible note hedges and warrants during the one day they were classified as derivatives and the equity components of these instruments will not be adjusted for subsequent changes in fair value.

Under current accounting guidance, the company bifurcated the proceeds from the offering of the Notes between the liability and equity components of the debt. On the date of issuance, the liability and equity components were calculated to be approximately $187.0 million and $43.0 million , respectively. The initial $187.0 million liability component was determined based on the fair value of similar debt instruments excluding the conversion feature. The initial $43.0 million ( $28.0 million net of tax) equity component represents the difference between the fair value of the initial $187.0 million in debt and the $230.0 million of gross proceeds. The related initial debt discount of $43.0 million is being amortized using the effective interest method over the life of the Notes. An effective interest rate of 7% was used to calculate the debt discount on the Notes.

In connection with the above-noted transactions, the company incurred $8.0 million of directly related costs. The initial purchaser's transaction fees and related offering expenses were allocated to the liability and equity components of the debt in proportion to the allocation of proceeds and accounted for as debt issuance costs. We allocated $6.5 million of debt issuance costs to the liability component of the debt, which were capitalized as deferred financing costs. These costs are being

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amortized to interest expense over the term of the debt using the effective interest method. The remaining $1.5 million of costs allocated to the equity component of the debt were recorded as a reduction of the equity component of the debt.

The following table presents the amount of interest cost recognized for the for the years ended December 31, 2012 and December 31, 2011 related to the contractual interest coupon, accretion of the debt discount and the amortization of financing costs (in thousands).




	For the Year Ended December 31,		For the Year Ended December 31,
	2012		2011
Contractual coupon interest	$	5,750	$	4,313
Accretion of debt discount	7,862		5,567
Amortization of financing costs	1,303		977
Total	$	14,915	$	10,857


7.	COMMITMENTS

Leases

We have entered into various operating lease agreements. Total rent expense, primarily for office space, was $3.4 million , $3.4 million and $2.9 million in 2012 , 2011 and 2010 , respectively. Minimum future rental payments for operating leases as of December 31, 2012 are as follows (in thousands):



2013	$	2,406
2014	2,385
2015	2,120
2016	1,997
2017	1,875
Thereafter	6,073


8.	LITIGATION AND LEGAL PROCEEDINGS

Samsung, Nokia, Huawei and ZTE 2013 USITC Proceeding (337-TA-868) and Related Delaware District Court Proceedings

On January 2, 2013, the company's wholly owned subsidiaries InterDigital Communications, Inc., InterDigital Technology Corporation, IPR Licensing, Inc. and InterDigital Holdings, Inc. filed a complaint with the United States International Trade Commission (the “USITC” or “Commission”) against Samsung Electronics Co., Ltd., Samsung Electronics America, Inc. and Samsung Telecommunications America, LLC, Nokia Corporation and Nokia Inc., Huawei Technologies Co., Ltd., Huawei Device USA, Inc. and FutureWei Technologies, Inc. d/b/a Huawei Technologies (USA) and ZTE Corporation and ZTE (USA) Inc. (collectively, the “337-TA-868 Respondents”), alleging violations of Section 337 of the Tariff Act of 1930 in that they engaged in unfair trade practices by selling for importation into the United States, importing into the United States and/or selling after importation into the United States certain 3G and 4G wireless devices (including WCDMA-, cdma2000- and LTE-capable mobile phones, USB sticks, mobile hotspots, laptop computers and tablets and components of such devices) that infringe one or more of up to seven of InterDigital's U.S. patents. The complaint also extends to certain WCDMA and cdma2000 devices incorporating WiFi functionality. InterDigital's complaint with the USITC seeks an exclusion order that would bar from entry into the United States infringing 3G or 4G wireless devices (and components), including LTE devices, that are imported by or on behalf of the 337-TA-868 Respondents, and also seeks a cease-and-desist order to bar further sales of infringing products that have already been imported into the United States. Certain of the asserted patents have been asserted against Nokia, Huawei and ZTE in earlier pending USITC proceedings (including the Nokia, Huawei and ZTE 2011 USITC Proceeding (337-TA-800) and the Nokia 2007 USITC Proceeding (337-TA-613), as set forth below) and therefore are not being asserted against those 337-TA-868 Respondents in this investigation. On February 6, 2013, the Administrative Law Judge (“ALJ”) overseeing the proceeding issued an order setting a target date of June 4, 2014 for the Commission's final determination in the investigation, with the ALJ's Initial Determination on alleged violation due on February 4, 2014. On February 21, 2013, each 337-TA-868 Respondent filed their respective responses to the complaint.

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Also on January 2, 2013, the company's wholly owned subsidiaries InterDigital Communications, Inc., InterDigital Technology Corporation, IPR Licensing, Inc. and InterDigital Holdings, Inc. filed four related district court actions in the United States District Court for the District of Delaware (the “Delaware District Court”) against the 337-TA-868 Respondents. These complaints allege that each of the defendants infringes the same patents with respect to the same products alleged in the complaint filed by InterDigital in USITC Proceeding (337-TA-868). The complaints seek permanent injunctions and compensatory damages in an amount to be determined, as well as enhanced damages based on willful infringement, and recovery of reasonable attorneys' fees and costs. On January 24, 2013, Huawei filed its answer and counterclaims to InterDigital's complaint. Huawei asserted counterclaims for breach of contract, equitable estoppel, waiver of right to enjoin and declarations that InterDigital has not offered or granted Huawei licenses on fair, reasonable and non-discriminatory (“FRAND”) terms, declarations seeking the determination of FRAND terms and declarations of noninfringement, invalidity and unenforceability of the asserted patents. In addition to the declaratory relief specified in its counterclaims, Huawei seeks specific performance of InterDigital's purported contracts with Huawei and standards-setting organizations, appropriate damages in an amount to be determined at trial, reasonable attorneys' fees and such other relief as the court may deem appropriate. On January 31, 2013, ZTE filed its answer and counterclaims to InterDigital's complaint; ZTE asserted counterclaims for breach of contract, equitable estoppel, waiver of right to enjoin and declarations that InterDigital has not offered ZTE licenses on FRAND terms, declarations seeking the determination of FRAND terms and declarations of noninfringement, invalidity and unenforceability. Nokia and Samsung have not yet responded to the complaints against them. In addition to the declaratory relief specified in its counterclaims, ZTE seeks specific performance of InterDigital's purported contracts with ZTE and standards-setting organizations, appropriate damages in an amount to be determined at trial, reasonable attorneys' fees and such other relief as the court may deem appropriate.

Huawei Complaint to European Commission

Huawei China Proceedings

On February 21, 2012, InterDigital was served with two complaints filed by Huawei Technologies Co., Ltd. in the Shenzhen Intermediate People's Court in China on December 5, 2011. The first complaint names as defendants InterDigital, Inc. and its wholly owned subsidiaries InterDigital Technology Corporation and InterDigital Communications, LLC (now InterDigital Communications, Inc.). This first complaint alleges that InterDigital had a dominant market position in China and the United States in the market for the licensing of essential patents owned by InterDigital, and abused its market power by engaging in allegedly unlawful practices, including differentiated pricing, tying and refusal to deal. Huawei sought relief in the amount of 20.0 million RMB (approximately 3.2 million USD based on the current exchange rate), an order requiring InterDigital to cease the allegedly unlawful conduct and compensation for its costs associated with this matter. The second complaint names as defendants the company's wholly owned subsidiaries InterDigital Technology Corporation, InterDigital Communications, LLC (now InterDigital Communications, Inc.), InterDigital Patent Holdings, Inc. and IPR Licensing, Inc. This second complaint alleges that InterDigital is a member of certain standards-setting organization(s); that it is the practice of certain standards-setting organization(s) that owners of essential patents included in relevant standards license those patents on FRAND terms; and that InterDigital has failed to negotiate on FRAND terms with Huawei. Huawei is asking the

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court to determine the FRAND rate for licensing essential Chinese patents to Huawei and also seeks compensation for its costs associated with this matter.

Nokia, Huawei and ZTE 2011 USITC Proceeding (337-TA-800) and Related Delaware District Court Proceeding

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be added to USITC Proceeding (337-TA-800). On October 11, 2011, the Delaware District Court granted the defendants' motion to stay.

LG Arbitration

Nokia 2007 USITC Proceeding (337-TA-613), Related Delaware District Court Proceeding and Federal Circuit Appeal

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enforceable, but that Nokia did not infringe these patents. In the event that a Section 337 violation were to be found by the Commission, the ALJ recommended the issuance of a limited exclusion order barring entry into the United States of infringing Nokia 3G WCDMA handsets and components, as well as the issuance of appropriate cease-and-desist orders.

Nokia Delaware Proceeding

On December 10, 2007, pursuant to a joint request by the parties, the Delaware District Court entered an order staying the proceedings pending the full and final resolution of USITC Proceeding (337-TA-613). Specifically, the full and final resolution of USITC Proceeding (337-TA-613) includes any initial or final determinations of the ALJ overseeing the proceeding, the USITC and any appeals therefrom and any remand proceedings thereafter. Pursuant to the order, the parties and their affiliates are generally prohibited from initiating against the other parties, in any forum, any claims or counterclaims that are the same as the claims and counterclaims pending in the Nokia Delaware Proceeding, and should any of the same or similar claims or counterclaims be initiated by a party, the other parties may seek dissolution of the stay.

Except for the Nokia Delaware Proceeding and the Nokia Arbitration Concerning Presentations (described below), the order does not affect any of the other legal proceedings between the parties.

Nokia Arbitration Concerning Presentations

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InterDigital has no obligation as a result of this or any of the other matters described in this Note 8 to Consolidated Financial Statements, and we have not recorded any related liabilities in our financial statements.

Other

Contingency related to Technology Solutions Agreement Arbitration


9.	RELATED PARTY TRANSACTIONS

On December 17, 2009, we announced a multi-faceted collaboration agreement with Attila, a company in which we have a direct investment. Under the agreement, we collaborate on the development and marketing of bandwidth aggregation technologies and related multi-network innovations. In addition, we paid approximately $0.7 million in 2009 to acquire a 7% minority stake in Attila. In each of 2011 and 2010, we paid $0.4 million to Attila in relation to the collaboration agreement previously discussed.


10.	COMPENSATION PLANS AND PROGRAMS

Stock Plans

On June 4, 2009, the company’s shareholders adopted and approved the 2009 Stock Incentive Plan (the “2009 Plan”), under which current or prospective officers and employees and non-employee directors, consultants and advisors can receive share-based awards such as RSUs, restricted stock, stock options and other stock awards. As of this date, no further grants were permitted under any previously existing stock plans (the “Pre-existing Plans”). We issue the share-based awards authorized under the 2009 Plan through a variety of compensation programs.

The following table summarizes changes in the number of equity instruments available for grant (in thousands) under the 2009 Plan for the current year:



	Available for Grant
Balance at December 31, 2011	3,494
RSUs granted (a)	(207	)
Options expired and RSUs cancelled	140
Balance at December 31, 2012	3,427

_______________________________________


(a)	RSUs granted include time-based RSUs, performance-based RSUs and dividend equivalents.

Stock Options

We have outstanding non-qualified stock options that were granted under the Pre-existing Plans to non-employee directors, officers and employees of the company and other specified groups, depending on the plan. No further grants are allowed under the Pre-existing Plans. In 2009, our shareholders approved the 2009 Plan, which allows for the granting of incentive and non-qualified stock options, as well as other securities. The 2009 Plan authorizes the issuance of up to approximately 3.0 million shares of common stock. The administrator of the 2009 Plan, initially the Compensation Committee

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of the Board of Directors, determines the number of options to be granted. Under the terms of the 2009 Plan, the exercise price per share of each option, other than in the event of options granted in connection with a merger or other acquisition, cannot be less than 100% of the fair market value of a share of common stock on the date of grant. Under all of the plans, options are generally exercisable for a period of 10 years from the date of grant and may vest on the grant date, another specified date or over a period of time.

Information with respect to current year stock options activity under the above plans is summarized as follows (in thousands, except per share amounts):



	Outstanding Options		Weighted Average Exercise Price
Balance at December 31, 2011	342		$	14.37
Canceled	—		—
Exercised	(132	)	17.62
Balance at December 31, 2012	210		$	16.39

The weighted average remaining contractual life of our outstanding options was 21.39 years as of December 31, 2012 . We currently have approximately 0.1 million options outstanding that have an indefinite contractual life. These options were granted between 1983 and 1986 under a Pre-existing Plan. For purposes of calculating the weighted average remaining contractual life, these options were assigned an original life in excess of 50 years. The majority of these options have an exercise price between $8.25 and $26.86 . The total intrinsic value of stock options exercised during the years ended December 31, 2012 , 2011 and 2010 was $2.8 million , $12.1 million and $25.3 million , respectively. The total intrinsic value of our options outstanding at December 31, 2012 was $5.8 million . In 2012 , we recorded cash received from the exercise of options of $2.1 million and tax benefits from option exercises and RSU vestings of $0.9 million . Upon option exercise, we issued new shares of stock.

At December 31, 2012 and 2011 , we had, respectively, approximately 0.2 million and 0.3 million options outstanding that had exercise prices less than the fair market value of our stock at each balance sheet date. These options would have generated cash proceeds to the company of $2.8 million and $4.9 million , respectively, if they had been fully exercised on those dates.

RSUs and Restricted Stock

Under the 2009 Plan, we may issue up to approximately 3.0 million RSUs and/or shares of restricted stock to current or prospective officers and employees and non-employee directors, consultants and advisors. No further grants are allowed under the Pre-existing Plans. Any cancellations of outstanding RSUs that were granted under the 2009 Plan or Pre-existing Plans will increase the number of RSUs and/or shares of restricted stock available for grant under the 2009 Plan. The RSUs vest over periods generally ranging from 0 to 3 years from the date of the grant. During 2012 and 2011 , we granted approximately 0.2 million and 0.2 million RSUs, respectively, under the 2009 Plan. We have issued less than 0.1 million shares of restricted stock under the 2009 Plan.

At December 31, 2012 and 2011 , we had unrecognized compensation cost related to share-based awards of $6.1 million and $6.0 million , respectively. For grants made prior to 2010 with graded vesting, we expect to amortize the unrecognized compensation cost at December 31, 2012 over a weighted average period of less than one year using an accelerated method. For grants made in 2012, 2011 and 2010 that cliff vest, we expect to amortize the associated unrecognized compensation cost at December 31, 2012 on a straight-line basis over a three-year period.

We grant RSUs as an element of compensation to all of our employees under our Long-Term Compensation Program (“LTCP”).

Under all LTCP cycles that began after 2009, all time-based awards vest at the end of the respective three-year LTCP cycle. For employees below manager level, 100% of their LTCP award is in the form of time-based RSUs. For all employees at or above the manager level, 25% of their total LTCP award is in the form of time-based RSUs and the remaining 75% is a performance-based award that is paid out at the end of the respective three-year cycle in cash, equity or any combination thereof pursuant to the Long-Term Incentive Plan (“LTIP”) component of the LTCP. Where the allocation has not been determined at the beginning of the cycle, as in the case of Cycles 5, 6, and 7 (as defined below), the allocation is assumed to be 100% cash for accounting purposes. The terms of the current LTCP are discussed further below.

For LTCP cycles that began prior to 2010, RSU awards vested over three years according to the following schedules:

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	Year 1		Year 2		Year 3
Time-Based Awards
- Employees below manager level (represents 100% of the total award)	33	%	33	%	34	%
- Managers and technical equivalents (represents 75% of the total award)	25	%	25	%	25	%
- Senior Officers (represents 50% of the total award)	—	%	—	%	50	%
Performance-Based Awards
- Managers and technical equivalents (remaining 25% of the total award)	—	%	—	%	25	%
- Senior officers (remaining 50% of the total award)	—	%	—	%	50	%

Vesting of performance-based RSU awards is subject to attainment of specific goals established by the Compensation Committee of the Board of Directors. Depending upon performance against these goals, the payout range for performance-based RSU awards under the prior LTCP could have been anywhere from 0 to 3 times the value of the award.

Other RSU Grants

We also grant RSUs to all non-management Board members and, in special circumstances, management personnel outside of the LTCP. Grants of this type are supplemental to any awards granted to management personnel through the LTCP.

Information with respect to current RSU activity is summarized as follows (in thousands, except per share amounts):



	Number of Unvested RSUs		Weighted Average Per Share Grant Date Fair Value
Balance at December 31, 2011	498		$	35.93
Granted*	207		39.35
Forfeited*	(140	)	43.04
Vested*	(312	)	32.35
Balance at December 31, 2012	253		$	38.09

_______________________________________


*	These numbers include less than 0.1 million RSUs credited on unvested RSUs as dividend equivalents. Dividend equivalents accrue with respect to unvested RSUs when and as cash dividends are paid on the company's common stock, and vest if and when the underlying RSUs vest.

The total vest date fair value of our RSUs that vested in 2012 , 2011 and 2010 was $12.9 million , $8.0 million and $7.8 million , respectively. The weighted average per share grant date fair value in 2012 , 2011 and 2010 was $39.35 , $42.17 and $31.77 , respectively.

Compensation Programs

We use a variety of compensation programs to both attract and retain employees and more closely align employee compensation with company performance. These programs include both cash and share-based components, as discussed further below. We issue new shares of our common stock to satisfy our obligations under the share-based components of these programs from the 2009 Plan discussed above. However, our Board of Directors has the right to authorize the issuance of treasury shares to satisfy such obligations in the future. We recognized $8.3 million , $1.8 million and $11.2 million of compensation expense in 2012 , 2011 and 2010 , respectively, related to the performance-based cash incentive component of our LTCP, discussed in greater detail below. The majority of the share-based compensation expense, for all years, relates to RSU awards granted under our LTCP. The 2012 amount includes a charge of $4.4 million to adjust the accrual rate on Cycle 5 (as defined below) to 100% . The 2011 amount includes a credit of $5.7 million to reduce the accrual rates for the performance-based incentive under Cycles 5 and 6 (each as defined below) from 100% to 50% , based on revised expectations for a lower payout. The $5.7 million adjustment represents a reduction to the accrual established for LTCP Cycles 5 and 6 in 2010 and 2011, respectively. The 2011 amount includes a charge of $1.3 million to increase the accrual rate for LTCP Cash Cycle 3 (as defined below) from the previously estimated payout of 50% to the actual payout of 86% . The 2010 amount includes a credit of $3.3 million to reduce the accrual rate for Cash Cycle 3 from 100% to 50% based on revised expectations for a lower payout. This $3.3 million adjustment related to the reduction of our accrual established in the prior year. We also recognized share-based compensation expense of $6.5 million , $8.1 million and $5.8 million in 2012 , 2011 and 2010 , respectively.

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Long-Term Compensation Program

Prior to 2011 , the LTCP, which consists of overlapping cycles that are generally three years in length, was designed to alternate annually between equity and cash cycles, with equity cycles including both time-based and performance-based components and cash cycles consisting of a performance-based cash incentive. Under the equity cycles, executives received 50% of their awards in the form of performance-based RSUs, and 50% in the form of time-based RSUs that vested in full at the end of the respective three-year cycle. Employees at or above the manager level received 25% of their equity awards in the form of performance-based RSUs, and 75% in the form of time-based RSUs that vested in full at the end of the three-year cycle. Performance-based RSUs vested, if at all, based on the company's level of achievement with respect to goals established for the three-year cycle period. For cycles that began prior to 2010, payouts under the performance-based RSU cycles were capped at 300% and payouts under performance-based cash incentive cycles were capped at 225% . Employees below the manager level did not participate in the LTCP, but did receive RSU grants under a separate program. The following cycles were initiated between 2005 and 2009:


•	Cash Cycle 3: A long-term performance-based cash incentive covering the period January 1, 2008 through December 31, 2010; and


•	RSU Cycle 4: Time and performance-based RSUs granted on January 1, 2009, with a target vest date of January 1, 2012.

In fourth quarter 2010, the LTCP was amended to, among other things, increase the relative proportion of performance-based compensation for both executives and managers, extend participation to all employees, and eliminate alternating annual RSU and cash cycles.

Under the terms of the current LTCP, effective beginning with the cycle that began on January 1, 2010, all employees below manager level receive 100% of their LTCP participation in the form of time-based RSUs that vest in full at the end of the respective three-year cycle. Executives and managers receive 25% of their LTCP award in the form of time-based RSUs that vest in full at the end of the respective three-year cycle and the remaining 75% in the form of performance-based awards granted under the LTIP component of the LTCP. The LTIP performance-based awards that are applicable to both executives and managers may be paid out in the form of cash or equity, or any combination thereof at the end of the respective three-year cycle. The form of the LTIP award will be determined by the Compensation Committee of our Board of Directors, in its sole discretion, at the beginning or the end of each three-year cycle. The following cycles have been initiated under the current LTCP through December 31, 2011:


•	Cycle 5: Time-based RSUs granted on November 1, 2010, which vested on January 1, 2013, and a long-term performance-based incentive covering the period from January 1, 2010 through December 31, 2012;


•	Cycle 6: Time-based RSUs granted on January 1, 2011, which vest on January 1, 2014, and a long-term performance-based incentive covering the period from January 1, 2011 through December 31, 2013; and


•	Cycle 7 : Time-based RSUs granted on January 1, 2012, which vest on January 1, 2015, and a long-term performance-based incentive covering the period from January 1, 2012 through December 31, 2014.

Payouts of performance-based awards will continue to be determined by the Compensation Committee in its sole discretion, based on the company’s achievement of one of more performance goals, previously established and approved by the Compensation Committee, during the respective cycle period. Payouts may exceed or be less than target, depending on the level of the company’s achievement of the performance goal(s). No payout may be made under the LTIP if the company fails to achieve the minimum level of performance for the applicable cycle, and the payout for any particular cycle is capped at 200% of target.

