Good day everyone. Welcome to today's InterDigital Fourth quarter 2008 Earnings Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Janet Point. Please go ahead.

All right. Thank you, Jamie. Good morning everyone and welcome to InterDigital’s Fourth Quarter 2008 Earnings Conference Call. With me this morning are Bill Merritt, our President and CEO, and Scott McQuilkin, our Chief Financial Officer. Consistent with last quarter’s call, we will offer some highlights about the quarter and the company and then open up the call for questions. But before we begin our remarks, I need to remind you that in this call we will be making forward-looking statements regarding our current beliefs, plans, and expectations, which are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and events to differ materially from the results and events contemplated by such forward-looking statements. These risks and uncertainties include those set forth in our earnings release published yesterday and those detailed from time-to-time in our other filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date today hereof and except as required by law, we undertake no obligation to update or revise any of them whether as a result of new information, future events, or otherwise. So with that taken care of, I will now turn the call over to Scott.

Thank you, Janet and good morning to everyone. Our fourth quarter financial results reflect solid performance despite a weak economic environment. Total revenue was $58.7 million in fourth quarter 2008, an increase from $54.9 million in fourth quarter of 2007 and $55.1 million in third quarter 2008. Net income was $3.8 million or $0.09 per fully diluted share. I’m also pleased to report that in January we signed a 2G and 3G patent license agreement with Samsung that will generate $400 million cash over 18 months. We received the first installment of $100 million in January and will recognize 2.5 months of revenue in first quarter 2009. Compared to the prior year, our fourth quarter 2008 revenue of $58.7 million reflects a $4.1 million increase in technology solutions revenue and $3.8 million increase in non-recurring revenue. These increases were partially offset by a $4 million decrease in recurring patent license royalties, which is related to declining royalties from our Japanese licensees. Declining royalties from our Japanese licensees is due to a number of factors including worldwide economic weakness, inventory adjustments, the relative maturity of the 3G market in Japan, and a shift away from subsidization of retail handset prices by operators. Near term, we expect that our Japanese licensees will continue to face a challenging environment. Although the current economic environment is uncertain, we have structured our royalty stream in a manner to provide significant insulation from market swings. Specifically, licenses with fixed revenue recognition accounted for 43% of our recurring revenue in fourth quarter 2008. The other major component is unit-based revenue, which depends on quarterly sales by our licensees. The fixed component of our recurring revenue provides stability, which is particularly helpful near term, while the unit-based revenue provides opportunity for growth in revenue from our existing licensees…

Thank you and good morning to everyone. As we announced last night, 2008 was a very solid year for the company both from a financial and strategic perspective. As we typically view this time of year, I want to recap the major achievements for the pervious year and compare those achievements with our stated goals. I will also set out the company’s strategy for 2009, so you can know what to measure us against. As I said many times the value in our licensing business is driven in first by success in completing license agreements with the top five headset manufacturers, and second by our success in securing licenses with Tier-2 and 3 manufacturers. In 2008, we set out aggressive goals for ourselves and we are successful on both fronts. In November 2008, we resolved our long running 2G and 3G licensing disputes with Samsung culminating in an agreement in which the company will receive $400 million over an 18 months period. This is a strong agreement that is consistent with our long-term strategic plan and provides concrete evidence of the value of our patent portfolio from someone that had the opportunity to thoroughly review it. With Samsung added as a licensee, 50% of the 3G devices shipped worldwide are now sold under license with InterDigital, another strong indicator of strength of the company’s patent portfolio and licensing program. In addition to Samsung, we also made very nice progress in 2008 in adding additional companies as patent licensees including ASUSTeK, Pegatron, IWELL and ModeLabs. That progress continued last week when we announced Global Wireless as new licensee. These players have interesting new products and approaches to the market and they will provide incremental revenue to InterDigital overtime. For 2009, the primary goal with respect to patent licensing business will be…

All right. Jamie you can give the instructions for asking questions.

Thank you. (Operator Instructions) We will go first to Bill Nasgovitz with Heartland Funds. William Nasgovitz – Heartland Funds: This bear market must be taking its toll. I am first oh my god! Well, good morning to everyone. What I came on late, so I might have missed this is, what’s your share, 3G share today is and in the past you’ve made some very - well, you’ve had a goal of pretty aggressive goal, would you like to restate that or amplify on that?

