Good day, everyone, and welcome to today's InterDigital Communications Corporation second 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 Ms. Janet Point. Please go ahead.

Before we begin our remarks today, I need to remind you that in this call we will make 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 results and events contemplated such as the 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 SEC. 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, I would like to turn the call over to Scott.

Thank you, Janet. And good morning to everyone. Overall, we had a solid second quarter and first half with strong revenues, good expense control, and positive free cash flow. Total revenue was $58.7 million in the second quarter of 2008, an increase from $56 million in the first quarter 2008. Excluding royalties from past infringement in each period, revenue was $58.5 million in the second quarter of 2008, a $3 million increase from first quarter 2008 and a $5.3 million increase from second quarter 2007. Among the notable contributors to second quarter 2008 revenues were LG 25%, Sharp 18%, and NEC 13%. Second quarter 2008 patent royalty revenues, excluding royalty revenue from past infringement, were $56 million, a $2.7 million increase from first quarter 2008 and a $3.4 million increase from second quarter 2007. Although there has been some concern about the impact of a weakening global economy on handset sales, our second quarter per unit royalties, which are based on first quarter sales by our licensees, were supported by sequential increases in handset unit shipments for several of our existing licensees including Sharp, NEC, Panasonic, RIM, and Toshiba, as well as the addition of Asustek and Pegatron, two related licensees that we signed in the second quarter. Our per-unit royalties accounted for 63% of our recurring royalties in second quarter 2008 with the remainder being fixed fee and amortized royalties. In addition, our technology solutions revenue grew to a little over $2.5 million in the second quarter 2008 from $2.2 million in first quarter 2008 and $0.6 million in second quarter 2007. The growth in technology solutions revenue was due primarily to engineering services associated with the first quarter 2008 license of our SlimChip 3G modem technology to Spreadtrum, a leading Asian [ph] fabless company. Consistent with past practice,…

Thanks, Scott, and good morning to everyone. As Scott already mentioned, we had another very good quarter from a financial perspective. We also had an excellent quarter from the standpoint of strategic positioning, both with regard to our progress on signing 3G licenses as well as bringing our family of SlimChip products to market. I will discuss both of these as well as our development of the next generation technology, including our progress in our media independent hand-off technology (inaudible). After adding new 3G licensees, the major news, of course, is the positive decisions we received last week from the Second Circuit Court of Appeals involving Nokia and from the ICC Arbitral Tribunal involving Samsung. These were very good results for the company, and let me explain why. First, as to Nokia, we believe the Second Circuit decision clears the path for resuming the ITC investigation regarding Nokia’s importation into the US of WCDMA enabled products. While Nokia may attempt some additional legal maneuvers to avoid a near-term resumption of the ITC case, we don’t see any legitimate basis for Nokia doing so. As such, borrowing something unusual, we anticipate that the ITC action involving Nokia should resume in the near-term. As for Samsung, the decision by the Arbitral Tribunal confirms what InterDigital has said all along. Samsung cannot use the Nokia-InterDigital 2000 settlement to avoid its payment obligation – its obligation to pay InterDigital over $150 million in royalties we are due based on Samsung sale of 2G products through 2005. The Arbitral Tribunal award also confirms Samsung’s obligation to pay royalties for its 2006 2G sales on the terms of the prior Samsung arbitration award without change. We believe further challenges to Samsung’s 2G payment obligations are without merit. Should Samsung nonetheless press forward with its appeal of…

Thank you. (Operator instructions) We’ll go first to Tom Carpenter with Hilliard Lyons. Tom Carpenter – Hilliard Lyons: Hello, Scott and Janet.

Are you there? Tom Carpenter – Hilliard Lyons: Yes, are you?

Okay. (inaudible) Tom Carpenter – Hilliard Lyons: Okay. Excellent. Like, where did you guys go? Congratulations on getting some clarity on Samsung 2G. Have Samsung’s 2006 sales reports been submitted to the Tribunal?

I think that information is with the panel or at least been produced in that litigation. And that’s really the remaining issue with respect to that case, is applying the rates that were established under the prior award to the determined royalty basis. So, that data is in. Tom Carpenter – Hilliard Lyons: And just because some of us out there really don’t understand the ICC process, is there another need for an evidentiary hearing or is this something they can just meet for a couple of hours and resolve without going through the formal process?

I don’t know at this point. Typically you’ll have evidentiary hearings if there’s disputes of the fact. Right? So this may not – so if there is not a dispute of the fact, but there’s maybe a dispute as to how to apply those facts in particular situation. What you’ll instead have is they will just have an oral argument. And it’s a little looser because in the arbitration, the arguments tend to even be – they even mix law and fact type things. But we will see. I guess the panel will set a schedule for the remainder of the case and it will be helpful if it moves pretty quickly through the very few remaining issues in that case. Tom Carpenter – Hilliard Lyons: Okay. Is your current thought process to try and crack all the years, ’02 through ’06 together, or because the ’02 through ’05 matter appears to be decided to collect that before you proceed with ’06?

Certainly in the context of working on an agreement with Samsung, we would collect all years. Right? And if it ends up being a situation where the litigation is forcing payment, then you would get the ’02 to ’05 presumably first because that’s already teed up. And then you would then move to collect on the ’06 amount. Tom Carpenter – Hilliard Lyons: Okay. I think you brought up something that’s a nice segue to my follow-up question. What are your thoughts on using part of this award as a bargaining chip in your 3G negotiations with Samsung?