401(k) and Profit-Sharing

We have a 401(k) plan (“Savings Plan”) wherein employees can elect to defer compensation within federal limits. The company matches a portion of employee contributions. The company’s contribution expense was approximately $1.0 million for each of 2012 , 2011 and 2010 . At its discretion, the company may also make a profit-sharing contribution to our employees’ 401(k) accounts. In fourth quarter 2009, the Compensation Committee of the Board of Directors determined that it would not elect to make a profit-sharing contribution to each employee in 2010 or the foreseeable future. In 2010 , we issued 25,563 shares of common stock to satisfy our accrued obligations from the prior year of $0.6 million related to our profit-sharing contributions to eligible employees under our Savings Plan.


11.	TAXES

Our income tax provision consists of the following components for 2012 , 2011 and 2010 (in thousands):

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	2012			2011			2010
Current
Federal	$	93,441		$	30,990		$	85,848
State	44			131			38
Foreign source withholding tax	4,173			5,453			35,707
	97,658			36,574			121,593
Deferred
Federal	22,209			(21,621		)	(31,747		)
State	(4,494		)	(416		)	277
Foreign source withholding tax	21,457			20,603			(5,292		)
	39,172			(1,434		)	(36,762		)
Total	$	136,830		$	35,140		$	84,831

The deferred tax assets and liabilities are comprised of the following components at December 31, 2012 and 2011 (in thousands):



	2012
	Federal		State			Foreign		Total
Net operating losses	$	—	$	68,640		$	—	$	68,640
Deferred revenue, net	24,691		2,030			5,467		32,188
Foreign tax credits	—		—			—		—
Stock compensation	6,709		951			—		7,660
Patent amortization	13,215		7			—		13,222
Depreciation	1,202		199			—		1,401
Other accrued liabilities	3,874		716			—		4,590
Other employee benefits	4,096		735			—		4,831
	53,787		73,278			5,467		132,532
Less: valuation allowance	—		(68,378		)	—		(68,378		)
Net deferred tax asset	$	53,787	$	4,900		$	5,467	$	64,154



	2011
	Federal			State			Foreign		Total
Net operating losses	$	—		$	73,754		$	—	$	73,754
Deferred revenue, net	56,128			435			22,751		79,314
Foreign tax credits	—			—			—		—
Stock compensation	10,748			1,686			—		12,434
Patent amortization	11,909			35			—		11,944
Depreciation	1,182			162			—		1,344
Other accrued liabilities	2,726			447			—		3,173
Other employee benefits	938			159			—		1,097
	83,631			76,678			22,751		183,060
Less: valuation allowance	(2,225		)	(76,272		)	—		(78,497		)
Net deferred tax asset	$	81,406		$	406		$	22,751	$	104,563

The following is a reconciliation of income taxes at the federal statutory rate with income taxes recorded by the company for the years ended December 31, 2012 , 2011 and 2010 (in thousands):

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	2012			2011			2010
Tax at U.S. statutory rate	$	143,022		$	43,612		$	83,456
Foreign withholding tax, with no U.S. foreign tax credit	—			—			—
State tax provision	(8,831		)	(14,251		)	(1,252		)
Change in federal and state valuation allowance	2,140			13,608			1,554
Adjustment to tax credits	—			—			—
Adjustments to uncertain tax positions	—			(6,775		)	—
Other	499			(1,054		)	1,073
Total tax provision	$	136,830		$	35,140		$	84,831

Valuation Allowances and Net Operating Losses

We establish a valuation allowance for any portion of our deferred tax assets for which management believes it is more likely than not that we will be unable to utilize the assets to offset future taxes. We believe it is more likely than not that the majority of our state deferred tax assets will not be utilized; therefore and we have maintained a near full valuation allowance against our state deferred tax assets as of December 31, 2012 .

Under Internal Revenue Code Section 382, the utilization of a corporation’s net operating loss (“NOL”) carryforwards is limited following a change in ownership (as defined by the Internal Revenue Code) of greater than 50% within a three-year NOL period. If it is determined that prior equity transactions limit our NOL carryforwards, the annual limitation will be determined by multiplying the market value of the company on the date of the ownership change by the federal long-term tax-exempt rate. Any amount exceeding the annual limitation may be carried forward to future years for the balance of the NOL carryforward period.

The company recognizes excess tax benefits associated with share-based compensation to shareholders' equity only when realized. When assessing whether excess tax benefits relating to share-based compensation have been realized, the company follows the with and without approach excluding any indirect effects of the excess tax deductions. Under this approach, excess tax benefits related to share-based compensation are not deemed to be realized until after the utilization of all other tax benefits available to the company. During 2012 , the company realized $0.9 million of such excess tax benefits for federal purposes, and accordingly recorded a corresponding credit to additional paid in capital. As of December 31, 2012 , the company had $12.1 million of state unrealized tax benefits associated with share-based compensation. At December 31, 2011, this amount was included in NOL with a full valuation allowance. These state tax benefits will be accounted for as a credit to additional paid-in capital, if and when realized, rather than a reduction of the provision for income taxes.

Uncertain Income Tax Positions

The company’s unrecognized tax benefits as of December 31, 2012 , 2011 and 2010 were $0.0 million , $0.0 million and $6.5 million , respectively, which if recognized, would reduce the company’s effective income tax rate in the period of recognition. The total amount of unrecognized tax benefits could increase within the next twelve months for a number of reasons including audit settlements, tax examination activities and the recognition and measurement considerations under this guidance.

As of January 1, 2009, we had unrecognized tax benefits of $4.4 million , primarily related to NOL carryforwards. During 2009, we received a settlement offer from the Internal Revenue Service related to our 2006 Internal Revenue Service audit and we reclassified $0.6 million from the reserve to offset our current receivable. In 2011, we settled the 2006 Internal Revenue Service audit and recognized the remaining tax benefit of $3.8 million .

During 2009, we established a reserve of $2.7 million related to the recognition of a $19.1 million gross benefit for amending tax returns for the periods 1999 — 2005 to switch foreign tax payments made during that period from a deduction to a foreign tax credits. In 2011, we recorded an additional tax benefit of $8.3 million to eliminate this tax contingency and recognize interest income on the associated refund. As of December 31, 2012 , our reserve was $0.0 million . We do not expect a material change in this estimate in the next twelve months, although a change is possible.

The following is a roll forward of our total gross unrecognized tax benefits, which if reversed would impact the effective tax rate, for the fiscal years 2010 through 2012 (in thousands):

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	2012		2011			2010
Balance as of January 1	$	—	$	6,459		$	6,459
Tax positions related to current year:
Additions	—		—			—
Reductions	—		—			—
Tax positions related to prior years:
Additions	—		—			—
Reductions	—		(6,459		)	—
Settlements	—		—			—
Lapses in statues of limitations	—		—			—
Balance as of December 31	$	—	$	—		$	6,459

Our policy is to recognize interest and or penalties related to income tax matters in income tax expense. In addition to the balance of unrecognized tax benefits in the above table, we have accrued related interest of $0.0 million , $0.0 million and $0.3 million as of December 31, 2012 , 2011 and 2010 , respectively. The accrued interest was not included in the reserve balances listed above.

The company and its subsidiaries are subject to United States federal income tax, foreign income and withholding taxes and income taxes from multiple state jurisdictions. Our federal income tax returns for 2007 to the present are currently open and will not close until the respective statutes of limitations have expired. The statutes of limitations generally expire three years following the filing of the return or in some cases three years following the utilization or expiration of net operating loss carry forwards. The statute of limitations applicable to our open federal returns will expire at the end of 2015. Specific tax treaty procedures remain open for certain jurisdictions for 2006 and 2007. Many of our subsidiaries have filed state income tax returns on a separate company basis. To the extent these subsidiaries have unexpired net operating losses, their related state income tax returns remain open. These returns have been open for varying periods, some exceeding ten years.

Currently the company is under audit by the State of New York for tax years 2002 through 2008. The State is claiming that prior to 2007 the company should have reported its returns as a combined report instead of as a separate entity as the company had filed. The company has reviewed the findings of the State and believes that it is more likely than not that the company will successfully sustain its separate company reporting and thus has not accrued any tax, interest or penalty exposure under the accounting for uncertain income tax position guidance.

Foreign Taxes

We pay foreign source withholding taxes on patent license royalties and state taxes when applicable. We apply foreign source withholding tax payments against our United States federal income tax obligations to the extent we have foreign source income to support these credits. In 2012 , 2011 and 2010 , we paid $3.6 million , $5.5 million and $35.6 million in foreign source withholding taxes, respectively and applied these payments as credits against our United States federal tax obligation. We previously accrued approximately $2.8 million of the 2012 foreign source withholding payments and established a corresponding deferred tax asset representing the associated foreign tax credit that we expect to utilize to offset future U.S. federal income taxes. At December 31, 2012 , we accrued $4.0 million of foreign source withholding taxes payable associated with expected royalty payments from licensees and recorded corresponding deferred tax assets related to the expected foreign tax credits that will result from these payments.

Between 1999 and 2005 we paid approximately $29.3 million of foreign taxes. During this period we were in a net operating loss position for U.S. federal income tax purposes and elected to deduct these foreign tax payments as expenses on our United States federal income tax returns rather than take them as foreign tax credits. We elected this strategy because: a) we had no United States cash tax obligations at the time and b) net operating losses can be carried forward significantly longer than foreign tax credits. We utilized most of our net operating losses in 2006 and began to generate United States cash tax obligations. At that time, we began to treat our foreign tax payments as foreign tax credits on our United States federal income tax return.

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incremental benefit would be $19.1 million . We recognized a net benefit of $16.4 million after establishing a $2.7 million reserve for related tax contingencies. In 2011, we recorded an additional tax benefit of $8.3 million to eliminate this $2.7 million reserve and other tax contingencies and recognize interest income on the associated refund.


12.	EQUITY TRANSACTIONS

Repurchase of Common Stock

In March 2009, our Board of Directors authorized a 100.0 million share repurchase program (the “2009 Repurchase Program”). The company repurchased shares under the 2009 Repurchase Program through pre-arranged trading plans. During 2012 , we repurchased 2.3 million s hares under the 2009 Repurchase Program for $75.0 million . The 2009 Repurchase Program was completed in second quarter 2012, bringing the cumulative repurchase total under the program to approximately 3.3 million shares at a cost of $ 100.0 million .

In May 2012, our Board of Directors authorized a new share repurchase program, which was then expanded in June 2012 to increase the amount of the program from $100.0 million to $200.0 million (the "2012 Repurchase Program"). The company may repurchase shares under the 2012 Repurchase Program through open market purchases, pre-arranged trading plans or privately negotiated purchases. During 2012 , we repurchased approximately 2.6 million shares under the 2012 Repurchase Program for $77.7 million .

From January 1, 2013 through February 25, 2013, we did not make any share repurchases under the 2012 Repurchase Program.

Dividends

Prior to 2011, we had not paid any cash dividends on our shares of common stock. In fourth quarter 2010, our Board of Directors approved the company’s initial dividend policy and declared the first quarterly cash dividend of $0.10 per share. On December 5, 2012, we announced that our Board of Directors had declared a special cash dividend of $1.50 per share on InterDigital common stock. The dividend was payable on December 28, 2012 to stockholders of record as of the close of business on December 17, 2012. Cash dividends on outstanding common stock declared in 2012 and 2011 were as follows (in thousands, except per share data):



2012	Per Share		Total		Cumulative by Fiscal Year
First quarter	$	0.10	$	4,469	$	4,469
Second quarter	0.10		4,348		8,817
Third quarter	0.10		4,095		12,912
Fourth quarter	1.60		65,643		78,555
	$	1.90	$	78,555

2011
First quarter	$	0.10	$	4,535	$	4,535
Second quarter	0.10		4,540		9,075
Third quarter	0.10		4,549		13,624
Fourth quarter	0.10		4,570		18,194
	$	0.40	$	18,194

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Common Stock Warrants

On March 29, 2011 and March 30, 2011, we entered into privately negotiated warrant transactions with Barclays Bank PLC through its agent, Barclays Capital Inc., whereby we sold to Barclays Bank PLC warrants to acquire, subject to customary anti-dilution adjustments, approximately 3.5 million and approximately 0.5 million shares of our common stock, respectively, at a strike price of $64.0909 per share, also subject to adjustment, as updated. The warrants become exercisable in tranches starting in June 2016. In consideration for the warrants issued on March 29, 2011 and March 30, 2011, the company received $27.6 million and $4.1 million , respectively, on April 4, 2011.


13.	SELECTED QUARTERLY RESULTS (Unaudited)

The table below presents quarterly data for the years ended December 31, 2012 and 2011 :



	First		Second		Third		Fourth
	(In thousands, except per share amounts, unaudited)
2012
Revenues (a)	$	69,305	$	71,871	$	434,010	$	87,877
Net income applicable to common shareholders (b)	$	10,930	$	9,673	$	235,669	$	15,532
Net income per common share — basic	$	0.24	$	0.22	$	5.61	$	0.38
Net income per common share — diluted	$	0.24	$	0.22	$	5.56	$	0.38
2011
Revenues	$	78,458	$	69,873	$	76,455	$	76,956
Net income applicable to common shareholders (c)	$	23,339	$	17,156	$	26,206	$	22,767
Net income per common share — basic	$	0.52	$	0.38	$	0.58	$	0.50
Net income per common share — diluted	$	0.51	$	0.37	$	0.57	$	0.49

(a) In third quarter 2012, our revenues included $375.0 million related to a patent sale to Intel Corporation.


(b)	In third quarter 2012, we recognized $16.5 million of expense associated with the Intel patent sale. In fourth quarter 2012, we incurred a repositioning charge of $12.5 million .

(c) In third quarter 2011, our income tax provision included benefits of $6.8 million related to the favorable resolution of tax contingencies. Our fourth quarter 2011 income tax provision included a $1.5 million benefit associated with after-tax interest income on tax refunds. In fourth quarter 2012 our income tax provision included a benefit of $4.5 million related to the release of valuation allowances on deferred tax assets, which we now expect to utilize in future periods.


Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

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Item 9A.	CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The company’s Chief Executive Officer and its Chief Financial Officer, with the assistance of other members of management, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2012 . Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that:


•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;


•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorization of management and directors of the company; and


•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Management, including the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of internal control over financial reporting as of December 31, 2012 . Management based this assessment on criteria for effective internal control over financial reporting described in “ Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, as of December 31, 2012 , the company maintained effective internal control over financial reporting at a reasonable assurance level.

The effectiveness of the company’s internal control over financial reporting as of December 31, 2012 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears under Part II, Item 8, of this Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during fourth quarter 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.	OTHER INFORMATION.

None.

PART III


Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this item is incorporated by reference to the information following the captions "Election of Directors," "EXECUTIVE OFFICERS," "Section 16(a) Beneficial Ownership Reporting Compliance," "Code of Ethics," "Nominating and Corporate Governance Committee" and "Audit Committee" in the definitive proxy statement to be filed pursuant to Regulation 14A in connection with our 2013 annual meeting of shareholders (the "Proxy Statement").

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Item 11.	EXECUTIVE COMPENSATION.

The information required by this item is incorporated by reference to the information following the captions "EXECUTIVE COMPENSATION" and "DIRECTOR COMPENSATION" in the Proxy Statement.


Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by this item is incorporated by reference to the information following the captions "EQUITY COMPENSATION PLAN INFORMATION" and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the Proxy Statement.


Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by this item is incorporated by reference to the information following the captions "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and "Director Independence" in the Proxy Statement.


Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this item is incorporated by reference to the information following the captions "Fees Paid to Independent Registered Public Accounting Firm" and "Audit Committee Pre-Approval Policy for Audit and Non-Audit Services of Independent Registered Public Accounting Firm" in the Proxy Statement.

PART IV


Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.


(a)	The following documents are filed as a part of this Form 10-K:

(1) Financial Statements.

The information required by this item begins on Page 53.

(2) Financial Statement Schedules.

Valuation and Qualifying Accounts



	Balance Beginning of Period		Increase/ (Decrease)				Reversal of Valuation Allowance				Balance End of Period
2012 valuation allowance for deferred tax assets	$	78,497	$	(5,624	)	(a)	$	(4,495	)	(d)	$	68,378
2011 valuation allowance for deferred tax assets	$	64,034	$	14,463		(a)	$	—			$	78,497
2010 valuation allowance for deferred tax assets	$	62,480	$	1,554		(a)	$	—			$	64,034
2012 reserve for uncollectible accounts	$	1,750	$	—			$	—			$	1,750
2011 reserve for uncollectible accounts	$	1,750	$	—			$	—			$	1,750
2010 reserve for uncollectible accounts	$	1,500	$	1,750		(b)	$	(1,500	)	(c)	$	1,750

_______________________________________


(a)	The increase was primarily necessary to maintain a full, or near full, valuation allowance against our state deferred tax assets and did not result in additional tax expense.


(b)	The increase relates to the establishment of reserves against an account receivable associated with our SlimChip modem IP.


(c)	The decrease relates to the receipt of a payment against an account receivable associated with our SlimChip modem IP.


(d)	The decrease relates to the reversal of valuation allowances against state and federal deferred tax assets and net operating losses.

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(3) Exhibits.

See Item 15(b) below.



(b)	Exhibit Number	Exhibit Description
	*2.1	Plan of Reorganization by and among InterDigital Communications Corporation, InterDigital, Inc. “InterDigital”) and ID Merger Company dated July 2, 2007 (Exhibit 2.1 to InterDigital's Quarterly Report on Form 10-Q dated August 9, 2007).
	*2.2	Agreement and Plan of Merger by and among InterDigital Communications Corporation, InterDigital and ID Merger Company dated July 2, 2007 (Exhibit 2.2 to InterDigital's Quarterly Report on Form 10-Q dated August 9, 2007).
	*3.1	Amended and Restated Articles of Incorporation of InterDigital, Inc. (Exhibit 3.1 to InterDigital's Current Report on Form 8-K dated June 7, 2011).
	*3.2	Amended and Restated Bylaws of InterDigital, Inc. (Exhibit 3.2 to InterDigital's Current Report on Form 8-K dated June 7, 2011).
	*4.1	Indenture, dated April 4, 2011, between InterDigital, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (Exhibit 4.1 to InterDigital's Current Report on Form 8-K dated April 4, 2011).
	*4.2	Form of 2.50% Senior Convertible Note due 2016 (Exhibit 4.2 to InterDigital's Current Report on Form 8-K dated April 4, 2011).
	*4.3	Specimen Stock Certificate of InterDigital, Inc. (Exhibit 4.3 to InterDigital's Current Report on Form 8-K dated April 4, 2011).
		Patent and Technology Contracts
	*10.1	Patent License and Settlement Agreement by and among ITC, Tantivy, IPR Licensing, Inc., InterDigital Patent Holdings, Inc., InterDigital Communications, LLC and Samsung Electronics Co., Ltd. effective as of November 24, 2008 (Exhibit 10.18 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2008). (Confidential treatment has been requested for portions of this agreement.)
		Real Estate Leases
	*10.2	Agreement of Lease dated November 25, 1996 by and between InterDigital and We're Associates Company (Exhibit 10.42 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2000).
	*10.3	Third Modification to Lease Agreement effective June 1, 2006 by and between InterDigital and Huntington Quadrangle 2, LLC (successor to We're Associates Company). (Exhibit 10.18 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2006).
	10.4	Fourth Modification of Lease Agreement effective November 1, 2012 by and between InterDigital, Inc. and Huntington Quadrangle 2, LLC.
	10.5	Lease Agreement effective March 1, 2012 by and between InterDigital, Inc. and Musref Bellevue Parkway, LP.
		Benefit Plans
	†*10.6	Non-Qualified Stock Option Plan, as amended (Exhibit 10.4 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 1991).
	†*10.7	Amendment to Non-Qualified Stock Option Plan (Exhibit 10.31 to InterDigital's Quarterly Report on Form 10-Q dated August 14, 2000).
	†*10.8	Amendment to Non-Qualified Stock Option Plan, effective October 24, 2001 (Exhibit 10.6 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2001).
	†*10.9	1999 Restricted Stock Plan, as amended April 13, 2000 (Exhibit 10.43 to InterDigital's Quarterly Report on Form 10-Q dated August 14, 2000).
	†*10.10	1999 Restricted Stock Plan, Form of Restricted Stock Unit Agreement (Awarded to Independent Directors Upon Re-Election) (Exhibit 10.62 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2004).
	†*10.11	1999 Restricted Stock Plan, Form of Restricted Stock Unit Agreement (Annual Award to Independent Directors) (Exhibit 10.63 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2004).