Sure I mean the goal of the company is to secure revenue on every 3G device sold. Today we are at approximately 50% of that market. William Nasgovitz – Heartland Funds: 50%. And Nokia would represent what percent?

They are probably about 30% in that, maybe a little bit below that. William Nasgovitz – Heartland Funds: Okay, well good luck in those efforts.

Okay. Thank you. William Nasgovitz – Heartland Funds: We like the trend.

Good luck in the market. William Nasgovitz – Heartland Funds: Yeah, thank you very much.

We will go next to Michael Ciarmoli with Boenning & Scattergood Michael Ciarmoli – Boenning & Scattergood: Hi guys, thanks for taking my question. Just on some of your bigger licensees; NEC, Sharp, do you have any idea how far those two revenue sources will trend lower or what the magnitude will be in 2009. I guess they did NEC about $27 million, Sharp about $36 million, can you give us any sense as to where those slide down to?

Mike, it’s Scott McQuilkin. As you know, it’s pretty difficult to project what’s going to happen with the economy in 2009. Clearly, if you look at the numbers historically, the fourth quarter reflects a pretty significant decrease in those numbers and I think the general view in the industry is there was a pretty significant inventory adjustment that took place. And there is a pretty weak outlook generally. So, I think it’s hard to put a number on it, but our view as I said in my comments is that it’s going to be a challenging year for everybody and probably for the Japanese licensees in particular, just because of their market tends to be more mature and you have this issue of the subsidization by the operators of the pricing, being a headwind that’s fairly unique to that market. Michael Ciarmoli – Boenning & Scattergood: Okay.

I think, we are approaching that market as, with a conservative viewpoint, but at the same time I think the very key point is that our - historically, that was a very sensitive number in terms of our quarter-to-quarter revenue going forward with the addition of Samsung, it’s a much smaller percentage. Michael Ciarmoli – Boenning & Scattergood: Okay, can you give us a sense are there any other customers, royalty paying customers now, that will be paid up or are they coming to the end of the royalty paying streams that are impacting ’09 revenues or is it merely just the overall weakness in the kind of global handset market?

Yeah, we do have people that, come in and out I mean, where we have to renew the licenses from time-to-time. Off the top of my head I’m not aware of any very large one in 2009. Michael Ciarmoli – Boenning & Scattergood: Okay.

So, 2010 I’m not sure what's happening out there, but certainly 2009 I’m not aware of any big ones. Michael Ciarmoli – Boenning & Scattergood: Okay and speaking of renewals, how is the process with the Sony Ericsson going? I guess that’s one the 2G rolled off and I presume you are still in kind of negotiations working on a 3G deal with those guys?

Yeah, with respect to all the unlicensed folks we have different levels of dialog with all those folks. They are obviously, the remainder of the top five is our biggest priority frankly for 2009, to get that stuff done. And getting Samsung done, it’s very important both respect to that top five but I would also say with respect to the non-top five too. You tend to the discussions tend to move a little faster when somebody else is effectively doing the due diligence for them right? Michael Ciarmoli – Boenning & Scattergood: Right.

So we are certainly seeing within some of our licensees somewhat of a quicker pace of discussions. Michael Ciarmoli – Boenning & Scattergood: Okay. And then last one, I will get out of the way here. You mentioned your fixed royalty revenues streams for the current quarter and I guess for the next quarter expected to be 60%, what is the unit-based percentage, you just said it would be lower. Do you have that number?

Yeah the unit-based percentage is basically 40%, Michael Ciarmoli – Boenning & Scattergood: 40%

They add to a 100% Michael Ciarmoli – Boenning & Scattergood: Okay. Great, thanks guys.

(Operator Instructions) We will take our next question from Bennett Notman with Davenport. Bennett Notman – Davenport: Yeah hi, could you give us a little more color on what drove the increase in the technology solutions revenue line and if we should think of what we just size sort of a run rate level? Or is there something extraordinary during the fourth quarter?

