America’s Most Profitable company per employee makes your phone work—and it’s not Apple

By Christopher Mims

What InterDigital makes: an illustration from its patent for "Data transfer between wireless devices." United States Patent and Trademark Office

 

You’d be forgiven for not recognizing the name InterDigital, despite the fact that it has been around since 1972 and developed many of the technologies that are critical to our increasingly mobile, wireless world. As a result, per employee, InterDigital is the most profitable company in the US, with a net income of $937,255 per worker, according to Bloomberg’s just-released visual compendium of data. And the only thing InterDigital produces is designs for new technology—and the occasional lawsuit.

But whatever you do, don’t call InterDigital a patent troll—CEO William Merritt hates that term. And it’s admittedly not a fair label for InterDigital, in contrast to firms that merely buy up patents in order to then sue other people over them. Like ARM, the Cambridge, UK-based company that designs the chips that are in practically every mobile device on the planet, InterDigital does not manufacture anything itself. Yet the company employs more than 200 engineers who have collectively helped InterDigital amass a trove of patents that could be worth billions. InterDigital also creates working prototypes of all of its technologies, in order to demonstrate them to industry partners like Alcatel-Lucent, who later incorporate them into their products.

InterDigital isn’t shy about both licensing the technology it develops and selling it outright. In 2012, InterDigital sold 1,700 patents to Intel for $375 million, which led InterDigital’s stock to surge 27% in a single day as the markets speculated that the rest of the company’s patent portfolio might be equally valuable. In 2011, the company’s stock shot up 70% when its leaders announced the company would be for sale, and rumors circulated that Apple and Google would bid on it, in an attempt to lock up InterDigital’s intellectual property. (InterDigital’s attempt to sell itself ended in January 2012, when the company opted to license its IP instead.)

Using that patent portfolio in court cases appears to be as important to InterDigital as licensing its technology to mobile companies—you might call it the carrot (develop new wireless standards and technology) and stick (sue anyone who violates your intellectual property) approach to innovation. Presently, InterDigital is suing Nokia, Huawei and ZTE for violation of its patents, seeking a ban on import of their products. However, the company’s case may have weakened, and its stock has declined, after another patent case—this one by Samsung against Apple—came to naught when president Barack Obama vetoed an import ban on older Apple products.

InterDigital’s job pages reflect the company’s dual nature. They include openings for both hardware engineers and patent managers. While the company has yet to sell itself, its per-employee revenue suggests that the only thing more profitable than either inventing or suing is doing both at the same time.