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	†*10.12		1999 Restricted Stock Plan, Form of Restricted Stock Unit Agreement (Periodically Awarded to Members of the Board of Directors) (Exhibit 10.64 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2004).
	†*10.13		1999 Restricted Stock Plan, Form of Restricted Stock Agreement (Awarded to Executives and Management as Part of Annual Bonus) (Exhibit 10.65 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2004).
	†*10.14		1999 Restricted Stock Plan, Form of Restricted Stock Unit Agreement (Awarded to Independent Directors Upon Re-Election) (Exhibit 10.62 to InterDigital's Quarterly Report on Form 10-Q dated August 9, 2005).
	†*10.15		1999 Restricted Stock Plan, Form of Restricted Stock Unit Agreement (Annual Award to Independent Directors) (Exhibit 10.63 to InterDigital's Quarterly Report on Form 10-Q dated August 9, 2005).
	†*10.16		1999 Restricted Stock Plan, Form of Restricted Stock Unit Award Agreement (Exhibit 10.86 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2006).
	†*10.17		1999 Restricted Stock Plan, Form of Restricted Stock Unit Award Agreement, as amended December 14, 2006 (Exhibit 10.58 to Inter Digital's Annual Report on Form 10-K for the year ended December 31, 2006).
	†*10.18		2000 Stock Award and Incentive Plan (Exhibit 10.28 to InterDigital's Quarterly Report on Form 10-Q dated August 14, 2000).
	†*10.19		2000 Stock Award and Incentive Plan, as amended June 1, 2005 (Exhibit 10.74 to InterDigital's Quarterly Report on Form 10-Q dated August 9, 2005).
	†*10.20		2000 Stock Award and Incentive Plan, Form of Option Agreement (Director Awards) (Exhibit 10.66 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2004).
	†*10.21		2000 Stock Award and Incentive Plan, Form of Option Agreement (Executive Awards) (Exhibit 10.67 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2004).
	†*10.22		2000 Stock Award and Incentive Plan, Form of Option Agreement (Inventor Awards) (Exhibit 10.68 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2004).
	†*10.23		2002 Stock Award and Incentive Plan (Exhibit 10.50 to InterDigital's Quarterly Report on Form 10-Q dated May 15, 2002).
	†*10.24		2002 Stock Award and Incentive Plan, as amended through June 4, 2003 (Exhibit 10.52 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2003).
	†*10.25		2002 Stock Award and Incentive Plan, as amended June 1, 2005 (Exhibit 10.87 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2006).
	†*10.26		2002 Stock Award and Incentive Plan, Form of Option Agreement (Inventor Awards) (Exhibit 10.69 to InterDigital's Quarterly Report on Form 10-Q dated November 9, 2004).
	†*10.27		2009 Stock Incentive Plan (Exhibit 99.1 to InterDigital's Registration Statement on Form S-8 filed with the Securities and Exchange Commission (“SEC”) on June 4, 2009 (File No. 333-159743)).
	†*10.28		2009 Stock Incentive Plan, Term Sheet for Restricted Stock Units (Discretionary Award) (Exhibit 10.2 to InterDigital's Current Report on Form 8-K dated June 9, 2009).
	†*10.29		2009 Stock Incentive Plan, Standard Terms and Conditions for Restricted Stock Units (Discretionary Award) (Exhibit 10.3 to InterDigital's Current Report on Form 8-K dated June 9, 2009).
	†*10.30		2009 Stock Incentive Plan, Term Sheet for Restricted Stock Units (Nonemployee Directors - Annual Award) (Exhibit 10.4 to InterDigital's Quarterly Report on Form 10-Q dated July 30, 2009).
	†*10.31		2009 Stock Incentive Plan, Term Sheet for Restricted Stock Units (Nonemployee Directors - Election Award) (Exhibit 10.5 to InterDigital's Quarterly Report on Form 10-Q dated July 30, 2009).
	†*10.32		2009 Stock Incentive Plan, Standard Terms and Conditions for Restricted Stock Units (Nonemployee Directors) (Exhibit 10.6 to InterDigital's Quarterly Report on Form 10-Q dated July 30, 2009).

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	†*10.33		2009 Stock Incentive Plan, Term Sheet for Restricted Stock (Supplemental Award) (Exhibit 10.1 to InterDigital's Current Report on Form 8-K dated January 22, 2010).
	†*10.34		2009 Stock Incentive Plan, Standard Terms and Conditions for Restricted Stock (Supplemental Award) (Exhibit 10.2 to InterDigital's Current Report on Form 8-K dated January 22, 2010).
	†*10.35		2009 Stock Incentive Plan, Term Sheet and Standard Terms and Conditions for Restricted Stock Units (Discretionary Award) (Exhibit 10.2 to InterDigital's Current Report on Form 8-K dated January 28, 2013).
	†*10.36		2009 Stock Incentive Plan, Term Sheet and Standard Terms and Conditions for Restricted Stock Units (LTCP Time-Based Award) (Exhibit 10.3 to InterDigital's Current Report on Form 8-K dated January 28, 2013).
	†*10.37		2009 Stock Incentive Plan, Term Sheet and Standard Terms and Conditions for Restricted Stock Units (LTCP Performance-Based Award) (Exhibit 10.4 to InterDigital's Current Report on Form 8-K dated January 28, 2013).
	†*10.38		2009 Stock Incentive Plan, Term Sheet and Standard Terms and Conditions for Stock Options (LTCP Award) (Exhibit 10.5 to InterDigital's Current Report on Form 8-K dated January 28, 2013).
	†*10.39		Short-Term Incentive Plan, as amended October 2010 (Exhibit 10.2 to InterDigital's Quarterly Report on Form 10-Q dated October 29, 2010).
	†*10.40		Short-Term Incentive Plan, as amended May 2012 (Exhibit 10.2 to InterDigital's Quarterly Report on Form 10-Q dated July 27, 2012).
	†*10.41		Long-Term Compensation Program, as amended June 2009 (Exhibit 10.1 to InterDigital's Quarterly Report on Form 10-Q dated July 30, 2009).
	†*10.42		Long-Term Compensation Program, as amended December 2009 (Exhibit 10.63 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2009).
	†*10.43		Long-Term Compensation Program, as amended October 2010 (Exhibit 10.1 to InterDigital's Quarterly Report on Form 10-Q dated October 29, 2010).
	†*10.44		Long-Term Compensation Program, as amended August 2011 (Exhibit 10.1 to InterDigital's Quarterly Report on Form 10-Q dated October 28, 2011).
	†*10.45		Long-Term Compensation Program, as amended December 2011 (Exhibit 10.38 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2011).
	†*10.46		Long-Term Compensation Program, as amended May 2012 (Exhibit 10.3 to InterDigital's Quarterly Report on Form 10-Q dated July 27, 2012).
	†*10.47		Long-Term Compensation Program, as amended September 2012 (Exhibit 10.1 to InterDigital's Quarterly Report on Form 10-Q dated October 25, 2012).
	†*10.48		Amended and Restated Long-Term Compensation Program (Exhibit 10.1 to InterDigital's Current Report on Form 8-K dated January 28, 2013).
	†*10.49		Compensation Program for Outside Directors, as amended January 2010 (Exhibit 10.67 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2009).
	†*10.50		Compensation Program for Outside Directors (2011 - 2012 Board Term) (Exhibit 10.2 to InterDigital's Quarterly Report on Form 10-Q dated October 28, 2011).
	†*10.51		Compensation Program for Outside Directors (2012 - 2013 Board Term) (Exhibit 10.2 to InterDigital's Quarterly Report on Form 10-Q dated October 25, 2012).
	†*10.52		Designated Employee Incentive Separation Pay Plan and Summary Plan Description (Exhibit 10.3 to InterDigital's Quarterly Report on Form 10-Q dated October 25, 2012).
			Employment-Related Agreements
	†*10.53		Indemnity Agreement dated as of March 19, 2003 by and between InterDigital and Howard E. Goldberg (pursuant to Instruction 2 to Item 601 of Regulation S-K, the Indemnity Agreements, which are substantially identical in all material respects, except as to the parties thereto and the dates, between the company and the following individuals, were not filed: Gilbert F. Amelio, Jeffrey K. Belk, Steven T. Clontz, Edward B. Kamins, John A. Kritzmacher, Mark A. Lemmo, Scott A. McQuilkin, William J. Merritt, James J. Nolan, Jean F. Rankin, Robert S. Roath and Lawrence F. Shay) (Exhibit 10.47 to InterDigital's Quarterly Report on Form 10-Q dated May 15, 2003).

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	†*10.54		Assignment and Assumption of Indemnity Agreement dated as of July 2, 2007, by and between InterDigital Communications Corporation, InterDigital, Inc. and Bruce G. Bernstein (pursuant to Instruction 2 to Item 601 of Regulation S-K, the Indemnity Agreements, which are substantially identical in all material respects, except as to the parties thereto, between InterDigital Communications Corporation, InterDigital, Inc. and the following individuals, were not filed: Steven T. Clontz, Edward B. Kamins, Mark A. Lemmo, William J. Merritt, James J. Nolan, Robert S. Roath and Lawrence F. Shay) (Exhibit 10.90 to InterDigital's Quarterly Report on Form 10-Q dated August 9, 2007).
	†*10.55		Employment Agreement dated May 7, 1997 by and between InterDigital and Mark A. Lemmo (Exhibit 10.32 to InterDigital's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997).
	†*10.56		Amendment dated as of April 6, 2000 by and between InterDigital and Mark A. Lemmo (Exhibit 10.37 to InterDigital's Quarterly Report on Form 10-Q dated August 14, 2000).
	†*10.57		Employment Agreement dated as of November 12, 2001 by and between InterDigital and Lawrence F. Shay (Exhibit 10.38 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2001).
	†*10.58		Amended and Restated Employment Agreement dated May 16, 2005, by and between William J. Merritt and InterDigital (Exhibit 10.1 to InterDigital's Current Report on Form 8-K dated May 16, 2005).
	†*10.59		Employment Agreement dated as of May 16, 2006 by and between James Nolan and InterDigital (Exhibit 10.84 to InterDigital's Quarterly Report on Form 10-Q dated August 7, 2006).
	†*10.60		Amendment and Assignment of Employment Agreement dated as of July 2, 2007 by and among InterDigital Communications Corporation, InterDigital, Inc. and Bruce G. Bernstein (pursuant to Instruction 2 to Item 601 of Regulation S-K, the Amendment and Assignment of Employment Agreements dated as of July 2, 2007 which are substantially identical in all material respects, except as to the parties thereto, between InterDigital Communications Corporation, InterDigital, Inc. and the following individuals, were not filed: William J. Merritt, James Nolan, Mark A. Lemmo and Lawrence F. Shay, respectively) (Exhibit 10.89 to InterDigital's Quarterly Report on Form 10-Q dated August 9, 2007).
	†*10.61		Employment Agreement dated July 9, 2007 by and between InterDigital, Inc. and Scott A. McQuilkin (Exhibit 10.91 to InterDigital's Quarterly Report on Form 10-Q dated August 9, 2007).
	†*10.62		Amendment to Amended and Restated Employment Agreement dated as of November 17, 2008 by and between InterDigital, Inc. and William J. Merritt (pursuant to Instruction 2 to Item 601 of Regulation S-K, the Amendments to Employment Agreement dated as of November 17, 2008, which are substantially identical in all material respects, except as to the parties thereto, by and between InterDigital, Inc. and the following individuals, were not filed: Mark A. Lemmo, Scott A. McQuilkin, James Nolan and Lawrence F. Shay) (Exhibit 10.70 to InterDigital's Annual Report on Form 10-K for the year ended December 31, 2008).
	†*10.63		Employment Agreement dated May 9, 2012 by and between InterDigital, Inc. and Richard J. Brezski (Exhibit 10.1 to InterDigital's Current Report on Form 8-K dated May 11, 2012).
			Other Material Contracts
	*10.64		Bond Hedge Transaction Confirmation, dated March 29, 2011, by and between InterDigital, Inc. and Barclays Bank PLC, through its agent, Barclays Capital Inc. (Exhibit 10.1 to InterDigital's Current Report on Form 8-K dated April 4, 2011).
	*10.65		Bond Hedge Transaction Confirmation, dated March 30, 2011, by and between InterDigital, Inc. and Barclays Bank PLC, through its agent, Barclays Capital Inc. (Exhibit 10.2 to InterDigital's Current Report on Form 8-K dated April 4, 2011).
	*10.66		Warrant Transaction Confirmation, dated March 29, 2011, by and between InterDigital, Inc. and Barclays Bank PLC, through its agent, Barclays Capital Inc. (Exhibit 10.3 to InterDigital's Current Report on Form 8-K dated April 4, 2011).
	*10.67		Warrant Transaction Confirmation, dated March 30, 2011, by and between InterDigital, Inc. and Barclays Bank PLC, through its agent, Barclays Capital Inc. (Exhibit 10.4 to InterDigital's Current Report on Form 8-K dated April 4, 2011).
	21		Subsidiaries of InterDigital.
	23.1		Consent of PricewaterhouseCoopers LLP.

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	31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
	31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
	32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350. +
	32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350. +
	101		fixed-feeThe following financial information from InterDigital's Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on February [27], 2013, formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets at December 31, 2011 and December 31, 2010, (ii) Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009, (iii) Consolidated Shareholders' Equity and Comprehensive Income for the years ended December 31, 2011, 2010 and 2009, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009, and (v) Notes to Consolidated Financial Statements. ++



*	Incorporated by reference to the previous filing indicated.



†	Management contract or compensatory plan or arrangement.



+	This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that InterDigital, Inc. specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTERDIGITAL, INC.





Date: February 26, 2013	By:	/s/ William J. Merritt
		William J. Merritt
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Date: February 26, 2013	/s/ Steven T. Clontz
	Steven T. Clontz, Chairman of the Board of Directors

Date: February 26, 2013	/s/ Gilbert F. Amelio
	Gilbert F. Amelio, Director

Date: February 26, 2013	/s/ Jeffrey K. Belk
	Jeffrey K. Belk, Director

Date: February 26, 2013	/s/ Edward B. Kamins
	Edward B. Kamins, Director

Date: February 26, 2013	/s/ John A. Kritzmacher
	John A. Kritzmacher, Director

Date: February 26, 2013	/s/ Jean F. Rankin
	Jean F. Rankin, Director

Date: February 26, 2013	/s/ Robert S. Roath
	Robert S. Roath, Director

Date: February 26, 2013	/s/ William J. Merritt
	William J. Merritt, Director, President and Chief Executive Officer
	(Principal Executive Officer)

Date: February 26, 2013	/s/ Richard J. Brezski
	Richard J. Brezski, Chief Financial Officer
	(Principal Financial Officer)

EXHIBIT 10.4

FOURTH MODIFICATION OF LEASE AGREEMENT

AGREEMENT made as of this 15 ^th of November 2012, by and between HUNTINGTON QUADRANGLE 2, LLC. , having its principal office at 100 Jericho Quadrangle, Jericho, New York 11753 (“Landlord”) and INTERDIGITAL INC. successor in interest to InterDigital Communications Corp. with offices located at 200 Bellevue Parkway, Suite 300, Wilmington, Delaware 19809 (“Tenant”).

WHEREAS , Tenant has leased from Landlord certain office space known as Suites 3S02 and 4S01 (the “Original Premises”) in the building known as Two Huntington Quadrangle, Melville, New York 11747 (the “Building”) pursuant to an Agreement of the Lease dated as of November 25 ^th , 1996, as amended by a Modification of Lease Agreement dated as of December 28, 2000, a Modification of Lease Agreement dated March 10, 2003, and a Third Modification of Lease Agreement dated May 18, 2006, said lease as amended being hereinafter referred to as the “Lease”, and

WHEREAS , Tenant desires to surrender to Landlord, and Landlord desires to take back from Tenant, a portion of the Original Premises consisting of 11,315 square feet known as Suite 3S02 (the “Surrender Premises”) as shown on Exhibit 1A annexed hereto and made a part hereof; and

WHEREAS , Tenant desires to retain and Landlord desires to lease to Tenant the remainder of the Original Premises (the “Remainder Premises”) as shown on Exhibit 1A attached hereto; and

WHEREAS , the parties hereto desire to amend the Lease to extend the Expiration Date, redefine the rent, and in certain other mutually agreeable respects;

NOW, THEREFORE , effective as of November 1, 2012, (the “Effective Date”), except as modified in the next succeeding paragraph, the parties agree as follows:

The Effective Date set forth above is conditioned upon the unconditional execution and delivery of this Agreement by Tenant on or before November 7, 2012, If this Agreement is not unconditionally executed and delivered by Tenant on or before November 7, 2012, then, the effective date be modified to be the first day of the month following the unconditional execution and delivery of this Agreement by Tenant.


1.	All terms used herein and not otherwise defined shall have the meaning set forth in the Lease.


2.	Article 1 of the Lease is hereby amended to provide that the Demised Premises shall no longer include the Surrender Premises but shall only include the Remainder Premises as shown on Exhibit 1A attached hereto. The parties agree that for all purposes of the Lease the Remainder Premises consist of 44,810 square feet.


3.	Article 2 of the Lease is amended to provide that the Expiration Date of the Lease is February 29, 2020, unless the Effective Date is modified as provided hereinabove, in which case the Expiration Date will be modified to be the last day of the month that is seven (7) years and four (4) months after the Effective Date.


4.	Article 3 of the Lease is hereby deleted in its entirety and replaced as follows:

“RENT

3. A. The base annual rental rate payable by Tenant shall be $918,605.00, which Tenant agrees to pay in equal monthly installments in advance, on the first day of each calendar month during the Demised Term at the office of the Landlord. Tenant shall pay the rent as above and as hereinafter provided, without any set off or deduction whatsoever. As used herein, the term “Lease Year” shall mean each consecutive twelve (12) calendar month period, the first such period commencing on the Effective Date and ending on the day immediately preceding the first anniversary of the Effective Date.

B. The base annual rent set forth in Section 3.A hereof shall be increased on each anniversary of the Effective Date throughout the Demised Term (including any renewal period) by an amount equal to three percent (3%) of the base annual rent payable during the Lease Year immediately preceding such anniversary (excluding escalations pursuant to Article 11 or Schedule C) (e.g., during the second (2 ^nd ) Lease Year, the base annual rent shall be $946,163.15 ($918,605.00 and 3% of $918,605.00 and 3% of $918,605.00 for base rent) plus metered electric pursuant to Schedule C.

C. If Tenant shall fail to pay when due any installment of base annual rent or any payment of additional rent for a period of three (3) days after such installment or payment shall have become due, Tenant shall pay interest thereon at the lesser rate of (i) four percent (4%) per annum in excess of the prime interest rate of Citibank, N.A., as publicly announced from time to time or, if Citibank, N.A. shall cease to exist or announce such rate, any similar rate designated by Landlord which is publicly announced from time to time by any other bank in the City of New York having combined capital and surplus in excess of One Hundred Million and 00/100 Dollars ($100,000,000) (“Prime Rate”), or (ii) twelve percent (12%) per annum, from the date when such installment or payment shall have become due to the date of the payment thereof, and such interest shall be deemed additional rent. In addition, upon the third failure of Tenant to pay when due any installment of base annual rent or any payment of additional rent for a period of three (3) days after such installment or payment shall have become due during any twelve month period Tenant shall pay to Landlord a late fee in the amount of five percent (5%) of such overdue amount to compensate Landlord for its administrative costs associated with such failure to timely pay. Such fee shall be deemed additional rent and shall be payable immediately upon demand. This provision is in addition to all other rights or remedies available to Landlord for nonpayment of base annual rent or additional rent under this lease and at law and in equity.

D. Anything contained herein to the contrary notwithstanding, Tenant shall be entitled to occupy the Demised Premises without an obligation to pay the base annual rental rate for the period commencing on the Effective Date and terminating four (4) calendar months thereafter.”

A. Article 5 of the Lease shall not apply to this Fourth Modification of Lease Agreement. In lieu thereof; Landlord, at its expense, will perform the work and make the installations to the elevator lobby serving the Demised Premises as set forth in the Estimating Breakdown Sheet annexed hereto, which is sometimes herein referred to “Landlord’s Additional Construction.” Tenant shall not alter, demolish or remove Landlord’s Initial Construction, Landlord’s Additional Construction, or any part thereof, unless Tenant shall, prior to the commencement thereof, obtain Landlord’s written consent thereto.

B. Landlord shall provide Tenant with six hundred and eighty-eight thousand eight hundred and twenty-five dollars ($688,825.00) (the “Landlord’s Contribution”), to make installations, decorations, and improvements necessary and desirable for Tenant’s occupancy of the Demised Premises (“Tenant Alterations”). Landlord will from time to time but, not more frequently than monthly, disburse portions of the Landlord Contribution upon request by Tenant, in order to reimburse Tenant for Tenant Alterations. All Tenant requests for disbursement, pursuant to this article, shall include invoices for Tenant Alterations, along with reasonably satisfactory evidence that all amounts owed by Tenant to third party vendors, in connection with Tenant Alterations have been paid. All Tenant requests for disbursements pursuant to this article shall also include waivers of lien by each third party vendor in connection with Tenant Alterations. All Tenant Alterations shall be constructed in a good and workmanlike manner and in conformance with all applicable laws and regulations as well as the terms and conditions set forth in the Lease.


6.	Article 9 of the Lease is hereby amended to provide that Tenant shall have the right to use one hundred and eighty (180) parking spaces, four (4) of which shall be marked as reserved for Tenant as indicated on the Parking Plan annexed hereto as Exhibit 2, in the Building Parking Area.


7.	A. Article 11.A. of the Lease is hereby amended by deleting the percentage 15.873% from the fourth line thereof and replacing the percentage 12.673% therefore, and by deleting the figure 56,126 from the fifth line thereof and replacing the figure 44,810 therefor.

B. Article 11.A. of the Lease is hereby amended to provide that the tax base shall be the total taxes due for the tax year December 1, 2012 to November 30, 2013.

C. Article 11.B. of the Lease is hereby superseded by Article 3.B. of the Lease.


8.	Article 47 of the Lease is hereby deleted in its entirety and replaced as follows:

“RENEWAL OPTION

50. A. Tenant shall have the option, to be exercised as hereinafter provided, to extend the Demised Term for a period of five (5) years upon the following terms and conditions:

B. That at the time of the exercise of such option, that the Lease shall be in full force and effect, Tenant shall not be in default in the performance of any of the terms, covenants or conditions herein contained with respect to a matter as to which notice of default has been given hereunder and which has not been remedied within the time limited in this Lease.

C. That at the time of the exercise of such option and at the time of the commencement of such extended period Tenant shall not have assigned this Lease or sublet greater than twenty percent (20%) of the area of the Demised Premises (except per subsection 21.F hereof).