Yeah, as I said in my comments, it was - the increase was driven basically by higher unit sales of licensees of our SlimChip modem IP, and certainly overtime, we expect that those licensees will continue to be successful and grow and we’d expect to see increases in that revenue stream associated with that. Bennett Notman – Davenport: So should we assume that $5 million is kind of the baseline going forward or maybe some little bit of drop-off for that from the seasonality? But it is, that’s pretty good number to work with?

I don’t know if I would go that far I think, there is obviously a lot of factors that drive the numbers from quarter-to-quarter inventory adjustment, seasonality, new product introductions. So I’m not sure if I would say that. I would look at it more from a longer-term point of view and say that if our licensees are successful, we will see increases in that number overtime. Bennett Notman – Davenport: Okay, and then on the legal expense side, should we assume that expenses will stay relatively low for Q1 before maybe kicking backup in the Q2 ahead of the Nokia, ITC commencement?

It all depends on the level of activities as I said, we are not, we’ve typically not provided any kind of guidance on that number just because it’s very sensitive to actions that we might take. And of course we do have the action with Nokia coming up in May. Bennett Notman – Davenport: Thank you.

We’ll go next to Bill Nasgovitz with Heartland Advisors.

Hello. William Nasgovitz – Heartland Advisors: Janet, can you hear me?

.: William Nasgovitz – Heartland Advisors: You mentioned, you purchased the one-third of your shares. Do you have any idea of the average cost to lot of stock, cost per share?

Yeah, it’s a lot of stock overtime. The prices moves up and down. I can tell you for the $100 million program that we did in the last year or so, that’s I think it’s averaged some more in the $21 share. William Nasgovitz – Heartland Advisors: Okay.

Prior to that, the average was probably a bit higher. William Nasgovitz – Heartland Advisors: Okay, and is the buyback active today?

We completed the buyback in the fourth quarter. William Nasgovitz – Heartland Advisors: And so what is the Board’s intent?

The share buyback is always something that we look at as an investment that we can make. So, it’s always under consideration by the Board and management. William Nasgovitz – Heartland Advisors: Okay, thanks Bill.

We will go next to Michael Ciarmoli with Boenning & Scattergood. Michael Ciarmoli – Boenning & Scattergood: Hi, guys. Just a quick followup, I guess Scott what’s the outlook how should be modeling for development expenses and can we expect additional kind of performance based items to hit in ’09?

Let me make sure I understand your question. Performance based items meaning? Michael Ciarmoli – Boenning & Scattergood: You guys had the charge of, I guess the $9.4 million to adjust accrual rate on long-term performance?

I got you, yeah. Michael Ciarmoli – Boenning & Scattergood: Is that something that hits in ’09 as well? And just how do we think of the trend in development expenses there?

Yeah, fair enough. On the development cost side, it depends very significantly on the past, we choose with respect to our modem business. As Bill said, that’s a decision that I think we will make in the near future and at that point in time, I think we’ll be ready to present, a pretty specific picture for what we expect there in terms of expenses going forward. And it could go in a number of different directions depending on that strategy. In terms of the incentive comp accrual, that was specifically related to one aspect of our incentive comp program. It was basically, in the fourth quarter a significant catch up adjustment for a program that accrues over a three-year period. If you spread that out, over three years, ends up having a fairly negligible effect on a quarterly basis. That particular program went through the end of the year 2008. We will pay it out in 2009. So, I don’t expect that there is a continuing expense associated with that program going forward. Michael Ciarmoli – Boenning & Scattergood: Now, if you guys are there any payouts if you guys were to sign a Nokia and a Sony Ericsson this year? Would that trigger any additional payouts that would have to be baked into ’09 expenses?

Yeah, if you look at the – actually the company has - with many companies we have a number of long-term comp plans. And so the long-term comp plans as Scott just described one ran out this year. We have other ones that are in the middle of their cycles and running as well. And with respect those programs, they are certainly, they are incentive based programs and we want to drive the things in the company that drive to highest values. So, while you typically don’t put a particular licensee name into any of these things instead what you look at is overall share of the 3G market, overall cash produced. So, positive results with respect to a Sony Ericsson or Motorola or Nokia to the extent that you’re driving higher levels of cash which they will, they essentially are driving higher results for the company, they will find their way into those long-term comp plans in that matter. Scott can - and typically, we will accrue for those programs based upon some level of achievement. So, it’s just in the instance of ’09, what happen is that is we really we did extraordinarily well with respect to the results of the company and the results of which was an adjustment on that long-term comp plan. Michael Ciarmoli – Boenning & Scattergood: Okay, fair enough.

