InterDigital, Inc. (IDCC) - Introduction to the Ongoing Litigation Between InterDigital and Disney.

***Please note that the information below was delivered to clients on May 19, 2025. While we continue to believe that the information below provides a good introduction to the ongoing litigation, it is worth noting that the Court Denied the Motion for a Preliminary Injunction on May 28, 2025.***

On May 30, 2025, a Hearing on the Walt Disney Company's Motion for a Preliminary Injunction is currently scheduled to commence at 1:30 PM PT in the Case of: "InterDigital, Inc. et al v. The Walt Disney Company et al" (Case 25-00895 in the Central District of California).

InterDigital (IDCC) filed this Case against Disney in the Central District of California on February 2, 2025.  In its Complaint, InterDigital asserts the following U.S. Patents related to video encoding/decoding technology:

InterDigital indicates in its Complaint that it contacted Disney in 2022 to discuss potential licensing; however, these talks were not fruitful.  InterDigital argues that Disney+, Hulu, and ESPN+ are the Infringing products.  InterDigital argues that Disney uses Advanced Video Coding ("AVC") and High Efficiency Video Encoding ("HEVC") video codec technologies in their platform.  In their Complaint, InterDigital provides some background on the technology at issue in this Case:

"Modern digital video typically consists of frames displayed at a rate of around 30 frames per second (“fps”), allowing the total amount of data required for a single second of video to be calculated. For an 8-bit 1080p video at 30 fps, each pixel requires 24 bits (3 components x 8 bits), and each frame consists of 1920x1080 or 2,073,600 pixels, representing a total of 49,766,400 bits. Given a frame rate of 30 fps, just one second of raw video would require transmitting or storing nearly 1.5 billion bits, or about 187 megabytes of data. The large amount of information required to store or transmit digital video is a fundamental problem, which experts in the field have aimed to solve by introducing a range of video encoders and decoders, often referred to as a “codecs” (“coder/decoder”), which allow video to be compressed prior to storage and transmission then later decompressed prior to display. 

Another modern video codec is High Efficiency Video Coding (“HEVC”), the successor to AVC. HEVC, also referred to as H.265, takes advantage of many similar concepts to AVC and includes numerous advancements upon the prior technology, which allow for even more significant compression of digital video. HEVC can achieve 25-50% more compression than AVC without sacrificing video quality."

Disney filed its Answer to the Complaint on March 31, 2025 - besides counterclaims of Invalidity and Noninfringement, Disney also asserts Counterclaims for breach of its RAND Obligations. Note that Disney also claims a defense of implied license - that Disney has an implied license, because Apple is an authorized InterDigital licensee, and this license therefore extends to Disney through its use of "Mac Studio."  The Court recently (May 13, 2025) issued a Scheduling Order, which sets the Final Pretrial Conference to be held on August 21, 2026, and the Jury Trial to commence on September 8, 2026.  We believe that the next, more imminent, near-term catalyst for shares of InterDigital, Inc. (IDCC) may be Disney's Motion for a Preliminary Injunction that will be argued during the Hearing scheduled for May 30, 2025 - Note that InterDigital's Motion to Dismiss Disney's Counterclaims will also be argued at this upcoming Hearing. In this Motion, Disney seeks a Preliminary Injunction preventing InterDigital from enforcing any Injunction that it receives in the ongoing Brazilian Action until this Court in the Central District of California makes a determination as to whether InterDigital breached is Reasonable and Non-Discriminatory ("RAND") Licensing Obligations. Disney argues that InterDigital had expressly promised the International Telecommunication Union ("ITU") that it would license InterDigital's compression standards patents on RAND terms; however, according to Disney, InterDigital has now reneged on that promise in launching its "global litigation campaign."  InterDigital has sought an Injunction in Brazil, and Disney argues that "InterDigital selectively sued in Brazil, because its courts historically have granted injunctions in patent cases within months of the complaint being filed, even while the merits of the patents continue to be litigated.  In fact, the Brazilian Court could issue a Preliminary Injunction preventing Defendants from offering their Disney+ streaming platform in that country as soon as June 2025."  As such, Disney seeks an Injunction preventing InterDigital from enforcing any injunctive relief in Brazil until the conclusion of the Central District of California Case. Disney provides the following summary of its position and why it believes that the Court should Grant this Injunction:

"Defendants satisfy each element of the three-prong test that courts apply when considering whether to issue such an injunction. First, Defendants satisfy the two threshold requirements because the parties and issues are the same in both the domestic and foreign suits. This action will also be dispositive of whether injunctive relief is permissible in Brazil [(Disney later clarifies that adjudication of the RAND counterclaims would dispose of the availability of an Injunction in Brazil)]. Second, while Defendants need only satisfy one so-called Unterweser factor to qualify for an injunction, Defendants satisfy at least three. Finally, Defendants’ proposed injunction is narrowly tailored in both scope and time and will have no intolerable impact on comity. The Court should issue the proposed preliminary injunction and maintain the status quo."

As to the "Unterweser" factors mentioned above, Disney writes that the three factors that they satisfy are: "InterDigital’s foreign litigation would (1) frustrate a policy of the forum issuing the [anti-suit] injunction; (2) be vexatious or oppressive, and (3) prejudice other equitable consideration[s].”  Note that in its Motion for a Preliminary Injunction, Disney argues that during the correspondence that happened between the Parties in 2022, InterDigital refused to provide a RAND offer and instead argued that the relevant Patents are not "RAND encumbered."  Defendants state that any Injunction in Brazil would be harmful to Disney because a "re-encoding" of the content on the platform would be expensive and result in service interruptions.  We therefore believe that any Injunction in Brazil (note that we are still exploring if we can access the Brazilian Court's Docket in order to get this eventual Order quickly) combined with a hypothetical Denial of the Motion for a Preliminary Injunction in the Central District of California may be Positive for the Share-Price of InterDigital, Inc. (IDCC), as we believe that this would provide InterDigital with significant leverage in any licensing negotiations with The Walt Disney Company (DIS).