D. That such extension shall be upon the same terms, covenants and conditions as in this Lease provided, except that; (i) there will be no further privilege of extension for the Demised Term beyond the period referred to above; (ii) during the renewal period, the annual rental payable by Tenant to Landlord shall be the base annual rent as calculated pursuant to Article 3 hereof (including the provisions of Section 3.B hereof) (iii) During the extension period, the base year for determining additional rent under the escalation clause, Article 11, shall remain unchanged and continue to be the base year established at the commencement of the Demised Term as extended by this Fourth Modification of Lease Agreement.

E. Tenant shall exercise its option to the extension of the Demised term by notifying Landlord of Tenant’s election to exercise such option on or before July 31, 2019. Upon the giving of this notice, this Lease shall be deemed extended for the specified period, subject to the provisions of this Article, without execution of any further instrument. Upon Tenant’s notifying Landlord of its election to extend the term of the Lease, the cancellation option set forth in Article 10 shall be rendered null, void, and of no further force or effect.


9.	Article 49 of the Lease is hereby deleted in its entirety and replaced as follows:

“TENANT’S RIGHT OF FIRST OFFER

49. Provided this Lease is in full force and effect, and that Tenant shall not be in default beyond any applicable notice and cure periods in the performance of any of the terms, covenants or conditions herein contained with respect to a matter as to which notice of default has been given hereunder and which has not been remedied within the time specified in this Lease, on and after the Effective Date, subject and subordinate to (i) any rights of first offer, rights of first refusal, or any similar such rights of any existing tenants in the Building (including without limitation the right of first offer granted by Landlord to ADP, Inc. pursuant to a certain Agreement of Lease dated February 28, 2008), (ii) any renewal rights of any other tenants in the Building, and (iii) the right of Landlord to negotiate a renewal or extension of a lease with any tenants in the Building, Tenant shall have the right of first offer with respect to the leasing of space on the 3 ^rd floor of the south wing of the Building (an “ Expansion Space ”) during the term of the Lease. Such right of first offer shall be exercisable, and shall be subject to the conditions following:


A.	Before offering a lease for an Expansion Space to a third party, Landlord shall send to Tenant written notice of its intention to rent an Expansion Space (a “ Landlord’s Notice ”). Tenant shall

have ten (10) business days from the date of delivery of such Landlord’s Notice to deliver to Landlord written notice (an “ Acceptance Notice ”) wherein Tenant agrees to lease the Expansion Space on the terms specified herein.


B.	If Tenant declines to lease an Expansion Space or fails to reply to Landlord’s Notice within said ten (10) business day period, Landlord may lease such Expansion Space to any third party upon any terms as Landlord may desire.

If Tenant timely delivers an Acceptance Notice to Landlord, the parties shall promptly enter into a modification of lease agreement for the Expansion Space reflecting the terms herein, and shall make appropriate pro rata adjustments with respect to all items of additional rent which depend on the amount of space occupied by Tenant, including, but not limited to, tax escalations pursuant to Article 11 and electric rent pursuant to Schedule C.

If Tenant timely exercises its right of first offer Landlord shall prepare and renovate the Expansion Space for use and occupancy by the Tenant (the “ Expansion Space Work ”) subject to a mutually agreeable plan and using building standard materials, and at a cost to Landlord not to exceed the “ Pro Rata Work Letter ” based upon the remaining term of this Lease. The Pro Rata Work Letter shall be calculated by multiplying (i) the cost per rentable square foot of Landlord’s Additional Construction, including Landlord’s general contractor’s overhead and profit, paid by Landlord, multiplied by the rentable square feet of such Expansion Space times (ii) the remaining term of this Lease (at the time of the substantial completion of the Expansion Space Work) divided by the seven year extension period of the term.

Upon substantial completion of the Expansion Space Work, the base annual rental rate, and additional rent for the Demised Premises shall be increased by the rent allocable to such Expansion Space (the “ Expansion Space Rent ”). The initial Expansion Space Rent shall be computed by multiplying (i) the total number of rentable square feet comprising such Expansion Space times (ii) the amount of base annual rental rate and additional rent per square foot then being paid by Tenant for the original Demised Premises hereunder, as theretofore escalated as in Article 3, Article 11 and Schedule C hereof provided, and otherwise on the same terms and conditions as set forth in this Lease.

In the event Tenant exercises its right of first offer as hereinabove provided, upon substantial completion of such Expansion Space Work, should the Expiration Date be a date less than three (3) years from the date Landlord completes such Expansion Space Work, the Demised Term of this Lease shall be deemed amended and extended to terminate three (3) years from the date Landlord completes such Expansion Space Work, it being intention of Landlord and Tenant that the terms of the Lease for the Demised Premises and the Expansion Space (including the expiration dates thereof) shall for all purposes be co-terminus.


G.	The Renewal Option set forth in Article 50 shall remain unaffected by an exercise of Tenant’s right of first offer, however in the event that Tenant exercises its right of first offer then the Cancellation Option set forth in hereinbelow, will be rendered void, and of no further force or effect.


H.	If Tenant declines to lease an Expansion Space, Tenant acknowledges and agrees that Landlord may grant such tenants of such Expansion Space renewal options therefore and that the right of first offer set forth in this Article 49 shall be subject and subordinate thereto.


I.	Landlord does not warrant the availability of Expansion Space.


J.	Upon exercise by Tenant of the Right of First Offer (in accordance with Article “49” hereof) the number of parking spaces [set forth in Article “9.” Hereof], the number of directory listings (set

forth in Article “10.” hereof) and Tenant’s Proportionate Share (set forth in Article “11.” hereof) shall be increased on a proportionate basis.

Landlord and Tenant agree that it is their intention that all space leased hereunder (including the Expansion Space pursuant to Tenant’s exercise of the Right of First Offer in accordance with Article “49.” hereof) shall be on the same terms and conditions as the lease for the initially Demised Premises including, without limitation, base annual rent (as may be escalated), increases in base annual rent, base year and escalations for real estate taxes (in accordance with Article “11.” hereof) and electricity (in accordance with Schedule C).”

10.

Notwithstanding anything to the contrary contained herein, Tenant shall have the right to cancel and terminate this Lease effective February 28, 2018. If Tenant wishes to exercise this right to cancel Tenant shall send written notice to Landlord, no later than February 28, 2017, and accompanied by a bank or certified check payable to Landlord, in the amount of $676,880.60 (the “Termination Fee”), which the parties agree constitutes (a) the rent conceded to Tenant and (b) the unamortized portion of, (i) the cost of Landlord’s Additional Construction, and (ii) the brokerage commission paid by Landlord. In the event that Tenant shall exercise the option herein contained, Tenant shall vacate, quit, and surrender the Remainder Premises on or before February 28, 2018 time being of the essence thereto. In the event that Tenant does not sent notice and the Termination Fee as described above, this right to cancel will be automatically deemed to have been irrevocably waived by Tenant.

11.

Tenant represents and warrants to Landlord that Newmark of Long Island, LLC is the sole broker that has been utilized in the transaction covered hereby. Tenant agrees to indemnify, defend and save Landlord harmless of, from and against, any and all claims (and all expenses and fees, including attorney’s fees, related thereto) for commissions or compensation made by any other broker or entity, arising out of or relating to the breach by Tenant of the foregoing representation. As, if and when this Fourth Modification of Lease Agreement shall be fully executed and unconditionally delivered by both Landlord and Tenant, Landlord agrees to pay any commission that may be due Newmark of Long Island, LLC in connection with this Fourth Modification of Lease Agreement in accordance with separate agreement between Landlord and Newmark of Long Island, LLC.

Except as amended hereby the Lease remains, and shall remain, in full force and effect and each and every term, condition, and provision thereof is hereby confirmed, ratified and continued.

IN WITNESS WHEREOF , the parties hereto have hereunto set their hands and seals the day and year first above written.

HUNTINGTON QUADRANGLE 2, LLC.

BY: /s/ Tony Fromer _

Manager

INTERDIGITAL COMMUNICATIONS, LLC.

BY: /s/ Gary Isaacs _

(Print Name) Gary Isaacs _

(Print Title) CAO _

EXHIBIT 10.5

LEASE AGREEMENT

between

MUSREF BELLEVUE PARKWAY, LP

as Landlord

and

INTERDIGITAL, INC.

as Tenant

for

Suites 300 and 400

200 Bellevue Parkway

Bellevue Park Corporate Center

Wilmington, Delaware 19809


1.	REFERENCE DATA 1


2.	PREMISES 2


3.	TERM; EXTENSION OPTIONS; TERMINATION OPTION; RIGHT OF FIRST REFUSAL 3


4.	RENT 6


5.	OPERATING EXPENSES 7


6.	LATE CHARGES 12


7.	USE OF PREMISES 12


8.	COMMON AREAS; PARKING 12


9.	CONDITION OF PREMISES; TENANT FINISH WORK 13


10.	ALTERATIONS AND TRADE FIXTURES; REMOVAL 13


11.	MECHANICS’ LIENS 14


12.	BUILDING SERVICES 15


13.	CERTAIN RIGHTS RESERVED BY LANDLORD 17


14.	ASSIGNMENT AND SUBLETTING 18


15.	ACCESS TO PREMISES 20


16.	REPAIRS 20


17.	INDEMNIFICATION AND INSURANCE 21


18.	WAIVER OF CLAIMS 22


19.	QUIET ENJOYMENT 22


20.	LIABILITY FOR INCREASED INSURANCE COSTS 22


21.	CASUALTY DAMAGE 23


22.	CONDEMNATION 24


23.	SUBORDINATION 24


24.	ESTOPPEL CERTIFICATE 25


25.	DEFAULT 25


26.	REMEDIES 26


27.	LANDLORD’S LIEN 29


28.	REQUIREMENT OF STRICT PERFORMANCE 29


29.	MONUMENT SIGN 29


30.	SURRENDER OF PREMISES; HOLDING OVER 30


31.	COMPLIANCE WITH LAWS AND ORDINANCES 30


32.	USE AND OCCUPANCY TAXES, SALES TAXES, AND OTHER TAXES 32


33.	WAIVER OF TRIAL BY JURY 32


34.	NOTICES 33


35.	NOTICE TO LENDER 33


36.	REAL ESTATE BROKERS 33


37.	FORCE MAJEURE 33


38.	LANDLORD’S OBLIGATIONS 33


39.	LANDLORD’S LIABILITY 34


40.	LIABILITY OF TENANT 34


41.	FINANCIAL STATEMENTS 34


42.	SUCCESSORS 34


43.	GOVERNING LAW 35


44.	SEVERABILITY 35


45.	CAPTIONS 35


46.	GENDER 35


47.	EXECUTION 35


48.	ENTIRE AGREEMENT 35


49.	TENANT STATUS AND AUTHORITY 35


50.	TIME OF ESSENCE 35


51.	GENERATOR 36


52.	EXHIBITS 36

LEASE AGREEMENT

THIS LEASE is made this 19th day of March, 2012, by and between MUSREF BELLEVUE PARKWAY, LP, a Washington limited partnership (“ Landlord ”), and INTERDIGITAL, INC., a Pennsylvania corporation (“ Tenant ”).

1. Reference Data . As used in this Lease, the following terms shall have the indicated meanings and refer to the data set forth in this Section:

(a) Landlord’s Address: c/o Metzler Realty Advisors, Inc.

700 Fifth Avenue, 61 ^st Floor

Seattle, Washington 98104

(b) Tenant’s Address: prior to the Commencement Date :

InterDigital, Inc.

781 Third Avenue

King of Prussia, PA 19406

Attn: General Counsel

with a copy to:

InterDigital, Inc.

781 Third Avenue

King of Prussia, PA 19406

Attn: Director of Facilities

after the Commencement Date :

200 Bellevue Parkway, Suite 300

Bellevue Park Corporate Center

Wilmington, Delaware 19809

Attn: General Counsel

with a copy to:

200 Bellevue Parkway, Suite 300

Bellevue Park Corporate Center

Wilmington, Delaware 19809

Attn: Director of Facilities


(c)	Building: 200 Bellevue Parkway

Bellevue Park Corporate Center

Wilmington, Delaware 19809


(d)	Premises: Suites 300 and 400, which both parties stipulate to contain 21,317 rentable square feet on the third floor and 14,865 rentable square feet on the fourth floor of the Building, shown outlined in black on the floor plans attached hereto as Exhibit “A” .


(e)	Land: The tract of land on which the Building is located, as further described in Exhibit “B” attached hereto.


(f)	Term: One hundred twenty-three (123) months (plus, if the Commencement Date is not the first day of a calendar month, the balance of the calendar month in which the Commencement Date occurs).


(g)	Extension Options: Two (2) options, each to extend the Term for five (5) years.


(h)	Commencement

Date: As defined in Section 3 .

(i) Rent Commencement

Date: The date three months following the Commencement Date.

(j) Base Rent:



Period	Per Square Foot		Annual		Monthly
Months 1 – 3*	- 0 -		- 0 -		- 0 -
Months 4 – 15		$20.50		$741,731.00		$61,810.92
Months 16 - 27	21.01			$760,274.28		$63,356.19
Months 28 - 39	21.54			$779,281.13		$64,940.09
Months 40 - 51	22.08			$798,763.16		$66,563.60
Months 52 - 63	22.63			$818,732.24		$68,227.69
Months 64 - 75	23.19			$839,200.55		$69,933.38
Months 76 - 87	23.77			$860,180.56		$71,681.71
Months 88 - 99	24.37			$881,685.07		$73,473.76
Months 100 - 111	24.98			$903,727.20		$75,310.60
Months 112 - 123	25.60			$926,320.38		$77,193.36

*Measured from the Commencement Date. The Rent Commencement Date is the first day of Month 4.


(k)	Tenant’s Percentage

Share: 36.78% as of the Commencement Date, subject to change as hereinafter provided.

(l) Security Deposit: $ -0-

(m) Base Year: 2012

2. Premises .

(a) For and in consideration of the rent to be paid and the covenants and agreements to be performed by Tenant as hereinafter set forth, Landlord does hereby lease, demise and let unto Tenant the Premises, together with the non-exclusive right to use the common areas of the Building and the common walkways, sidewalks, driveways and parking lots of the Land provided by Landlord from time to time. The Building and the Land shall be referred to herein collectively as the “ Property .” For purposes of this Lease the Premises are deemed to include the number of rentable square feet designated for the Premises in Section 1(d) . The Premises includes approximately 3,254 rentable square feet currently leased to Black & Veatch Corporation (the “ B&V Space ”). The balance of the Premises, excluding the B&V Space, is sometimes referred to herein as the “ Initial Premises ”.

(b) In the event that Exhibit “A” shows as being within the Premises any hallways, passageways, stairways, elevators, or other means of access to and from the Premises or the upper and lower portions of the Building, the space occupied by the said hallways, passageways, stairways, elevators and other means of access, although within the Premises as described above, shall be taken to be excepted therefrom and reserved to Landlord or to the other lessees of the Building and the same shall not be considered a portion of the Premises. All ducts, pipes, wires or other equipment used in the operation of the Building, or any part thereof, and any space occupied thereby, whether or not within the Premises as described above, shall likewise be excepted and reserved from the Premises, and Tenant shall not remove or tamper with or use the same and will permit Landlord to enter the Premises to service, replace, remove or repair the same.

3. Term; Extension Options; Termination Option ; Right of First Refusal .

(a) Term . The Term shall commence on the “ Commencement Date ,” which shall be the earlier to occur of (i) the date on which Tenant takes possession of the Initial Premises, or (ii) the date the Tenant Finish Work is Substantially Completed (as defined in the Work Letter attached hereto as Exhibit “C”) . Once the Commencement Date has been determined, Landlord and Tenant shall confirm the commencement and expiration dates of the Term in writing. However, the failure of the parties to execute such writing shall not defer the Commencement Date or otherwise invalidate this Lease.

(b) Extension Options . Tenant shall have two options to extend the Term of this Lease (each, an “ Extension Option ”) for a period of five (5) years (each, an “ Option Period ”). Each Option Period shall be upon the same terms and conditions contained in this Lease, except for the Base Rent, which shall be the then-current Fair Market Rent for the Premises determined in accordance with the procedures set forth below. Notwithstanding anything to the contrary in the preceding sentence, Tenant shall have the right to exercise an Extension Option only so long as (i) this Lease shall be in full force and effect, (ii) Tenant shall not have assigned this Lease or sublet more than twenty percent (20%) of the Premises, and (iii) no Event of Default shall have occurred and be continuing as of either the date Tenant purports to exercise the Extension Option or the first day of the Option Period. Tenant shall exercise an Extension Option by giving Landlord written notice of its election to do so not less than twelve (12) months prior to the end of the Term, time being of the essence, and, upon the giving of such notice, the Term shall be deemed to be extended for the Option Period without the execution of any further lease or instrument.

(i) As used in this Section 3 , “ Fair Market Rent ” shall mean the amount of annual Base Rent, expressed in dollars and cents per rentable square foot, equal to the market rental then being negotiated for renewal leases for comparable space in “Class A” mid-rise office buildings of similar quality in the suburban Wilmington, Delaware office sub-market, taking into account any rent abatement, tenant allowance and base year being offered to renewal tenants. Landlord shall advise Tenant of the Fair Market Rent within thirty (30) days after Tenant provides Landlord with notice of Tenant's intent to exercise an Extension Option. In the event that Landlord and Tenant are unable to agree on the Fair Market Rent for the Option Period within ten (10) days after Tenant’s receipt of Landlord’s rental notice, then either party may require determination of the Fair Market Rent for such Option Period by giving written notice to that effect to the other party within ten (10) days thereafter, which notice shall designate a real estate broker selected by the initiating party with at least ten (10) years experience in the office leasing business in the suburban Wilmington, Delaware office sub-market. Within ten (10) days after receipt of such notice, the other party to the Lease shall select a real estate broker meeting the same requirements and give written notice of such selection to the initiating party. Within ten (10) days after selection of the second broker, the two (2) real estate brokers so selected shall select a third real estate broker with at least ten (10) years experience in the office leasing business in the suburban Wilmington, Delaware office sub-market who (and whose firm) is not then employed as an exclusive leasing broker or management agent by either party or any of their respective affiliates. Each of the three (3) brokers shall determine the Fair Market Rent rate for the Premises as of the commencement of the Option Period for a term equal to the Option Period within ten (10) days after the appointment of the third broker. The Fair Market Rent shall be equal to the arithmetic average of such three determinations; provided, however, that if any such broker’s determination deviates more than ten percent (10%) from the median of such determinations the Fair Market Rent shall be an amount equal to the average of the two (2) closest determinations. Landlord shall pay the costs and fees of Landlord’s broker in connection with any determination hereunder, and Tenant shall pay the costs and fees of Tenant’s broker in connection with such determination. The cost and fees of the third broker shall be paid one-half by Landlord and one-half by Tenant. If a party fails to designate a real estate broker within the time period required by this paragraph, the “third” real estate broker shall be selected by the broker designated by the initiating party, and those two brokers shall determine the Fair Market Rental by averaging their determinations.

(c) Option to Terminate . Tenant shall have the one time right (the “ Early Termination Option ”) to terminate this Lease effective as of the last day of the eighty-seventh (87 ^th ) full calendar month of the Term (the “ Early Termination Date ”), subject to the following terms and conditions:

(i) Tenant must give Landlord written notice of its election to terminate this Lease on or before the last day of the seventy-fifth (75 ^th ) full calendar month of the Term, time being of the essence, provided that Tenant shall not have the right to give such notice, and this Early Termination Option shall be void and of no further force or effect, if as of the date Tenant purports to give such notice (A) an Event of Default has occurred and is continuing hereunder or (B) Tenant has assigned this Lease or sublet all or any part of the Premises.

(ii) Not less than ninety (90) days prior to the Early Termination Date, time being of the essence, Landlord shall deliver to Tenant an accounting and invoice for a fee (the “ Early Termination Payment ”) equal to the sum of (A) the unamortized balance, as of the Early Termination Date, of (1) the leasing commissions paid to the brokers referenced in Section 36 on account of this Lease, (2) the Construction Allowance (as defined in the Work Letter), (3) Landlord’s share of the B&V Relocation Costs (as defined in the Work Letter), and (4) if Tenant elects pursuant to the Work Letter to amortize Tenant’s share of the B&V Relocation Costs as Additional Rent, Tenant’s share of the B&V Relocation Costs, with all such costs amortized over the ten (10) year period commencing on the Rent Commencement Date at nine percent (9%) per annum, plus (B) an amount equal to three times the monthly installment of Base Rent payable as of the Early Termination Date. Not less than thirty (30) days prior to the Early Termination Date, time being of the essence, Tenant shall pay to Landlord, as Additional Rent, the Early Termination Payment.

(iii) If Tenant properly gives notice exercising this Early Termination Option as provided above, then (A) Tenant’s Right of First Refusal set forth in Section 3(d) shall be void and of no further effect, and (B) the Term shall end on the Early Termination Date as if the Early Termination Date was designated as the last day of the Term, and Tenant shall be obligated to surrender the Premises to Landlord on the Early Termination Date in accordance with Section 30 .

(iv) If Tenant fails to pay the Early Termination Payment when due, Landlord shall have the right, at its option, to either (A) treat such failure as a Event of Default and exercise Landlord’s rights and remedies pursuant to Section 26 as Landlord may elect, or (B) by written notice to Tenant, void Tenant’s exercise of this Early Termination Option, in which case this Lease shall continue in accordance with its terms as if Tenant never exercised this Early Termination Option.