And just to follow-up on that Michael, the long-term comp plan does cover about half of the employee population. So, it’s a fairly broad program throughout the organization. Michael Ciarmoli – Boenning & Scattergood: Okay. Great, thanks.

We’ll go next to Bill Nasgovitz with Heartland Funds. William Nasgovitz – Heartland Funds: Yes, can you hear me?

Yeah.

Yeah. William Nasgovitz – Heartland Funds: Okay, good. It works this time. Development, could you just talk and amplify on $101 million for developments in 2008?

Yeah, I mean, principally Bill, the development expense is related to the modem program that we were driving a good portion of that which was a SlimChip modem, IP and ASIC program. And, with respect to that, we had a good year last year positioning that product in the market. As Scott mentioned, of course that program now has been under review for two months. We started that review again in the end of last year. And so the continuing expense with respect to that program will be very much affected by the strategic decision we make either to scale up that business, to sell it or to discontinue it. We expect to make that decision in the near term and once we make that decision we’ll give guidance but, in the instance where the programs are being shutdown, and those expenses will go down, and assimilate this being sold, those expenses will go down. And if we are scaling up, just to give you a sense to what we are thinking about in that side,and certainly if you are scaling up your expenses would go up, but we’re also looking at opportunities where we would be buying revenue streams as well, that would cover those increased expenses. So that’s the decision process we are in and in the near-term we will be making a decision there and communicating that to the market. William Nasgovitz – Heartland Funds : Okay. How much do you think we’ve invested in the SlimChip over these many years in total?

If you look at the, the investment came in a couple traunches, the initial investment in the technology which drove the patent portfolio was occurring in, the early 2000s and then you made a incremental investment to develop software, and that was what drove the relationship for example with Infineon which is now starting to pay off as Infineon get share with Zappone, LG and other folks. The third level of investment was when we actually took the technology to chip and that really occurred over the last couple of years. Scott could probably give you a sense of that, but I break it into the buckets because, certainly the first bucket with respect to investing in the standards and stuff like that being repaid in with great value from the patent licensing programs. The investments in software are now being, we are seeing a return on that through Infineon is in our licensee sales. The ASIC business which has been the more recent one, that we had not yet had sales. We have not seen a return yet on that. Scott can kind of size it up for you the overall investment.

Certainly I think the best way to look at it Bill in we are kind of a one segment company and it’s difficult to say very discreetly that X dollars were in support of our patent license development program and Y dollars were a part of the product business. The truth is, the development expense is a benefit both sides of the business and although there is probably some expenses that are clearly on one side, some expenses clearly on the other side, there is a pretty big chunk of our development expenses that are really kind of in the middle and support both initiatives. The way I think we have described it in the past is, kind of go back to 2006, look at our quarterly development expenses there. That’s really when we started, an initiative to create an ASIC and look at quarterly expenses overtime and the increase in those on a quarterly basis, that’s a one way judge it. William Nasgovitz – Heartland Funds: Okay. So, are you seeing a bulk of this is a SlimChip? Are you seeing the bulk of $101 million is SlimChip?

I think for the current - for 2008, and think a good portion of that expense is directly attributable to the ASIC implementation and that part of the portfolio. William Nasgovitz – Heartland Funds: So as a long-term shareholder, I’m interested in how many we’re spending or how much we did spend just on our basic IP outside of the SlimChip? And what do we think that might be going forward? How many engineers are involved? Just put a little bit color on this for us, would you please?

With respect to the chip part or the non-chip part? I think the non-chip part. Okay, if you go back, and Scott can correct me, when we went to chip, I think we targeted… William Nasgovitz – Heartland Funds: I’m just talking about 2008, and I looking forward.