(d) Right of First Refusal . Landlord hereby grants to Tenant a continuing right of first refusal for the Term (including, if exercised, the first Option Period but specifically excluding the Second Option Period) to lease Available Space (as hereinafter defined), subject to the terms and conditions set forth in this Section 3(d) . As used in this Section, “ Available Space ” means space on the fourth floor of the Building as to which Landlord has received a fully executed letter of intent to lease such space from a prospective tenant who does not occupy such space or have rights to such space pursuant to an expansion right, right of first offer, right of first refusal or similar right. For avoidance of doubt, space shall not be deemed Available Space if (i) the tenant occupying such space renews or extends its term with respect to such space, whether or not pursuant to an option contained in its lease, or (ii) such space is subject to an existing expansion right, right of first offer or right of first refusal as of the Commencement Date and the holder of such existing right exercises its rights thereunder.

(i) No Event of Default shall have occurred and be continuing at the time the applicable space becomes Available Space or at the time Tenant purports to exercise this right.

(ii) This Lease shall be in full force and effect and Tenant shall not have assigned this Lease or sublet more than twenty percent (20%) of the Premises.

(iii) At such time as Landlord and a prospective tenant agree upon a letter of intent for leasing Available Space, Landlord shall provide Tenant a written notice (“ Landlord's Notice of Terms ”) describing the financial terms and conditions of the proposed lease between Landlord and the prospective tenant, provided that (i) the lease term with respect to the Available Space shall be adjusted to be coterminous with the remaining Term and any rent abatement, improvement allowance or other concession shall be adjusted as necessary to reflect the difference in lease term between the term stated in the letter of intent with the prospective tenant and the remaining Term , and (ii) if the remaining Term of this Lease as of the commencement date of the lease with respect to the Available Space is less than three (3) years, then as a condition to Tenant’s exercise of this right of first refusal Tenant must simultaneously exercise an available Extension Option, so that the Term is extended by the applicable Option Period .

(iv) Tenant shall notify Landlord in writing of its intention to lease the Available Space on the terms set forth in Landlord’s Notice of Terms within seven (7) business days after receipt thereof, time being of the essence. If Tenant fails to respond in writing to Landlord’s Notice of Terms within such seven (7) business day period, Landlord shall have the right to lease the Available Space at any time within one hundred eighty (180) days following the date of Landlord's Notice of Terms on substantially the same terms and conditions contained in Landlord's Notice of Terms (except that the lease term may be as set forth in the letter of intent with the prospective tenant and any rent abatement, improvement allowance or other concession adjusted accordingly). If Landlord does not enter into a new lease within such one hundred eighty (180) day period, or if the terms are modified so that they are not substantially the same terms and conditions contained in Landlord's Notice of Terms, Landlord must again provide to Tenant Landlord's Notice of Terms and Tenant shall have the right set forth hereinabove prior to Landlord leasing the Available Space. For purposes of Tenant’s right of first refusal, a lease shall contain substantially the same terms and conditions as those contained in Landlord's Notice of Terms if the Effective Rental Rate (as hereinafter defined) set forth in such lease is not less than ninety-five percent (95%) of the Effective Rental Rate set forth in Landlord's Notice of Terms. As used herein, the term “ Effective Rental Rate ” shall mean the dollar amount per square foot computed as follows: (i) total base rent over the term, (ii) less the amount of any tenant improvement allowance or the cost of any tenant improvements installed by Landlord, (iii) less the amount of any free rent, moving expenses, lease assumption payments and other concessions provided by Landlord, (iv) divided by the number of years in the term, and (v) further divided by the number of square feet in the premises in question.

(v) If Tenant timely exercises this right of first refusal, Tenant shall lease the Available Space on the terms and conditions set forth in Landlord's Notice of Terms, including, to the extent applicable, any build out, tenant improvements, free rent and/or period before occupancy. At Landlord’s option Landlord and Tenant shall enter into either an amendment to this Lease or a new Lease with respect to the Available Space containing terms and conditions set forth in Landlord's Notice of Terms.

(vi) The right of first refusal set forth in this Section 3(e) is personal to Tenant and may not be assigned, transferred or conveyed to any party. This right of first refusal shall not be effective during the second Option Period, if exercised .

4. Rent .

(a) Base Rent . Commencing on the Rent Commencement Date and thereafter during the Term of this Lease, Tenant shall pay to Landlord the Base Rent in equal monthly installments in advance on the first day of each calendar month, without prior demand, setoff or deduction, provided that the installment of Base Rent for the first full month of the Term following the Rent Commencement Date shall be paid by Tenant upon execution of this Lease. In the event the Term of this Lease commences on a day other than the first day of a calendar month, then on the Commencement Date Tenant shall pay to Landlord a pro rata portion of the monthly installment of Base Rent for such partial month, based on the Base Rent for the first month following the Rent Commencement Date.

(b) Additional Rent . Whenever under the terms of this Lease any sum of money is required to be paid by Tenant in addition to Base Rent herein reserved, even if said additional sum is not designated as “Additional Rent”, if such sum is not paid when due, said sum shall nevertheless be deemed “Additional Rent” and be collectible as rent. Nothing herein contained shall be deemed to limit any other remedy of Landlord if any such sum is not paid when due.

(c) Payment . All payments of Base Rent and Additional Rent shall be paid when due, without demand, setoff or deduction at Landlord’s Address, or at such other place as Landlord may from time to time direct by notice to Tenant. All checks shall be made payable to Landlord or such other person as Landlord may direct from time to time.

(d) Electric Charges . Commencing on the Commencement Date, in addition to the Base Rent and other charges set forth in this Lease, Tenant shall pay Landlord for all electricity consumed in the Premises, including electricity consumed by the air-conditioning, heating and ventilating equipment serving the Premises, together with Tenant’s Proportionate Share of the cost of electricity consumed in the operation of the common areas of the Property. Tenant shall pay Landlord for such electric charges based on the sub-meter reading for the Premises and the common areas, including any meter reading charges incurred by Landlord. All charges for electricity shall be payable as Additional Rent, with the installment of Base Rent with which they are billed, or if billed separately, shall be due and payable within ten (10) days after such billing.

5. Operating Expenses .

(a) Operating Expenses . For purposes of this Lease, the term “ Operating Expense Year ” shall mean calendar year 2012 as the first Operating Expense Year, and thereafter each successive calendar year or portion thereof during the Lease Term. “ Operating Expenses ” shall mean all costs and expenses of the operation, maintenance and repair of the Property, including, without limitation, the cost and expense to Landlord of the following items:

(v) All wages, salaries and payroll costs of all employees (whether employees of Landlord or its managing agent) engaged in management, operation, repair, replacement, maintenance and security, including payroll taxes, insurance and all other employee benefits relating thereto;

(vi) All supplies and materials used in the management, operation, repair, replacement, maintenance and security of the Property;

(vii) All utilities consumed by the Property and the servicing thereof (other than electric charges billed directly to tenants), including, without limitation, gas, water and sewer;

(viii) All management, maintenance and service contracts for the management, operation, repair, replacement, maintenance, and security of the Property, including, without limitation, window cleaning, security system, heating, ventilating and air-conditioning system, fire sprinkler system, elevators, landscaping, snow removal and ordinary trash removal;

(ix) All costs incurred as a result of or by virtue of the Building’s percentage interest of the Bellevue Park Corporate Center;

(x) All property, liability and other insurance for the Property including all common areas and Landlord’s personal property and fixtures used in connection therewith;

(xi) All repairs (including necessary replacements) and general maintenance of the Property, including without limitation restriping, resurfacing, maintaining and repairing all walkways, roadways and parking areas on the Land;

(xii) All cleaning and janitorial services for the Building;

(xiii) The cost of any capital repairs or capital improvements for the Property, which costs shall be amortized over the expected useful life of the capital repairs or capital improvement as reasonably determined by Landlord in accordance with generally accepted accounting principles, together with interest on the unamortized balance at a rate reasonably determined by Landlord;

(xiv) All Real Estate Taxes, as hereinafter defined, and all other permit and license fees and taxes (other than income taxes) payable in connection with the ownership and operation of the Property; and

(xv) All other costs and expenses necessarily and reasonably incurred by Landlord in the proper operation and maintenance of a first-class office building;

Notwithstanding the foregoing, the term "Operating Expenses" shall not include any of the following:

(A) Repairs or other work occasioned by fire, windstorm or other insured casualty or by the exercise of the right of eminent domain to the extent of insurance proceeds or condemnation awards received therefor;

(B) Leasing commissions, accountants', consultants', auditors or attorneys' fees, costs and disbursements and other expenses incurred in connection with negotiations or disputes with other tenants or prospective tenants or other occupants, or associated with the enforcement of any other leases or the defense of Landlord's title to or interest in the real property or any part thereof;

(C) Costs incurred by Landlord in connection with construction of the Building and related facilities, the correction of latent defects in construction of the Building or the completion of the Tenant Finish Work;

(D) Costs (including permit, licenses and inspection fees) incurred in renovating or otherwise improving or decorating, painting, or redecorating space for other tenants or other occupants or vacant space;

(E) Depreciation and amortization;

(F) Costs incurred due to a breach by Landlord or any other tenant of the terms and conditions of any lease;

(G) Overhead and profit increment paid to subsidiaries or affiliates of Landlord for management or other services on or to the Building or for supplies, utilities or other materials, to the extent that the costs of such services, supplies, utilities or materials exceed the reasonable costs that would have been paid had the services, supplies or materials been provided by unaffiliated parties on a reasonable basis without taking into effect volume discounts or rebates offered to Landlord as a portfolio purchaser;

(H) Interest on debt or amortization payments on any mortgage or deeds of trust or any other borrowings and any ground rent;

(I) Ground rents or rentals payable by Landlord pursuant to any over-lease;

(J) Any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord;

(K) Costs incurred in managing or operating any "pay for" parking facilities within the Project;

(L) Any fines or fees for Landlord's failure to comply with governmental, quasi-governmental, or regulatory agencies' rules and regulations;

(M) Legal, accounting and other expenses related to Landlord’s financing, re-financing, mortgaging or selling the Property;

(N) Costs for sculpture, decorations, painting or other objects of art in excess of amounts typically spent for such items in office buildings of comparable quality in the competitive area of the Building;

(O) Cost of any political, charitable or civic contribution or donation; and

(P) Costs that are capital in nature except as provided in subsection 5(a)(ix) hereof.

(b) Real Estate Taxes . “ Real Estate Taxes ” shall mean all gross real property taxes, charges and assessments (including any special assessments, whether voluntary or involuntary) which are levied, assessed or imposed by any governmental authority or special district with respect to the Land and the Building, and any improvements, fixtures and equipment located upon the Property and any tax which shall be levied or assessed in addition to and/or in lieu of such real or personal property taxes, but shall not include any federal or state income tax, or any franchise, capital stock, estate or inheritance taxes, or any transfer tax or recording charge resulting from a transfer of the Property.

(c) Payment . For each Operating Expense Year (or part thereof) included in the Term of this Lease Tenant shall pay Landlord, as Additional Rent, Tenant’s Percentage Share of the Operating Expenses for such Operating Expense Year in excess of the Operating Expenses incurred during the Base Year. In the event that this Lease shall expire at any time other than at the end of a calendar year, then within forty-five (45) days after statements reflecting the actual Operating Expenses for the year in which such expiration occurs are submitted by Landlord to Tenant, either Landlord or Tenant shall pay to the other party the adjustment sum due, pro rated for the portion of the year in which this Lease was in force. The provisions of this subsection (c) shall survive the expiration of this Lease.

(d) Monthly Installments . Commencing on the first day of the first Operating Expense Year following the Base Year, and continuing thereafter on the first day of each month during each Operating Expense Year, Tenant shall pay monthly, in advance, an amount equal to one-twelfth of Landlord’s estimate of Tenant’s Percentage Share of the amount by which the Operating Expenses for such Operating Expense Year will exceed the Operating Expenses incurred during the Base Year. For each Operating Expense Year, Landlord shall make an estimate of Tenant’s Percentage Share of the excess Operating Expenses and use reasonable efforts to notify Tenant as to such estimate prior to December 31st of the preceding year. Landlord may adjust its estimate of Tenant’s Percentage Share of the excess Operating Expenses one time during each Operating Year (in addition to the initial estimate for such Operating Year), and Tenant shall commence payment of monthly installments at the adjusted estimate upon not less than thirty (30) days prior written notice thereof from Landlord.

(e) Reconciliation . On or about May 1 of each calendar year, commencing with the second calendar year following the Base Year, Landlord shall submit to Tenant a statement setting forth the actual Operating Expenses for the Property for the preceding calendar year, the Operating Expenses for the Property for the Base Year and Tenant’s Percentage Share of the excess Operating Expenses. Within thirty (30) days after delivery of such statement to Tenant, an adjustment shall thereupon be made between Landlord and Tenant to reflect any difference between Tenant’s estimated payments under subsection (d) above and Tenant’s Percentage Share of the excess Operating Expenses. In no event, however, shall a decrease in Operating Expenses result in a reduction of the Base Rent.

(f) Back-Up and Disputes . Landlord shall provide Tenant with reasonable back-up information supporting any estimate delivered pursuant to Section 5(d) or annual statement delivered pursuant to Section 5(e) promptly after Tenant’s written request. Each statement furnished by Landlord to Tenant shall be conclusive and binding upon Tenant unless, within ninety (90) days after receipt of such statement, Tenant shall notify Landlord in writing that it disputes the correctness of such statement, stating the reason for such dispute. Pending the determination of such dispute, Tenant shall pay, without delay, the full amount of the Additional Rent due from Tenant in accordance with each such statement that Tenant is disputing.

(g) Right of Audit . In the event Tenant gives timely notice of a dispute as provided in Section 5(f) , Tenant, acting through an independent nationally recognized accounting firm that is not being compensated by Tenant on a contingency fee basis, shall have the right, upon reasonable advance notice and during business hours, to inspect the books and records of Landlord applicable to the determination of such disputed statement for the purpose of verifying in good faith the information contained in such statement. Any such review shall take place at the location Landlord customarily maintains its books and records with respect to Operating Expenses and must be completed within sixty (60) days after the receipt of such statement by Tenant. Landlord shall maintain at its office or the office of its managing agent full, complete and accurate books and records prepared in accordance with prudent building management practices with respect to Operating Expenses, and shall retain such records with respect to each calendar year for a period not less than one (1) year following delivery of the annual statement for such year. Tenant’s review of Landlord’s books and records shall be conditioned upon Tenant and its auditor confirming in writing that all information obtained by Tenant and its auditor as a result of such review, and any resulting compromise, settlement or adjustment between Landlord and Tenant, shall be maintained as confidential and not disclosed to any other person. If as a result of such review by Tenant it is determined that Tenant’s payments on account of Operating Expenses covered by such annual statement were in excess of the amount actually payable by Tenant, Landlord shall grant Tenant a rent credit for the amount of such excess within thirty (30) days after such determination. Similarly, if it is determined that Tenant’s payments on account were less than the amount actually due, Tenant shall pay the amount of the shortfall to Landlord within such thirty (30) day period. If it is determined that Tenant’s payments on account of the Operating Expenses covered by such annual statement exceeded the amount actually payable by Tenant by more than six percent (6%), Landlord shall reimburse Tenant for the reasonable out of pocket costs incurred by Tenant in its review of such annual statement. Except as provided in the preceding sentence, the cost of any such review of Landlord’s books and records, including but not limited to any reasonable copying charges imposed by Landlord, shall be at Tenant’s sole expense.

(h) Occupancy Adjustment . If during all or part of any Operating Expense Year (including, without limitation, the Base Year), Landlord shall not furnish any service or services otherwise includable in Operating Expenses to more than ninety-five percent (95%) of the rentable area of the Building because such portions are not occupied or because such service is not required or desired by the tenant of such portion of the Building or such tenant is itself obtaining and providing such service or for other reasons, then, for the purposes of computing Operating Expenses hereunder, the amount of Operating Expenses for such period shall be deemed to be increased by an amount equal to the additional costs which Landlord determines, in good faith, would normally have been incurred during such period by Landlord if it had at its own expense furnished such services to one hundred percent (100%) of the rentable area of the Building (i.e., taking into account that certain expenses depend on occupancy (e.g., janitorial) and certain expenses do not (e.g., landscaping)).

(i) Tenant’s Percentage Share . Tenant’s Percentage Share indicated in Section 1 of this Lease was determined by dividing the rentable area of the Premises by the total number of rentable square feet in the Building, determined in accordance with BOMA standards, stipulated to be 98,377 rentable square feet as of the date hereof. If the Building from time to time contains non-office uses, Landlord shall have the right to allocate Operating Expenses in accordance with sound accounting and management principles between the office and non-office uses. In the event (i) the Premises expand or contract due to the addition or deletion of space, whether pursuant to the exercise of an option contained in this Lease or otherwise, or (ii) the rentable area of the Building is increased or decreased by Landlord, whether due to a re-measuring of the Building or otherwise, then in either case, Tenant’s Percentage Share shall be recalculated effective as of any such event in order to equal the ratio of rentable area then contained in the Premises divided by the area of the Building as determined above.

6. Late Charges . In the event that Tenant shall fail to pay Base Rent or any Additional Rent when due, Tenant shall pay an automatic late charge to Landlord equal to five percent (5%) of the total payment then due, provided that Tenant shall not be obligated to pay a late charge with respect to the first late payment in any twelve (12) month period unless the amount due is not paid within five (5) days after written notice from Landlord. In addition, in the event that Tenant shall fail to pay Base Rent or any Additional Rent within thirty (30) days after its due date, then from the date due until the date Tenant finally pays Base Rent or Additional Rent, Tenant shall pay Landlord interest at the rate of twelve percent (12%) per annum (the “ Overdue Interest Rate ”) with respect to the delinquent amount. Such late charges and interest shall be deemed Additional Rent for all purposes under this Lease.

7. Use of Premises . Tenant shall use and occupy the Premises for general office purposes. Tenant shall not use or occupy the Premises for any other purpose or business without the prior written consent of Landlord. Tenant and its employees, agents, licensees and invitees shall observe and comply with the rules and regulations set forth on Exhibit “D” attached hereto and made a part hereof (the “ Rules and Regulations ”), as such Rules and Regulations may be modified from time to time by Landlord by written notice given to Tenant, provided that any new or modified Rules and Regulations adopted by Landlord after the date hereof do not increase the financial burden of Tenant or unreasonably restrict Tenant’s rights under this Lease. Tenant’s right to dispute the application of any new or modified Rules and Regulations to Tenant shall be deemed waived unless asserted to Landlord in writing within ten (10) business days after Landlord shall have given Tenant written notice of such new or modified Rules and Regulations. In case of any conflict or inconsistency between the provisions of this Lease and any Rules and Regulations, the provisions of this Lease shall control.

8. Common Areas; Parking .

(a) All driveways, parking lots, walkways, elevators, stairs, alleys, public corridors, fire escapes, and other areas, facilities and improvements which may be provided by Landlord from time to time for the general use, in common, of Tenant and other Building tenants and their employees, agents, invitees and licensees, shall at all times be subject to the exclusive control and management of Landlord. Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to all such common areas, facilities and improvements.

(b) Landlord reserves the right, exercisable without notice to Tenant and without thereby creating an actual or constructive eviction or incurring any liability to Tenant therefor, to decorate and to make alterations, additions and improvements, structural or otherwise, to the corridors, lobbies, elevators, stairs and other public areas of the Building and, during the continuance of any such work, to close temporarily doors, entryways, corridors and common areas of the Property.

(c) During the Term Tenant shall have the non-exclusive right to use up to 3.2 parking spaces per 1,000 rentable square feet contained in the Premises without additional charge, provided that Landlord shall mark five (5) of the parking spaces allocated to Tenant for Tenant’s exclusive use, at a location to be designated by Landlord and reasonably approved by Tenant. Landlord shall have no obligation, however, to monitor or enforce Tenant’s exclusive use of such parking spaces. Tenant agrees not to use more than its allocated share of the parking spaces and to cooperate with Landlord in the use of the parking facilities.

9. Condition of Premises; Tenant Finish Work . Tenant acknowledges and agrees that, except for the Tenant Finish Work described in the Work Letter, Landlord has not agreed to make any improvements to the Premises or the Property and there have been no representations or warranties made by or on behalf of Landlord with respect to the Premises or the Property or with respect to the suitability of either for the conduct of Tenant’s business. The taking of possession of the Premises by Tenant shall conclusively establish that the Premises and the Property were in satisfactory condition, order and repair at such time.

10. Alterations and Trade Fixtures; Removal .

(a) During the Term of this Lease, except as provided in the following sentence, Tenant shall not make any alterations or additions to the Premises without the prior written consent of Landlord, which shall not be unreasonably withheld so long as the proposed alteration or addition does not affect the Building structure or any of the Building systems and is not visible from outside the Premises. Landlord’s consent shall not be required for (i) the installation of any office equipment or fixtures including internal partitions which do not affect the Building structure or Building systems and are not visible from outside the Premises, or (ii) minor work, including decorations, which does not affect the Building structure or Building systems, is not visible from outside the Premises, and costs in the aggregate less than $50,000. In the event that Tenant shall desire to perform any such alterations or additions in or about the Premises, Tenant shall deliver to Landlord detailed, professionally prepared plans and specifications prepared at the expense of Tenant. Landlord shall review such plans and specifications and return same to Tenant either marked approved, marked to show the corrections required (in which event such marked-up plans and specifications shall be deemed approved as marked-up), or marked disapproved with the reasons therefor. If Landlord disapproves Tenant’s plans and specifications, Tenant may submit revised plans and specifications subject to subsequent mark-ups or disapprovals and corrections in the above manner. Upon approval by Landlord of Tenant’s plans and specifications, Tenant shall proceed with due diligence to commence the work to be performed by Tenant and shall complete such work in a diligent manner. All such work to be done or performed in or about the Premises by Tenant shall be performed (1) at Tenant’s sole cost and expense, and (2) by contractors and subcontractors approved by Landlord. Prior to commencing work Tenant shall cause its contractor to provide Landlord with insurance certificates confirming that such contractor carries commercial general liability insurance with a combined single limit of not less than $1,000,000, naming Landlord, Landlord’s mortgagee and Landlord’s managing agent as additional insureds. Upon completion of any such work, Tenant shall pay to Landlord an amount equal to three percent (3%) of the total cost of such work, to reimburse Landlord for review of such plans and specifications and the coordination and final inspection of the work.

(b) Tenant’s right to do any alteration work in or about the Premises shall be and hereby is conditioned upon Tenant’s work being performed by workmen and mechanics working in harmony and not interfering with labor employed by Landlord, Landlord’s contractors or by any other tenants or their contractors. If at any time any of the workmen or mechanics performing any of Tenant’s work shall be unable to work in harmony or shall interfere with any labor employed by Landlord, other tenants or their respective mechanics and contractors, then the permission granted by Landlord to Tenant to do any work in or about the Premises may be withdrawn by Landlord upon written notice to Tenant.

(c) All alterations, interior decorations, improvements or additions made to the Premises by Tenant, except for movable alterations, interior decorations, improvements or additions, shall become Landlord’s property upon expiration or sooner termination of this Lease unless Landlord, by written notice to Tenant prior to the expiration or sooner termination of this Lease, requires that any such alterations, decorations, improvements or additions as designated in Landlord’s notice be removed by Tenant, in which case Tenant shall remove the same and repair all damage caused by such removal prior to the expiration or sooner termination of this Lease. Unless otherwise requested by Landlord and approved by Tenant, Tenant shall also remove all movable alterations, interior decorations, improvements or additions installed by Tenant in the Premises, except lighting fixtures and air-conditioning equipment, and repair any damage caused to the Premises by said removal. Without limiting the generality of the foregoing, all voice and data cabling and wiring installed by or on behalf of Tenant in the Premises shall be deemed Tenant’s personal property and shall be removed by Tenant upon the expiration or sooner termination of this Lease. All of said movable alterations, interior decorations, improvements or additions and other personal property remaining in the Premises after the Lease expiration date, or any sooner termination of this Lease, shall be deemed to be abandoned property and may be disposed of by Landlord or, at Landlord’s option, stored, in either case at Tenant’s risk and expense. Any costs incurred by Landlord in removing, storing and/or disposing of Tenant’s property and repairing any damage caused thereby, plus interest thereon at the Overdue Interest Rate, shall be paid by Tenant to Landlord on demand.

11. Mechanics’ Liens .

(a) If any mechanics’ or other lien shall be filed against the Premises or the Property purporting to be for labor or materials furnished or to be furnished at the request of Tenant, then Tenant, at its expense, shall cause such lien to be removed of record by payment, bond or otherwise, within ten (10) days after the filing thereof. If Tenant shall fail to cause such lien to be removed of record within such ten (10) day period, Landlord may cause such lien to be removed of record by payment, bond or otherwise, without investigation as to the validity thereof or as to any offsets or defenses thereto, in which event Tenant shall reimburse Landlord in the amount paid by Landlord, including expenses, within ten (10) days after Landlord’s billing therefor. Tenant shall indemnify and hold Landlord harmless from and against any and all claims, costs, damages, liabilities and expenses (including attorney fees) which may be brought or imposed against or incurred by Landlord by reason of any such lien or removal of record.

(b) Nothing in this Lease shall be deemed to be, or construed in any way as constituting, the consent or request of Landlord, expressed or implied, by inference or otherwise, to any person, firm or corporation for the performance of any labor or the furnishing of any materials for any construction, rebuilding, alteration, addition or repair of or to the Premises or any part thereof, nor as giving Tenant any right, power or authority to contract for or permit the rendering of any services or the furnishing of any materials which might in any way give rise to the right to file any lien against Landlord’s interest in the Property.

12. Building Services .

(a) Landlord shall provide, within its Building standards, the following services and facilities:

(i) Heating, ventilating and air conditioning, Monday to Friday from 8:00 A.M. to 6:00 P.M. and Saturday 8:00 A.M. to 1:00 P.M. (hereinafter “ Business Hours ”), except on holidays observed by the governments of the United States or the State of Delaware (“ Holidays ”), and further subject to such regulations as the Department of Energy or other local, state or federal agency, board or commission shall adopt from time to time. Tenant agrees to cooperate fully with Landlord and to abide by all the rules and regulations which Landlord may reasonably prescribe for the proper functioning and protection of the heating, ventilating and air conditioning systems. If Tenant requires heating, ventilation and air conditioning service at times other than Business Hours, Tenant may obtain after hours HVAC through use of the override switches in the Premises. After hours HVAC use shall be paid for by Tenant, within ten (10) days of billing, at the standard hourly rate determined from time to time by Landlord. Landlord’s current rate for after hours HVAC (in addition to electric costs, which are billed to Tenant pursuant to Section 4(d)) is $5.00 per hour per heat pump serving the Premises.

(ii) Subject to payment of the charges therefor by Tenant, electricity for normal office use, including normal office equipment, in the Premises.

(iii) Cleaning and maintenance of common areas in the Building, including bathroom facilities.

(iv) Continuous passenger elevator service during Business Hours, and service via at least one (1) car at all other times.

(v) Janitorial services, including cleaning of the Premises, Monday through Friday (excluding Holidays) in accordance with Landlord’s standard cleaning specifications, which are attached hereto as Exhibit “E” . Landlord shall not be required to furnish cleaning services to any kitchens, lunchrooms or non-Building standard lavatories in the Premises.

(vi) Water for lavatory and drinking purposes.

Tenant shall reimburse Landlord for all additional cleaning expenses incurred by Landlord, including but not limited to, garbage and trash removal expense over and above the normal cleaning provided by Landlord, due to the presence of a lunchroom or kitchen or food and beverage dispensing machines within the Premises. No food or beverage dispensing machines shall be installed by Tenant in the Premises without the prior written consent of Landlord.

(b) Without Landlord’s prior written consent, Tenant shall not install any equipment in the Premises which shall cause the connected electrical load to exceed the electrical capacity provided by Landlord, affect the temperature otherwise maintained by the air- conditioning system or overload any other system servicing the Premises. Should Landlord grant such consent, all additional risers or other equipment required therefor shall be provided by Landlord and the cost thereof (including Landlord’s 3% construction management fee) shall be paid by Tenant upon Landlord’s demand.

(c) The services referred to in Section 12(a) above may be subject to slowdown, interruption or stoppage due to the order of any governmental bodies and regulatory agencies, or caused by the maintenance, repair, replacement or improvement of any of the equipment involved in the furnishing of any such services, or caused by changes of services or service providers, alterations, strikes, lockouts, labor controversies, fuel shortages, accidents, acts of God or the elements or any other cause beyond the reasonable control of Landlord. No such slowdown, interruption or stoppage of any such services shall ever be construed as an eviction, actual or constructive, of Tenant, nor shall same cause any abatement of Base Rent or Additional Rent or in any manner or for any purpose relieve Tenant from any of its obligations under this Lease. Landlord agrees to use reasonable diligence to resume the affected service promptly following any such slowdown, interruption or stoppage. Landlord will provide Tenant, whenever reasonably possible, advance notice of any service slowdowns, interruptions or stoppages. Notwithstanding the foregoing, in the event such interruption of services prevents Tenant from using the Premises for the purposes contemplated by this Lease due to reasons within Landlord’s control and continues for a period of five (5) business days after written notice from Tenant without Landlord using commercially reasonable efforts to reinstate services as quickly as possible, the Base Rent and Additional Rent shall abate pro rata, that is, only for that portion of the Premises in which Tenant’s use and occupancy has been substantially impaired and for the entire period of substantial impairment that continues from and after the sixth (6 ^th ) business day of such interruption.

(d) If maintenance of the Building’s telecommunication cable system hereafter becomes an obligation of Landlord imposed by law, Landlord, to the extent required by any such law, shall maintain the intra-building network cable in the Building from the point of entry (i.e., the local telephone service provider’s final access point to the Building) to the Premises. In such event the maintenance, repair and replacement of the Building’s telecommunication cable system, including but not limited to the cost of any cable maintenance contract obtained by Landlord, shall be part of the Operating Expenses. In no event shall Landlord be responsible for the maintenance of the telecommunication cable system serving only the Premises, which shall be maintained, repaired and replaced by Tenant at its expense. Until such time (if ever) that such obligation is imposed on Landlord by law, the maintenance of the Building’s telecommunication cable system shall be the responsibility of the Building’s telecommunication service provider.

(e) Landlord shall have the right from time to time to select the company or companies providing local telephone and telecommunication services to the Building. In the event Tenant desires to use the services of a provider of local telephone and telecommunication services whose equipment is not then servicing the Building, no such provider shall be permitted to install its lines or other equipment within the Building without first securing the prior written consent of Landlord. Landlord shall not unreasonably withhold its consent provided that each of the following conditions is satisfied:

(i) Landlord determines that there is sufficient space in the Building for the placement of such provider’s equipment and materials.

(ii) The provider must be licensed and reputable and provide Landlord such financial statements, credit reports and bank references as Landlord may require to evaluate the financial ability of the provider.

(iii) The provider and Landlord must enter into a license agreement in form and content satisfactory to Landlord, reasonably compensating Landlord for space used in the Building for the storage and maintenance of the provider’s equipment, costs to be incurred by Landlord in arranging for access by the provider’s personnel and any other such costs Landlord may expect to incur.

All reasonable costs incurred by Landlord in evaluating any request for access by an alternate telecommunications provider and negotiating a license agreement with such provider shall be paid by Tenant or such provider, upon demand. Landlord’s consent under this subsection shall not be deemed any kind of representation or warranty by Landlord, including without limitation any representation as to the suitability, competence or financial strength of the provider proposed by Tenant. If Landlord consents to installation of equipment in the Building by an alternate telecommunications provider as set forth above, such installation shall be subject to all of the requirements of this Lease regarding construction work by or on behalf of Tenant, including but not limited to the requirements of Section 10 hereof.

13. Certain Rights Reserved by Landlord . Landlord shall have the following rights, exercisable without notice and without liability to Tenant for damage or injury to property, persons or business and without effecting an eviction, constructive or actual, or disturbance of Tenant’s use or possession or giving rise to any claim or setoff or abatement of rent:

(a) To decorate and to make repairs, alterations, additions, changes or improvements, whether structural or otherwise, in and about the Building, or any part thereof, and for such purposes to enter upon the Premises and, during the continuance of any such work, to temporarily close doors, entry ways, public space and corridors in the Building, to interrupt or temporarily suspend Building services and facilities and to change the arrangement and location of entrances or passageways, doors and doorways, corridors, elevators, stairs, toilets, or other public parts of the Building, all without abatement of rent or affecting any of Tenant’s obligations hereunder, so long as the Premises are reasonably accessible.

(b) To grant to anyone the exclusive right to conduct any business or render any service in or to the Building, provided such exclusive right shall not operate to exclude Tenant from the use expressly permitted herein. Without limiting the generality of the foregoing, Landlord shall have the right from time to time to select the company providing electric service to the Building.

(c) To take all such reasonable measures as Landlord may deem advisable for the security of the Building and its occupants, including without limitation, the search of all persons entering or leaving the Building, the evacuation of the Building for cause, suspected cause, or for drill purposes, the temporary denial of access to the Building, and the closing of the Building for cause, suspected cause, or for drill purposes, and the closing of the Building after normal business hours and on Saturdays, Sundays and holidays; subject, however, to Tenant’s right to admittance when the Building is closed after normal business hours under such reasonable regulations as Landlord may prescribe from time to time which may include, by way of example but not of limitation, that persons entering or leaving the Building, whether or not during normal business hours, identify themselves to a security officer by registration or otherwise and that such persons establish their right to enter or leave the Building.

14. Assignment and Subletting .

(a) Except as expressly permitted pursuant to this Section, Tenant shall not assign or mortgage this Lease or any interest therein or sublet the Premises or any part thereof, without the prior written consent of Landlord, to be granted or denied by Landlord in accordance with Section 14(b) . Any of the foregoing acts without Landlord’s consent shall be voidable and shall, at the option of Landlord, be an Event of Default under this Lease. Neither this Lease nor any interest therein shall be assignable as to the interest of Tenant by operation of law, without the prior written consent of Landlord. Unless Tenant is a company whose shares are publicly traded, any transfer of the ownership or control of Tenant, whether by transfers of stock or partnership interests, merger, consolidation or otherwise, however such transfer of ownership or control is accomplished, shall constitute an assignment of Tenant’s interest in this Lease and as such shall be subject to this Section 14 . Notwithstanding the foregoing, without the consent of Landlord but upon notice to Landlord, Tenant may assign or sublet all or any part of the Premises to:

(i) any corporation or partnership that controls, is controlled by, or is under common control with, Tenant; or

(ii) any corporation resulting from the merger, consolidation or other corporate reorganization with Tenant or to any entity that acquires all of substantially all of Tenant’s assets, as long as the assignee or sublessee is a bona fide entity and assumes the obligations of Tenant under this Lease and such entity has a net worth following such merger, consolidation or reorganization at least equal to the net worth of Tenant on the date hereof or the date of such merger, consolidation or reorganization, whichever is higher.

(b) If at any time or from time to time during the Term of this Lease, Tenant desires to assign this Lease or sublet all or a portion of the Premises, Tenant shall give Landlord written notice of such intent, which notice must be accompanied by (i) a written description of the proposed assignment or subletting and financial and business information for the proposed assignee or sublessee, including bank and general references; and (ii) an administrative fee of seven hundred fifty dollars ($750.00). Tenant shall also reimburse Landlord for its reasonable attorneys’ fees incurred in connection with any proposed assignment or sublease within ten (10) days of written deemed by Landlord, whether or not the proposed assignment or sublease is approved. Landlord shall have the option, exercisable by notice given to Tenant within ten (10) business days after receipt of Tenant’s notice, of reacquiring the Premises or portion thereof proposed to be sublet or assigned and terminating the Lease with respect thereto, effective on a date selected by Landlord which shall be no sooner than five (5) days and no later than thirty (30) days after Landlord’s receipt of Tenant’s notice. If Landlord does not exercise such option, Tenant may assign this Lease or sublet such space to any third party, subject to the following terms and conditions:

(i) Tenant shall obtain the consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed; Landlord shall base its decision upon the uses of other Building tenants (whether or not exclusives were granted), the financial condition, business and character of the proposed assignee or subtenant and the proposed use of the Premises;

(ii) Tenant may not sublease the Premises or any portion thereof or assign this Lease to an existing tenant in the Building or any of CIGNA Corporation, BlackRock Inc. or BNYMellon Corporation, or any of their respective affiliates, unless Landlord or an affiliate does not have space to accommodate such potential tenant’s needs within any building in Bellevue Park Corporate Center;

(iii) No sublease or assignment shall be valid and no subtenant or assignee shall take possession of the premises subleased or assigned until a fully executed original of such sublease or assignment of this Lease has been delivered to Landlord, and Tenant and such assignee or sublessee have executed such additional documentation as Landlord may reasonably require;

(iv) Any options granted to Tenant in this Lease to renew the Term, expand the Premises or lease additional space shall be deemed void and of no further effect, it being understood that all such options are personal to Tenant;

(v) No subtenant shall have a further right to sublet;

(vi) No assignee shall have a further right to assign the Lease, except in accordance with the provisions of this Section 14 ; and

(c) Tenant shall pay Landlord within ten (10) days after receipt, as Additional Rent, 50% of any subrents, other sums or other economic consideration received by Tenant as a result of any subletting or assignment (net of rental or other payments received that are attributable to the cost of leasehold improvements made to the assigned or sublet portion of the Premises by Tenant for the subtenant or assignee, and other reasonable expenses incurred by Tenant incident to the subletting or assignment, including standard leasing commissions), whether denominated as rentals under the sublease or otherwise, which exceed, in the aggregate, the aggregate of the total sums which Tenant is obligated to pay Landlord under this Lease (prorated to reflect obligations allocable to that portion of the Premises subject to a sublease). If such subleasing or assignment has been made without the consent of Landlord as provided herein, Landlord shall be entitled to all economic consideration received by Tenant in accordance with the provisions of this Section 14(c) , but the receipt of such monies shall not be deemed to be a waiver of the provisions of this Section 14 with respect to assignment and subletting, or the acceptance of such assignee or subtenant as Tenant hereunder.

(d) Whether or not Landlord’s consent is required or obtained hereunder, no subletting or assignment shall release Tenant of Tenant’s obligations or alter the primary liability of Tenant to pay Base Rent and Additional Rent and to perform all other obligations to be performed by Tenant under this Lease. This continuing obligation of Tenant shall not be affected in any way by any subsequent amendment of this Lease made by Landlord and any assignee, or any waiver, forbearance or other accommodation granted by Landlord to any assignee. The acceptance of rental by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one (1) assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by any assignee of Tenant or any successor of Tenant in the performance of any of the terms of this Lease, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee or successor.

(e) In the event that the Premises or any part thereof have been sublet by Tenant and an Event of Default under this Lease has occurred and is continuing, then Landlord may collect rent from the subtenant and apply the amount collected to the Base Rent and Additional Rent herein reserved, but no such collection shall be deemed a waiver of the provisions of this Section 14 with respect to subletting or the acceptance of such subtenant as Tenant hereunder or a release of Tenant under this Lease.

15. Access to Premises . Landlord, its employees and agents shall have the right to enter the Premises during business hours upon reasonable prior written notice and at any time in case of an emergency for the purpose of examining or inspecting the Premises, showing the Premises to prospective purchasers, mortgagees and (during the last year of the Term only) prospective tenants of the Building, and making such alterations, repairs, improvements or additions to the Premises or to the Property as Landlord may determine to be necessary or desirable. Landlord shall use reasonable efforts during any such entry into the Premises to minimize the disruption to Tenant’s business activities. If representatives of Tenant shall not be present to open and permit entry into the Premises at any time when such entry by Landlord is necessary or permitted hereunder, Landlord may enter by means of a master key (or forcibly in the event of an emergency) without liability to Tenant and without such entry constituting an eviction of Tenant or termination of this Lease. If Tenant has relocated from the Premises, the entry of Landlord into the Premises to retrofit the same or a portion thereof for a subsequent tenant shall not be deemed the acceptance of surrender, eviction or a termination of this Lease with respect to the Premises or such portion thereof unless or until a successor tenant has occupied the same and begun paying rent thereon.

16. Repairs .

(a) At its cost (which cost shall be an Operating Expense under Section 5 above), Landlord shall make all repairs necessary to maintain the plumbing, heating, ventilating, air conditioning and electrical systems serving the Premises, windows, floors (except finished flooring and carpeting) and all other structural portions of the Premises, provided, however, that Landlord shall not be obligated to make any of such repairs until Landlord has received written notice from Tenant that such repair is needed. Landlord shall make all repairs to the light fixtures in the Premises, including installation of replacement bulbs and ballasts, but at Tenant’s expense. Landlord shall also be responsible for the maintenance and repair of all common areas and facilities at the Property, provided that Tenant shall be responsible for the repair of any damage to the Premises or the Property common areas and facilities caused by the negligence or willful misconduct of Tenant or its employees, agents, invitees or licensees.

(b) Except for Landlord’s repairs under subsection (a) above, at its sole cost and expense, Tenant shall make all other repairs necessary to maintain and keep the Premises and the fixtures therein in neat and orderly condition. If Tenant refuses or neglects to make such repairs, or fails diligently to prosecute the same to completion, after notice from Landlord of the need therefor, Landlord may make such repairs at the expense of Tenant and such expense, along with a 3% service charge, shall be collectible as Additional Rent.

(c) Landlord shall not be liable for any interference with Tenant’s business arising from the making of any repairs in the Premises under subsection (a) above. Landlord shall interfere as little as reasonably practicable with the conduct of Tenant’s business. There shall be no abatement of Base Rent or Additional Rent because of such repairs.

17. Indemnification and Insurance .

(a) Tenant shall indemnify, defend and hold harmless Landlord, Landlord’s mortgagee and Landlord’s managing agent from and against any and all costs, expenses (including reasonable attorney fees), liabilities, losses, damages, suits, actions, fines, penalties, claims or demands of any kind and asserted by or on behalf of any person or governmental authority, arising out of (1) any failure by Tenant to perform any of the agreements, terms, covenants or conditions of this Lease required to be performed by Tenant, (2) any failure by Tenant to comply with any statutes, ordinances, regulations or orders of any governmental authority, or (3) any accident, bodily injury (including death resulting therefrom), or damage to or loss or theft of property, which shall occur in or about the Premises or otherwise arising out of Tenant’s use of the Premises, except to the extent due to the gross negligence or willful misconduct of Landlord. The indemnities contained in this paragraph shall survive the expiration or earlier termination of this Lease.

(b) Landlord shall indemnify, defend and hold harmless Tenant from and against any and all costs, expenses (including reasonable attorney fees), liabilities, losses, damages, suits, actions, fines, penalties, claims or demands of any kind and asserted by or on behalf of any person or governmental authority, arising out of (1) any failure by Landlord to perform any of the agreements, terms, covenants or conditions of this Lease required to be performed by Tenant, or (2) the gross negligence or willful misconduct of Landlord, provided that Landlord’s indemnification obligations shall not extend to loss of business, loss of profits or other consequential damages. The indemnities contained in this paragraph shall survive the expiration or earlier termination of this Lease.