Yeah, yeah I gotcha. I’d say a good portion of the investment in 2008 whether it’s 50% of that number or in that range is probably more associated with the chip and the other portion is probably associated with IP and patent generation and things like that. And I’d say that’s historical right. I think the one thing we are looking at with respect to investments in patents and IP is that there are some opportunities for incremental investments there, because you can see, that kind of return we get from the patent licensing program. So in my remarks, and I think in Scott’s remarks that we indicated, there maybe some increase in investment on that side of the business as we see new opportunities with respect to other wireless services and other wireless products, which we can extend the licensing program too. William Nasgovitz – Heartland Funds: Going forward Bill, how much - just on the base business, not the chip, going forward how many engineers are involved and how many dollars?

Again, yeah I think it’s - there is a historical perspective, and then going forward there is an opportunity for growth. I don’t know where we would ultimately end in 2009 as we look at additional investment there. But historically, again on the patent and IP side, you are running anywhere, if you could be 100 plus engineers on that side of the equation and, that’s, we look at that staffing consistent with other folks that are participating in the similar businesses that we look at Qualcom and others, and how they attend standards parties and stuff like that. So, think of that in terms of that is kind of a average historical number, but think of that that in terms of maybe some increased investment there to drive some new licensing opportunities in ’09. Okay. William Nasgovitz – Heartland Funds: Okay.

We will go next to Philip Zera, with Algorithm Capital Philip Zera – Algorithm Capital: Yes, good morning. My questions pertain with ITC case with Nokia.

Okay. Philip Zera – Algorithm Capital: The evidentiary hearing is scheduled for the end of May, correct?

That’s correct. Philip Zera – Algorithm Capital: And my next question is, is the composition of staff, the same that is the same person of persons that were involved or made the recommendation in the Samsung case?

I know that he was the staff attorney was previously on the Nokia case. I’m not aware that there has been a change but I also don’t follow that part of the case that that closely. So, I know that he was - at one time he was handling both the Nokia and the Samsung cases, so the actions, there hasn’t been some change at the ITC I assume he's still the counsel on the case. Philip Zera – Algorithm Capital: Okay so the counsel is the same, The Judge Luckern is the same.

Yeah, Luckern is the same Judge. Philip Zera – Algorithm Capital: Right. And the four patents that the same, correct?

Yes, I think there is the Samsung, case had five patents in it, this Nokia case has four, but the four are the same that were in the Samsung case. Those just an additional patents in the Samsumg case. Philip Zera – Algorithm Capital: And actually I believe your legal team was actually the same as well?

Correct, yes for a good reason. They did a good job. Philip Zera – Algorithm Capital: Thanks. Thank you.

Okay.

We will go next to Bennett Notman with Davenport. Bennett Notman – Davenport: Yeah hi, couple questions first on the $2.3 million in bad debt expense, where did that show up on the P&L?

All right. That will show up, I believe in general and administrative expenses and it’s related to a dispute with one of our licensees and we believe that we’ve delivered everything we need to deliver under that agreement and we are currently taking actions, to resolve that. It hasn’t been a write-off, but we established a reserve for it. Bennett Notman – Davenport: And are there potentially additional dollars in dispute there? Or is that cover that whole amount?

That covers the whole amount. Bennett Notman – Davenport: All right, great. And then when you are looking at the potential to grow the technology solutions business, are there any parameters around dilution, or any just philosophical things we should think about helping you make this decision, I mean, would you be willing to make a dilutive acquisition if you thought it was the right technology platform?

Yeah I mean, I think on the certainly the environment is one where acquisitions could be at the right price right now, because there’s a lot of companies out there that do need or in a position where they need cash and there is not a lot of free cash available out there. And so, I think does give us an opportunity to complement, for example the existing patent portfolio with new patent to expand our licensing program. I think it can give access to some future technologies There is folks out there working on all sorts of interesting things that will apply to 4G systems and beyond and I think we can may some good investments there. But I’ll tell you, obviously, while the opportunity is real good and we’re going to put a lot of resources against M&A to uncover the opportunities, we have a pretty good process internally to make sure that what we acquire is going to have real value. So this is not just a process to run out and acquire a bunch of things. It’s to go out there turnover lots and lots of rocks and see what’s out there and then if the right acquisition is out there and to make right acquisition. Bennett Notman – Davenport: Thank you.

That will conclude today’s question and answer session as well as today’s conference call. Thank you for your participation you may disconnect at any time.