(c) During the Term of this Lease and any renewal thereof, Tenant shall obtain and promptly pay all premiums for Commercial General Liability Insurance with broad form extended coverage, including Contractual Liability, covering claims for bodily injury (including death resulting therefrom) and loss or damage to property occurring upon, in or about the Premises, with a minimum combined single limit of at least $3,000,000. All such policies and renewals thereof shall name Landlord, Landlord’s mortgagee and Landlord’s managing agent as additional insureds. All policies of insurance shall provide (1) that no material change or cancellation of said policies shall be made without at least thirty (30) days prior written notice to Landlord and Tenant, and (2) that any loss shall be payable notwithstanding any act or negligence of Tenant or Landlord which might otherwise result in the forfeiture of said insurance. On or before the Commencement Date of the Term of this Lease, and thereafter not less than thirty (30) days prior to the expiration dates of said policy or policies, Tenant shall furnish Landlord with renewal certificates of the policies of insurance required under this paragraph. Tenant’s insurance policies shall be issued by insurance companies authorized to do business in the State of Delaware with a financial rating of at least A as rated in the most recent edition of Best’s Insurance Reports and have been in business for the past ten (10) years. The aforesaid insurance limits may be reasonably increased by Landlord from time to time during the Term of this Lease.

(d) Tenant and Landlord, respectively, hereby release each other from any and all liability or responsibility to the other for all claims of anyone claiming by, through or under them by way of subrogation or otherwise for any loss or damage to property owned by Landlord and Tenant respectively in the Premises and covered by insurance maintained by the other party. Each party shall cause its insurance carrier to endorse all applicable policies waiving the carrier’s rights to recovery under subrogation or otherwise against the other party.

18. Waiver of Claims . Landlord and Landlord’s agents and employees shall not be liable for, and Tenant hereby releases and relieves Landlord, its agents and employees from, all liability in connection with any and all bodily injury (including death), damage to or loss of property, or loss or interruption of business occurring to Tenant, its agents, employees, invitees and licensees in or about the Premises, from, without limitation, (a) any fire or other casualty, accident, occurrence or condition in or upon the Premises or the Property; (b) any defect in or failure of the plumbing, sprinkler, electrical, heating, ventilating and air-conditioning systems and equipment, or any other systems and equipment in the Premises and the Building; (c) any steam, gas, oil, water, rain or snow that may leak into or flow from any part of the Premises; (d) the falling of any fixture or any wall or ceiling materials; (e) broken glass; (f) latent or patent defects; (g) any acts or omissions of the other tenants or occupants of the Building; (h) any acts or omissions (excluding gross negligence) of Landlord, its agents, servants and employees; and (i) theft, criminal conduct, Act of God, public enemy, injunction, riot, strike, insurrection, war, court order, or any order of any governmental authorities having jurisdiction over the Premises.

19. Quiet Enjoyment . Landlord covenants and agrees with Tenant that upon Tenant paying the Base Rent and Additional Rent and observing and performing all the terms, covenants and conditions on Tenant’s part to be observed and performed under this Lease, Tenant may peaceably and quietly enjoy the Premises hereby demised without hindrance or molestation from Landlord, subject to the terms and conditions of this Lease and to the ground leases, underlying leases and mortgages referred to in Section 23 below.

20. Liability for Increased Insurance Costs . Tenant agrees that it will not do or suffer to be done, any act, matter or thing objectionable to Landlord’s fire insurance companies whereby the fire insurance or any other insurance now in force or hereafter placed on the Premises or any part thereof or on the Property by Landlord shall become void or suspended, or whereby the same shall be rated as a more hazardous risk than at the date when Tenant took possession of the Premises. In case of a breach of this covenant, in addition to all other remedies of Landlord hereunder, Tenant agrees to pay to Landlord, as Additional Rent, any and all increases in premiums on insurance carried by Landlord on the Premises or any part thereof or on the Property caused in any way by the occupancy of Tenant.

21. Casualty Damage .

(a) In the event of damage to or destruction of the Premises caused by fire or other casualty, or of the entrances and other common facilities necessary to provide normal access to the Premises, or to other portions of the Building or its equipment which portions and equipment are necessary to provide services to the Premises in accordance herewith, Landlord shall undertake to make repairs and restorations as hereafter provided, unless this Lease be terminated by Landlord or Tenant as hereinafter provided, or unless any mortgagee which is entitled to receive casualty insurance proceeds fails to make available to Landlord a sufficient amount of such proceeds to cover the cost of such repairs and restoration.

(b) If (i) the damage is of such nature or extent, in Landlord’s sole judgment, that more than two hundred ten (210) consecutive days after commencement of the work would be required (with normal work crews and hours) to repair and restore the part of the Premises or the Building which has been damaged, or (ii) a substantial portion of the Premises or the Building is so damaged that, in Landlord’s sole judgment, it is uneconomic to restore or repair the Premises or the Building, as the case may be, or (iii) less than two (2) years remain on the Term, or (iv) the amount of casualty insurance proceeds actually received by Landlord is insufficient, in Landlord’s sole judgment, to repair or restore the Premises of the Building, as the case may be, Landlord shall so advise Tenant promptly, and either party, in the case described in clause (i) above, or Landlord, in the case described in clauses (ii), (iii) or (iv) above, for a period of ten (10) days thereafter, shall have the right to terminate this Lease by written notice to the other, as of the date specified in such notice, which termination date shall be no later than thirty (30) days after the date of such notice. In the event of such fire or other casualty, if this Lease is not terminated pursuant to the terms of this Section 21 , if sufficient casualty insurance proceeds are available for use for such restoration or repair, and if this Lease is then in full force and effect, Landlord shall proceed diligently to restore the Premises to substantially its condition prior to the occurrence of the damage, provided that Landlord shall not be obligated to repair or restore any alterations, additions or fixtures which Tenant may have installed (whether or not Tenant has the right or the obligation to remove the same or is required to leave the same on the Premises as of the expiration or earlier termination of this Lease) unless Tenant, in a manner satisfactory to Landlord, assures payment in full of all costs as may be incurred by Landlord in connection therewith.

(c) Landlord shall not insure any improvements or alterations to the Premises made by Tenant, or any fixtures, equipment or other property of Tenant. Tenant shall have the right, at its sole expense, to insure the value of its leasehold improvements, fixtures, equipment or other property located in the Premises, for the purpose of providing funds to Landlord to repair and restore the Premises to substantially its condition prior to the occurrence of the damage. If there be any such alteration, fixtures or additions and Tenant does not assure or agree to assure payment of the cost of restoration or repair as aforesaid, Landlord shall have the right to determine the manner in which the Premises shall be restored so as to be substantially as the Premises existed prior to the damage occurring, as if such alterations, additions or fixtures had not then been made or installed.

(d) The validity and effect of this Lease shall not be impaired in any way by the failure of Landlord to complete repairs and restoration of the Premises or of the Building within two hundred ten (210) consecutive days after commencement of work, even if Landlord had in good faith notified Tenant that the repair and restoration could be completed within such period, provided that Landlord proceeds diligently with such repair and restoration.

(e) In the case of damage to the Premises not caused by the gross negligence or other tortuous acts of Tenant, its agents, employees, licensees or invitees which is of a nature or extent that Tenant’s continued occupancy is substantially impaired, the Base Rent otherwise payable by Tenant hereunder shall be equitably abated or adjusted for the duration of such impairment as determined by Landlord.

22. Condemnation .

(a) If the entire Premises shall be condemned or taken permanently for any public or quasi-public use or purpose, under any statute or by right of eminent domain, or by private purchase in lieu thereof, the Term of this Lease shall cease and terminate as of the date when possession is taken pursuant to such proceeding or purchase. Base Rent and Additional Rent shall be adjusted and apportioned as of the time of such termination and any Base Rent and Additional Rent paid for a period thereafter shall be refunded. In the event a material portion of the Building shall be so taken (even though the Premises may not have been affected by the taking), Landlord may elect to terminate this Lease as of the date when possession is taken pursuant to such proceeding or purchase or Landlord may elect to repair and restore the portion not taken at its own expense.

(b) In the event of any total or partial taking of the Premises, Landlord shall be entitled to receive the entire award in any such proceeding and Tenant hereby assigns any and all right, title and interest of Tenant now or hereafter arising in or to any such award or any part thereof and Tenant hereby waives all rights against Landlord and the condemning authority, except that to the extent permitted by applicable law, Tenant shall have the right to claim and prove in any such proceeding and to receive any award which may be made to Tenant, if any, specifically for loss of good will, movable trade fixtures, equipment and moving expenses.

23. Subordination . This Lease is and shall be subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which the Premises are a part, and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument of subordination shall be required by any ground or underlying lessor or lessee or by any mortgagee, but in confirmation of such subordination, Tenant shall execute a subordination agreement substantially in the form attached hereto as Exhibit “F” , within ten (10) days after Landlord’s request. Tenant agrees that in the event any person, firm, corporation or other entity acquires the right to possession of the real property of which the Premises are a part, including any mortgagee or holder of any estate or interest having priority over this Lease, Tenant shall, if requested by such person, firm, corporation or other entity, attorn to and become the tenant of such person, firm, corporation or other entity, upon the same terms and conditions as are set forth herein for the balance of the Term. Notwithstanding the foregoing, any mortgagee may, at any time, subordinate its mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such mortgage without regard to their respective dates of execution and delivery, and in that event, such mortgagee shall have the same rights with respect to this Lease as though it had been executed prior to the execution and delivery of the mortgage.

24. Estoppel Certificate . At any time and from time to time and within ten (10) days after written request by Landlord, Tenant shall execute, acknowledge and deliver to Landlord or Landlord’s mortgagee an estoppel certificate substantially in the form attached as Exhibit “G” , with any modifications thereto required by the then-applicable state of facts, or any other form of estoppel certificate reasonably required by a proposed mortgagee or purchaser. It is the intention and agreement of Landlord and Tenant that any such statement by Tenant may be relied upon by a prospective purchaser or a prospective mortgagee of the Property, or by others, in any matter affecting the Premises. In the event that Tenant shall fail to return a fully executed copy of such estoppel certificate to Landlord within the foregoing ten (10) day period, then Tenant shall be deemed to have approved and confirmed all of the terms, certifications and representations contained in such estoppel certificate, and Tenant irrevocably authorizes and appoints Landlord as its attorney-in-fact to execute such estoppel certificate on behalf of Tenant.

25. Default . The occurrence of any of the following events (each, an “ Event of Default ”) shall constitute a material default and breach of this Lease by Tenant:

(a) The failure of Tenant to take possession of the Premises on the Commencement Date;

(b) The vacation or abandonment of the Premises by Tenant, or the removal or attempt to remove Tenant’s property therefrom other than in the ordinary course of business, or the failure to operate or hold the Premises open for business for more than thirty (30) consecutive days (except pursuant to a sublease or assignment approved by Landlord);

(d) A failure by Tenant to pay, when due, any installment of Base Rent, Additional Rent or any other sum required to be paid by Tenant under this Lease, where such failure continues for more than five (5) business days after Tenant has received written notice of the delinquent payment from or on behalf of Landlord; provided, however, Landlord need not give any such written notice, and Tenant shall not be entitled to any such period of grace, more than two (2) times in any twelve (12) month period;

(e) A failure by Tenant to observe and perform any other provision or covenant of this Lease to be observed or performed by Tenant, where such failure continues for thirty (30) days after Tenant receives written notice thereof from or on behalf of Landlord provided that if such failure is not reasonably capable of cure within thirty (30) days, Tenant shall have such additional time, not to exceed an additional sixty (60) days, as may be reasonably required to cure such failure, provided that Tenant commences the cure thereof within the original thirty (30) day period and diligently pursues such cure to completion;

(f) The filing of a petition by or against Tenant for adjudication as a bankrupt or insolvent or for its reorganization or for the appointment of a receiver or trustee of Tenant’s property pursuant to any local, state or federal bankruptcy or insolvency law; or an assignment by Tenant for the benefit of creditors; or the seizure of Tenant’s property by any local, state or federal governmental officer or agency or court-appointed official for the dissolution or liquidation of Tenant or for the operating, either temporary or permanent, of Tenant’s business, provided, however, that if any such action is commenced against Tenant the same shall not constitute a default if Tenant causes the same to be dismissed within sixty (60) days after the filing thereof;

(g) The entry of any order, judgment or decree entered by a court of competent jurisdiction approving a petition seeking reorganization of Tenant or all or a substantial part of the assets of Tenant, or appointing a receiver, sequestrator, trustee or liquidator or Tenant or any of its property, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days; or

26. Remedies . Upon the occurrence of any Event of Default set forth in Section 25 above, Landlord may exercise any one or more of the following remedies:

(a) Landlord may perform for the account of Tenant the cure of any such default of Tenant and immediately recover as Additional Rent any expenditures made and the amount of any obligations incurred in connection therewith, plus interest at the Overdue Interest Rate from the date of any such expenditures.

(b) Landlord may accelerate all Base Rent and Additional Rent due for the balance of the Term of this Lease and declare the same, along with all sums past due, to be immediately due and payable. In determining the amount of any future Additional Rent payments due Landlord as a result of increases in Operating Expenses, Landlord may make such determination based upon the amount of Additional Rent paid by Tenant with respect to Operating Expenses for the entire Operating Expense Year immediately prior to such default.

(c) Landlord may immediately proceed to distrain, collect or bring action for such Base Rent and Additional Rent, as well as for liquidated damages provided for hereinafter, as being rent in arrears, or may file a Proof of Claim in any bankruptcy or insolvency proceeding for such Base Rent and Additional Rent, or Landlord may institute any other proceedings, whether similar to the foregoing or not, to enforce payment thereof.

(d) Landlord may re-enter and repossess the Premises, breaking open locked doors, if necessary, and may use as much force as necessary to effect such entrance without being liable to any action or prosecution for such entry or the manner thereof, and Landlord shall not be liable for the loss of any property in the Premises. Landlord may remove all of Tenant’s goods and property from the Premises. Landlord shall have no liability for any damage to such goods and property and Landlord shall not be responsible for the storage or protection of the same upon removal. No re-entry or repossession of the Premises shall be deemed a termination of this Lease or a release of Tenant from its continuing obligations hereunder. Without limiting the foregoing, unless Landlord has elected to accelerate rent as provided in Section 26(b) , Tenant shall continue to pay Base Rent, Additional Rent and other sums payable under this Lease when and as due. Tenant shall be entitled to a credit against such sums payable to Landlord in an amount equal to the net proceeds, if any, of any reletting effected for the account of Tenant pursuant to Section 26(e) , after deducting from such proceeds all of Landlord’s expenses in connection with such reletting (including, without limitation, all related repossession costs, brokerage commissions, legal expenses, attorneys’ fees, employees’ expenses, alteration costs and expenses of preparation for such reletting).

(e) Landlord shall use commercially reasonable efforts to relet the Premises for and upon such terms and to such persons, firms or corporations and for such period or periods as Landlord, in its good faith discretion, shall determine, including a term beyond the termination of this Lease, provided that Landlord shall have no obligation to attempt to relet the Premises or any part thereof during any period that Landlord has other space in Bellevue Park Corporate Center available for lease. Landlord need not consider any tenant offered by Tenant in connection with such reletting. For the purpose of such reletting, Landlord may decorate or make reasonable repairs, changes, alterations or additions in or to the Premises to the extent deemed by Landlord to be desirable or convenient and the cost of such repairs, changes, alterations or additions shall be charged to and be payable by Tenant as Additional Rent hereunder, as well as any reasonable brokerage and legal fees expended by Landlord. Any sums collected by Landlord from any new tenant obtained for the Premises shall be credited against the balance of Base Rent and Additional Rent due hereunder as aforesaid.

(f) At its option, Landlord may serve notice upon Tenant that this Lease and the then-unexpired Term hereof shall cease and expire and become absolutely void on the date specified in such notice, to be not less than ten (10) days after the date of such notice, without any right on the part of Tenant to save the forfeiture by payment of any sum due or by the performance of any term, provision, covenant, agreement or condition broken; and, thereupon and at the expiration of the time limit in such notice, this Lease and the Term hereof granted, as well as the entire right, title and interest of Tenant hereunder, shall wholly cease and expire and become void in the same manner and with the same force and effect (except as to Tenant’s liability) as if the date fixed in such notice were the expiration date of the Term of this Lease. Thereupon, Tenant shall immediately quit and surrender the Premises to Landlord and Landlord may enter into and repossess the Premises by summary proceedings, detainer, ejectment or otherwise and remove all occupants thereof and, at Landlord’s option, any property therein, without being liable to indictment, prosecution or damages therefor.

(g) No expiration or termination of the Term pursuant to Section 26(f) , by operation of law or otherwise, and no repossession of the Premises or any part thereof pursuant to Section 26(d) , or otherwise, and no reletting of the Premises or any part thereof pursuant to Section 26(e) shall relieve Tenant of its liabilities and obligations hereunder, all of which shall survive such expiration, termination, repossession or reletting.

(h) In the event of any expiration or termination of this Lease by reason of an occurrence of an Event of Default, and Landlord has not elected to accelerate rent pursuant to Section 26(b) , Tenant shall pay to Landlord the Base Rent, Additional Rent and other sums required to be paid by Tenant to and including the date of such expiration or termination; and, thereafter, Tenant shall, until the end of what would have been the expiration of the Term in the absence of such expiration or termination, and whether or not the Premises or any part thereof shall have been relet, be liable to Landlord for, and shall pay to Landlord, as liquidated and agreed current damages, the Base Rent, Additional Rent and other sums which would be payable under this Lease by Tenant in the absence of such expiration or termination, less the net proceeds, if any, of any reletting effected for the account of Tenant pursuant to Section 26(e) , after deducting from such proceeds all of Landlord’s expenses in connection with such reletting (including, without limitation, all related repossession costs, brokerage commissions, legal expenses, attorneys’ fees, employees’ expenses, alteration costs and expenses of preparation for such reletting). Tenant shall pay such current damages on the days on which the Base Rent would have been payable under this Lease in the absence of such expiration or termination, and Landlord shall be entitled to recover the same from Tenant on each such day.

(i) Any time after such expiration or termination of this Lease or repossession of the Premises or any part thereof by reason of the occurrence of an Event of Default, whether or not Landlord shall have collected any current damages pursuant to Section 26(h) , Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord on demand, unless Tenant has paid the whole of accelerated rent pursuant to Section 26(b) , as and for liquidated and agreed final damages for Tenant’s default and in lieu of all current damages beyond the date of such demand (it being agreed that it would be impracticable or extremely difficult to fix the actual damages), an amount equal to (x) the excess, if any, of (i) Base Rent, Additional Rent and other sums which would be payable under this Lease for the remainder of the Term from the date of such demand (or, if it be earlier, the date to which Tenant shall have satisfied in full its obligations under Section 26(h) to pay current damages) for what would have been the then-unexpired term of this Lease in the absence of such expiration, termination or repossession, discounted at the rate of one percent (1%) per annum, over (ii) the then-fair rental value of the Premises for the same period, similarly discounted, plus (y) those costs, charges and expenses reimbursable to Landlord under Section 26(k) . If any statute or rule of law shall validly limit the amount of such liquidated final damages to less than the amount above agreed upon, Landlord shall be entitled to the maximum amount allowable under such statute or rule of law.

(j) In the event of a breach or threatened breach by Tenant of any of the agreements, conditions, covenants or terms of this Lease, Landlord shall have the right to seek an injunction to restrain the same and the right to invoke any remedy allowed by law or in equity, whether or not other remedies, indemnities or reimbursements are herein provided. The rights and remedies given to Landlord in this Lease are distinct, separate and cumulative remedies, and no one of them, whether or not exercised by Landlord, shall be deemed to be in exclusion of any of the others.

(k) Tenant shall pay upon demand all of Landlord’s costs, charges and expenses, including all repossession costs, brokerage commissions, alteration costs and expenses of reletting, and fees and out-of-pocket expenses of legal counsel, agents and others retained by Landlord incurred in enforcing Tenant’s obligations hereunder or incurred by Landlord in any litigation, negotiation or transaction in which Tenant causes Landlord, without Landlord’s fault, to become involved or concerned, together with interest at the Overdue Interest Rate from the date incurred by Landlord to the date of payment by Tenant.

(l) Tenant agrees that this Lease sets forth all notices that Landlord may be required to give in connection with the exercise of remedies and waives any and all further notices of default, termination, to quit or otherwise that may be required under any present or future laws.

(m) Landlord may exercise any remedy, at law or in equity, now or hereafter available to Landlord.

27. Landlord’s Lien . In addition to the statutory Landlord’s lien, Landlord shall have, at all times, and Tenant hereby grants to Landlord, a valid security interest to secure payment of all rentals and other sums of money becoming due hereunder from Tenant, and to secure payment of any damages or loss which Landlord may suffer by reason of the breach by Tenant of any covenant, agreement or condition contained herein, upon all equipment, fixtures, furniture and improvements of Tenant presently or which may hereafter be situated on the Premises, and all proceeds therefrom, and such property shall not be removed therefrom without the consent of Landlord until all arrearages in Base Rent and Additional Rent as well as any and all other sums of money then due to Landlord hereunder shall first have been paid and discharged and all the covenants, agreements and conditions hereof have been fully complied with and performed by Tenant. Upon the occurrence of any Event of Default, Landlord may, in addition to any other remedies provided herein, enter upon the Premises and take possession of any and all equipment, fixtures, furniture and improvements of Tenant situated on the Premises, without liability for trespass or conversion, and sell the same at public or private sale. Any surplus shall be paid to Tenant or as otherwise required by law; and Tenant shall pay any deficiencies therein to Landlord forthwith. Landlord shall have the right to file a financing statement in form sufficient to perfect the security interest of Landlord in the aforementioned property and proceeds thereof under the provisions of the applicable Uniform Commercial Code. Tenant authorizes Landlord to file such instruments as are necessary to perfect the security interest of Landlord granted in this Section 27 .

28. Requirement of Strict Performance . The failure or delay on the part of Landlord to enforce or exercise at any time any of the provisions, rights or remedies in the Lease shall in no way be construed to be a waiver thereof, or in any way to affect the validity of this Lease or any part thereof, or the right of Landlord to thereafter enforce each and every such provision, right or remedy. No waiver of any breach of this Lease shall be held to be a waiver of any other or subsequent breach. The receipt by Landlord of Base Rent or Additional Rent at a time when Base Rent or Additional Rent is in default under this Lease shall not be construed as a waiver of such default. The receipt by Landlord of a lesser amount than Base Rent or Additional Rent due shall not be construed to be other than a payment on account of Base Rent or Additional Rent then due, and any statement on Tenant’s check or any letter accompanying Tenant’s check to the contrary shall not be deemed an accord and satisfaction, and Landlord may accept such payment without prejudice to Landlord’s right to recover the balance of Base Rent or Additional Rent due or to pursue any other remedies provided in this Lease. No act or thing done by Landlord or Landlord’s agents or employees during the Term of this Lease shall be deemed an acceptance of a surrender of the Premises and no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord.

29. Monument Sign . Landlord shall modify the existing monument sign for the Building as shown on Exhibit “H” in order to accommodate Tenant’s name. Landlord shall pay the cost of such modification up to $5,000. Tenant shall be responsible for any cost in excess of $5,000, and shall pay such excess cost to Landlord within ten (10) days after receipt of a statement therefor. For so long as Tenant occupies not less than 25,000 rentable square feet of the Premises, Tenant shall have the right, at its sole cost and expense, to install and maintain Tenant’s name on the Building’s monument sign. Tenant’s sign panel must comply with all applicable laws and shall be subject to Landlord’s prior written approval which approval shall not be unreasonably withheld, conditioned or delayed. Tenant, at its sole cost and expense, shall remove any signage installed by Tenant and repair any damage caused by such removal prior to the expiration or sooner termination of this lease, or if sooner, at such time as Tenant no longer occupies at least 25,000 rentable square feet of the Premises. Except as expressly permitted by this Section, Tenant shall not make any changes to the exterior of the Building, install any exterior lights, decorations, flags or banners, or erect or install any signs, decorations or advertising media of any type on the exterior of the Building or the Property.

30. Surrender of Premises; Holding Over .

(a) This Lease shall terminate and Tenant shall deliver up and surrender possession of the Premises to Landlord on the last day of the Term hereof, and Tenant hereby waives the right to any notice of termination or notice to quit. Upon the expiration or sooner termination of this Lease, Tenant covenants to deliver up and surrender possession of the Premises in the same condition in which Tenant has agreed to maintain and keep the same during the Term of this Lease in accordance with the provisions of this Lease, normal wear and tear excepted.

(b) If Landlord agrees in writing that Tenant may hold over after the expiration or termination of this Lease, unless the parties hereto otherwise agree in writing on the terms of such holding over, the hold over tenancy shall be subject to termination by Landlord at any time upon not less than thirty (30) days advance written notice, or by Tenant at any time upon not less than thirty (30) days advance written notice, and all of the other terms and provisions of this Lease shall be applicable during that period, except that Tenant shall pay Landlord from time to time upon demand, as Base Rent for the period of any hold over, an amount equal to one hundred fifty percent (150%) of the Base Rent in effect on the termination date, computed on a daily basis for each day of the hold over period. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly agreed by Landlord in writing. The foregoing notwithstanding, if Landlord does not agree in writing that Tenant may hold over after the expiration or termination of this Lease, Landlord, in addition to accepting the daily Base Rent during the period of such holding over, as hereinabove provided, shall be entitled to pursue all remedies at law and in equity to which Landlord is entitled, including, without limitation, rights to ejectment and damages, provided that Landlord shall not be entitled to recover consequential damages from Tenant unless Tenant fails to deliver possession of the Premises to Landlord in accordance with the requirements of this Lease by the later of the expiration of the Term or the date thirty (30) days following the date that Landlord gives Tenant written notice that Landlord requires possession of the Premises to deliver the same (or commence tenant improvements in order to deliver the same) to a tenant.

31. Compliance With Laws and Ordinances .

(a) In General . At its sole cost and expense, Tenant shall promptly fulfill and comply with all laws, ordinances, regulations and requirements of the municipal, county, state and federal governments and any and all departments thereof having jurisdiction over the Property, and of the National Board of Fire Underwriters or any other similar body now or hereafter constituted, affecting Tenant’s occupancy of the Premises or the business conducted therein.

(b) Environmental Matters . Tenant represents and warrants that Tenant’s use does not, and its use of the Premises will not, involve the use, maintenance, storage or discharge of materials or substances that are defined or listed as hazardous or toxic by any federal, state or municipal statutes, ordinances, laws rules or regulations (collectively, “ Hazardous Substances ”) other than materials of the type and in the quantities customarily found in general office use, such as cleaning supplies and copier and printer toner fluids (“ Permitted Substances ”). Tenant shall comply with all federal, state and municipal statutes, ordinances, laws, rules and regulations relating to the storage, use, discharge and disposal of such Permitted Substances.

(c) Recycling . Tenant agrees to comply with all laws, ordinances, rules and regulations regarding the removal of solid waste, including but not limited to voluntary or mandatory recycling of paper, cardboard, glass, metal and plastic containers. Tenant shall be responsible for and shall reimburse Landlord upon demand for all surcharges, fines and other costs and expenses incurred by Landlord by reason of Tenant’s failure to comply with all applicable recycling requirements.

(d) ADA Compliance . The parties acknowledge that the Americans With Disabilities Act of 1990 (42 U.S.C. § 12101 et seq.) and regulations and guidelines promulgated thereunder, as all of the same may be amended and supplemented from time to time (collectively referred to herein as the “ ADA ”) establish requirements for business operations, accessibility and barrier removal, and that such requirements may or may not apply to the Premises and Property depending on, among other things: (1) whether Tenant’s business is deemed a “public accommodation” or “commercial facility”, (2) whether such requirements are “readily achievable”, and (3) whether a given alteration affects a “primary function area” or triggers “path of travel” requirements. The parties hereby agree that: (a) Landlord shall perform any required ADA Title III compliance in the common areas, except as provided below, (b) Tenant shall perform any required ADA Title III compliance in the Premises including any leasehold improvements or other work to be performed in the interior areas of the Premises and (c) Landlord may perform and/or require that Tenant perform and Tenant shall be responsible for the costs of, ADA Title III “path of travel” compliance in the common areas triggered by alterations in the Premises made by Tenant after the Commencement Date. Tenant shall be solely responsible for requirements under Title I of the ADA relating to Tenant’s employees.

(e) New Climate Measures; LEED .

(i) Landlord and Tenant acknowledge that it is likely that new laws will be enacted dealing with energy conservation, CO2 emissions, transportation and other matters related to global climate change (" Climate Measures ") and that existing Climate Measures policies will be implemented through the adoption of governmental rules and regulations (such laws, rules and regulations being collectively referred to herein as " New Climate Measures ") which could increase the obligations of, and restrictions on, Landlord related to the Building from those which existed on the date of this Lease. Tenant covenants to comply with the requirements of New Climate Measures applicable to Tenant and to cooperate with Landlord in connection with satisfying Landlord's compliance requirements with respect to the Climate Measures and to any U.S. Green Building Council's Leadership in Energy and Environmental Design programs (" LEED ") measures implemented by Landlord , including, but not limited to, providing Landlord with monitoring data and reporting duties related to the Premises.

(ii) Tenant acknowledges that the Building may become in the future certified under the LEED rating system. At such time Landlord’s sustainability practices will address whole-building operations and maintenance issues including chemical use; indoor air quality; energy efficiency; water efficiency; recycling programs; exterior maintenance programs; and systems upgrades to meet green building energy, water, indoor air quality, and lighting performance standards. All construction and maintenance methods and procedures, material purchases, and disposal of waste must be in compliance with minimum standards and specifications adopted by Landlord for that purpose, in addition to all applicable laws. Tenant shall cooperate with Landlord to comply with Landlord’s sustainability practices adopted from time to time.

(iii) Effective as of the Commencement Date, Tenant shall make commercially reasonable efforts to use proven energy and carbon reduction measures, including energy efficient bulbs in task lighting; use of lighting controls; daylighting measures to avoid overlighting interior spaces; closing shades or blinds in the Premises to avoid overheating the space; turning off lights and equipment at the end of the work day; purchasing ENERGY STAR® qualified equipment, including but not limited to lighting, office equipment, vending and ice machines; and purchasing products certified by the U.S. EPA’s Water Sense® program.

32. Use and Occupancy Taxes, Sales Taxes and Other Taxes . Landlord shall collect and Tenant shall be obligated to pay to Landlord all amounts owing to the State of Delaware and any other governmental authority for use and occupancy taxes or sales taxes with respect to the Premises or the rentals payable under this Lease. These payments shall be made monthly at the time Tenant’s Base Rent payments are due. Payments representing amounts due for use and occupancy taxes shall not be abated during any period that Base Rent is abated pursuant to the terms of this Lease. Tenant shall be liable for all taxes levied or assessed against personal property, furniture or fixtures placed by Tenant in the Premises, and if any such taxes for which Tenant is liable are in any way levied or assessed against Landlord, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder.

33. Waiver of Trial by Jury . IT IS MUTUALLY AGREED BY AND BETWEEN LANDLORD AND TENANT THAT THE RESPECTIVE PARTIES HERETO SHALL AND HEREBY DO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OF OR OCCUPANCY OF THE PREMISES AND/OR ANY CLAIM OF INJURY OR DAMAGE. IN THE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDING FOR NON-PAYMENT OF RENT, TENANT WILL NOT INTERPOSE ANY COUNTERCLAIM (OTHER THAN A COMPULSORY COUNTERCLAIM) IN ANY SUCH PROCEEDING.

34. Notices . All notices or demands under this Lease shall be in writing and shall be given or served by either Landlord or Tenant to or upon the other, either by Registered or Certified Mail, Return Receipt Requested, postage prepaid, or by Fed Ex or other nationally recognized overnight delivery service, delivery charges prepaid. Such notices and demands shall be addressed, if to Landlord, to Landlord at Landlord’s Address, and if to Tenant, to Tenant at Tenant’s Address. All notices and demands shall be deemed given or served upon the date of receipt or refusal of delivery thereof. Either Landlord or Tenant may change its address to which notices and demands shall be delivered or mailed by giving written notice of such change to the other as herein provided.

35. Notice to Lender . If the Premises or the Property or any part thereof are at any time subject to a mortgage or other similar instrument and this Lease or the rentals are assigned to such mortgagee, trustee or beneficiary and the Tenant is given written notice thereof, including the post office address of such assignee, then Tenant shall not terminate this Lease or abate rentals for any default on the part of Landlord without first giving written notice by certified or registered mail, return receipt requested, to such assignee, specifying the default in reasonable detail, and affording such assignee a reasonable opportunity to make performance, at its election, for and on behalf of the Landlord. Tenant acknowledges that Landlord’s mortgagee as of the date of execution of this Lease is Metzler US Real Estate Fund GMBH & Co. KG with a notice address c/o Metzler Realty Advisors, Inc., 700 Fifth Avenue, 61 ^st Floor, Seattle, Washington 98104, fax no. (206) 623-4864, Attention: Asset Manager.

36. Real Estate Brokers . Tenant warrants to Landlord that Tenant dealt and negotiated solely and only with Grubb & Ellis Company, CBRE, Inc. and Landlord for this Lease and with no other broker, firm, company or person. Tenant hereby agrees to indemnify, defend and hold Landlord harmless from and against any and all claims, suits, proceedings, damages, obligations, liabilities, counsel fees, costs, losses, expenses, orders and judgments imposed upon, incurred by or asserted against Landlord by any other broker or agent claiming by, through or under Tenant.

37. Force Majeure . Landlord shall be excused for the period of any delay in the performance of any of its obligations under this Lease, when prevented from so doing by any cause or causes beyond Landlord’s reasonable control, which shall include, without limitation, delay in obtaining possession of the Premises due to the holdover by an existing occupant, all labor disputes, strikes, inability to obtain any materials or services, civil commotion, restrictions, limitations or delays caused by governmental regulations or governmental agencies, adverse weather conditions or acts of God, each of which shall be an event of “ Force Majeure ”.

38. Landlord’s Obligations . Landlord’s obligations hereunder shall be binding upon Landlord (and each successor Landlord) only for the period of time that such Landlord is in ownership of the Property, and upon termination of that ownership, except as to any obligations which have then matured, Tenant shall look solely to such Landlord’s successor in interest in the Property for the satisfaction of each and every obligation of Landlord hereunder. If any Security Deposit has been made by Tenant, Landlord shall transfer such Security Deposit to the purchaser and thereupon the transferring Landlord shall be discharged from any further liability with respect thereto.

39. Landlord’s Liability . Notwithstanding any provision to the contrary contained in this Lease, Tenant shall look solely to the estate and interest of Landlord in and to the Property, and Landlord shall have no personal liability, in the event of any claim against Landlord arising out of or in connection with this Lease, the relationship of Landlord and Tenant, or Tenant’s use of the Premises, and Tenant agrees that the liability of Landlord arising out of or in connection with this Lease, the relationship of Landlord and Tenant, or Tenant’s use of the Premises shall be limited solely to such estate or interest of Landlord in and to the Property and that Landlord shall have no personal liability as provided above in this sentence. No properties or assets of Landlord other than the estate and interest of Landlord in and to the Property, and no property owned by any partners, officer, member, director or trustee in or of Landlord, shall be subject to levy, execution or other enforcement procedures for the satisfaction of any judgment (or other judicial process) or for the satisfaction of any other remedy of Tenant arising out of or in connection with this Lease, the relationship of Landlord and Tenant or Tenant’s use of the Premises. Further, in no event whatsoever shall any partner, officer, member, director or trustee in or of Landlord have any liability or responsibility whatsoever arising out of or in connection with this Lease, the relationship of Landlord and Tenant or Tenant’s use of the Premises.

40. Liability of Tenant . If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. If there is a guarantor of Tenant’s obligations hereunder, the obligations hereunder imposed upon Tenant shall be the joint and several obligations of Tenant and such guarantor, and Landlord need not first proceed against Tenant before proceeding against such guarantor nor shall any such guarantor be released from its guaranty for any reason whatsoever, including without limitation, in case of any amendments hereto, waivers hereof or failure to give such guarantor any notice hereunder.

41. Financial Statements . Within fifteen (15) days following Landlord’s written request therefor, Tenant shall deliver to Landlord a copy of Tenant’s most recent financial statements (consisting, at a minimum, of Tenant’s balance sheet and income statement). In addition, Tenant shall provide from time to time, on request of Landlord, bank references necessary to verify Tenant’s continued good credit. Notwithstanding the foregoing, this Section shall not apply so long as Tenant or any guarantor of this Lease is a “reporting company” under the Securities Exchange Act of 1934. If as a result of a corporate reorganization or merger permitted by Section 14 Tenant itself is no longer a reporting company but is a subsidiary or affiliate of a reporting company, within thirty (30) days after the effective date of such reorganization or merger Tenant shall cause Tenant’s parent company or other affiliate that is a reporting company to guaranty this Lease pursuant to a guaranty in form and substance satisfactory to Landlord.

42. Successors . The respective rights and obligations of Landlord and Tenant under this Lease shall bind and shall inure to the benefit of Landlord and Tenant and their legal representatives, heirs, successors and assigns, provided, however, that no rights shall inure to the benefit of any successor of Tenant unless Landlord’s written consent to the transfer to such successor has first been obtained as provided in Section 14 above.

43. Governing Law . This Lease shall be construed, governed and enforced in accordance with the laws of the State of Delaware.

44. Severability . If any provisions of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions of this Lease shall in no way be affected or impaired and such remaining provisions shall continue in full force and effect.

45. Captions . Any headings preceding the text of the several Sections of this Lease are inserted solely for convenience of reference and shall not constitute a part of this Lease or affect its meaning, construction or effect.

46. Gender . As used in this Lease, the word “person” shall mean and include, where appropriate, an individual, corporation, partnership or other entity; the plural shall be substituted for the singular, and the singular for the plural, where appropriate; and words of any gender shall mean and include any other gender.

47. Execution . The submission and negotiation of this Lease by Landlord shall not be deemed an offer to lease by Landlord, but merely the solicitation of such an offer from Tenant. Tenant’s execution and delivery of this Lease constitutes a firm offer which may not be withdrawn for a period of thirty (30) days after delivery to Landlord. This Lease shall only become effective when it has been signed by a duly authorized officer or representative of both Landlord and Tenant.

48. Entire Agreement . This Lease, including the Exhibits , contains all the agreements, conditions, understandings, representations and warranties made between Landlord and Tenant with respect to the subject matter hereof, and may not be modified orally or in any manner other than by an agreement in writing signed by both Landlord and Tenant or their respective successors in interest.

49. Tenant Status and Authority . Tenant represents and warrants to Landlord that Tenant is a corporation duly incorporated, organized or formed under the laws of Pennsylvania and that Tenant’s exact name is the name as set forth for Tenant in this Lease. Tenant will provide Landlord with prompt notice before it changes its address, location, identity or jurisdiction of incorporation, organization or formation. If Tenant is a corporation, partnership or limited liability company each individual executing this Lease on behalf of said entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity in accordance with the duly adopted resolution of the governing body of Tenant or in accordance with the constituent documents of Tenant, and that this Lease is binding upon Tenant in accordance with its terms.

50. Time of Essence . Time is of the essence of this Lease and each and all of its provisions, including, without limitation, the time periods within which Tenant must provide notice to exercise any option granted herein.

51. Generator . Notwithstanding anything to the contrary set forth elsewhere in this Lease, and subject to Tenant’s compliance with applicable laws, Tenant shall have the right to place and maintain on the Property during the Term, at Tenant's sole cost and expense, an emergency generator and related above-ground fuel storage tank at a location on the Property approved by Landlord that shall be utilized by Tenant in connection with providing emergency power to the Premises. Landlord shall have the right to approve the plans and specifications for the generator and fuel tank, provided that Landlord shall have no liability whatsoever in connection with such generator or fuel tank, and Tenant shall indemnify Landlord for any and all claims, damages, liabilities, costs or expenses of every kind and nature (including without limitation reasonable attorney fees) arising from the presence, maintenance and use of such generator and fuel tank. Without limiting Landlord’s right to approve the plans and specifications for the generator and fuel tank, Tenant, at Tenant’s sole cost and expense, shall be required to screen such equipment from view in a manner which is architecturally consistent with the Building. The generator, fuel tank, screen and related equipment shall become Landlord’s property upon the expiration or sooner termination of this Lease unless Landlord, by written notice to Tenant prior to the expiration or termination of this Lease, requires that Tenant, at Tenant's sole cost and expense, remove the generator, fuel tank, screen, and other related equipment installed hereunder and repair any damage caused by such removal. All approvals by Landlord under this Section 51 herein shall not be unreasonably withheld, delayed or conditioned.

52. Exhibits . Attached to this Lease and made part hereof are Exhibits A, B, C, D, E, F, G and H.

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease the day and year first above written.

WITNESS OR ATTEST: LANDLORD:

MUSREF BELLEVUE PARKWAY, LP

By: MUSREF GP BELLEVUE PARKWAY LLC, its General Partner

By: METZLER US FUND LLC,

its Manager

By: METZLER MANAGEMENT, INC., its Manager

By: /s/ Steve Franceschina

Steve Franceschina,

Vice President

WITNESS OR ATTEST: TENANT:

INTERDIGITAL, INC.

a Pennsylvania corporation

/s/ James Papola By: /s/ Gary Isaacs

Gary Isaacs

Chief Administrative Officer

PHBF/ 900283. 3 - 5 - 1 -

EXHIBIT 21

SUBSIDIARIES OF INTERDIGITAL, INC.





Subsidiary	Jurisdiction / State of Incorporation or Organization

DRNC Holdings, Inc.	Delaware
InterDigital Administrative Solutions, Inc.	Pennsylvania
InterDigital Canada Ltee.	Delaware
InterDigital Communications, Inc.	Delaware
InterDigital Finance Corporation	Delaware
InterDigital Holdings, Inc.	Delaware
InterDigital Patent Holdings, Inc.	Delaware
InterDigital Technology Corporation	Delaware
Inventive Acquisition Company I, Inc.	Delaware
IPR Licensing, Inc.	Delaware
PCMS Holdings, Inc.	Delaware
VID SCALE, Inc.	Delaware

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-159743, 333-66626, 333-85560, 333-63276, 333-56412, 33-89922, and 33-43253) of InterDigital, Inc. of our report dated February 25, 2013 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 25, 2013

EXHIBIT 31.1

CERTIFICATIONS

I, William J. Merritt, certify that:


1.	I have reviewed this Annual Report on Form 10-K of InterDigital, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 26, 2013	/s/ William J. Merritt
	William J. Merritt
	President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS

I, Richard J. Brezski, certify that:


1.	I have reviewed this Annual Report on Form 10-K of InterDigital, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 26, 2013	/s/ Richard J. Brezski
	Richard J. Brezski
	Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K of InterDigital, Inc. (the “Company”) for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William J. Merritt, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: February 26, 2013	/s/ William J. Merritt
	William J. Merritt
	President and Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K of InterDigital, Inc. (the “Company”) for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard J. Brezski, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: February 26, 2013	/s/ Richard J. Brezski
	Richard J. Brezski
	Chief Financial Officer