Certainly at the end of the day we have to look at an entire settlement and value that, and maybe not necessarily the individual components if the whole deal that makes sense. Certainly as, however, the 2G process moves forward, we have less and less and less flexibility with respect to that number. That’s certainly something we’ve communicated to Samsung. If you choose the litigator matter to the end, then you are sort of stuck with the litigation result to a large extent. So – as I indicated in the remarks, we are as always with these folks we try to be creative and flexible wherever we need to, but we also have to – if we become entitled to certain amounts, we’re not going to walk away from that stuff. So, given that their 3G liability is also pretty significant, I think again at the end of the day we’ll have to look at an entire settlement. But certainly on any 2G-only resolution, it’s going to be at the numbers that the panel has determined. Tom Carpenter – Hilliard Lyons: Yes. And thanks for the update on trials with ST or SK Telecom on the MIH. Did you guys recently have some patents approved in this area? I know you have patents approved all the time, but I think you might have had five, six, or seven approved in the last couple of weeks.

I don’t watch the issuance (inaudible) rather than the US Patent Office – Tom Carpenter – Hilliard Lyons: Pretty interesting medium let me tell you.

But you’re right that we have – this is an area where we did a lot of inventing on the front end, cover a lot of aspects of the design. And given the timing of when those filings would have been made, it’s not out of the question that they would start the issue at this point. And we’re very encouraged. We’ve got good traction not only in Korea, but other operators in Europe are very interested in the technology and the other vendors are interested. So it’s definitely another area where I think we can create some good value for the company. Tom Carpenter – Hilliard Lyons: Okay. And can you help us understand better the type of products, if it’s just regular handsets, or if there are some smartphone, the type of products where we’d see your technology use and that there are certain parts of the world you’re initially focusing?

It would be used in any type of terminal unit. So whether it’s a data card, embedded modules, smartphone, feature phone, at the end of the day we believe it will all – it’s all capable of using the technology because it is a hand-off mechanism not just for data, but for data and voice. So that was the attraction of it. It’s pretty broadly applicable. As far as where we think it will launch, SK Telecom was a very good company to work with, one they tend to be leading at, they tend to want to push the envelope of which we like. They also have a combination of networks running in that country. They have CDMA 2000 network. They’ve got a WCDMA network, and they have a WiBro network. So it was a perfect testing bed for the technology. We do see good reaction in Europe on this. We see good reaction actually outside the cellular environment. We see good reaction, for example, in broadcast mobile television as well as another technology that maybe this would apply to. So we are definitely in at the stage in this process where people are very excited about the technology and our job is to get it out and get it into people’s hands and show them what it can do. Tom Carpenter – Hilliard Lyons: Okay. So this is something you actually see being the real deal, not just an experimental technology. We all understand there is a disparate amount of networks out there and different technologies, but is this one you’re pretty certain it’s going to work and create revenue over the next couple of years?

We have a lot of confidence that this will get into the market. First is the standardized technology. So we’re not talking about some proprietary implementation. It’s standardized under 802.21. That standard size has basically migrated that technology out into the other standard’s body so that those other standards are creating the hooks needed to incorporate the 21 hand-off techniques. So we see a lot of positive – everything right now is positive on this. And it’s definitely a technology that’s needed. In fact, one other thing – one of the more recent developments have been on the LTE side, and the need to have hand-off techniques because of the way infrastructure networks are being deployed, there may be a need for this technology sooner or rather later on the LTE side. So we’re very encouraged right now. Tom Carpenter – Hilliard Lyons: The revenue you receive, is it – are you going to transfer IP to companies, engineering services or products you’re going to have?

It would be a – it’s a software product that gets embedded in the internal unit. So that’s one – you’d have three types of revenue. Right? You’d have IP transfer of the software and royalty revenues associated with that. You may have some level of engineering services as you work through the incorporation of the technology into the handset. At this point, we think it’s pretty straightforward. And then the third piece would be to the extent other folks develop similar software we have patent coverage with respect to their technologies. So there could be people that are just patent licensees from us [ph]. Tom Carpenter – Hilliard Lyons: Okay. I’ve got two more questions and I’ll jump back in the queue.

Okay. Tom Carpenter – Hilliard Lyons: Qualcomm and Nokia resolved their 3G dispute with a 15-year 3G and 4G license. Many of the terms are not public, but a lot of analysts have that backed into an applied Qualcomm number. For 3G we’re estimating that somewhere around 2%. What – Qualcomm’s rack rate has been north of 4% in the past. What impact if any of you think that does in your 3G discussions with Nokia and Samsung, with Nokia paying quite a bit lower rate for 3G and 4G than they were paying in the past?

I think there’s a couple of things on that settlement as it implies to us. One I think is that it shows that at the end of the day that you can work these things out. I think there is a concern maybe held by some that this becomes almost a religious worry and it doesn’t solve. And I think – I was never a believer in that. I always felt like at the end of the day these folks would work it out and they did, on terms that they are both obviously very happy with. And I think that bodes well for us, because I think at the end of the day, we also will work these things out on terms that makes sense for us. So I think it does show that there is a level of – there is a process you may have to go through with these folks. As we’ve seen obviously, that one is settled on the courthouse steps. And if you look at the timing of all litigations, we’re walking up to those courthouse steps with respect to the ITC decision in November and things like that. So I think that bodes well and we can never predict when these things are going to happen, but I think it bodes well for us. We’ve been positioned to get things done this year with those folks. As far as the rates that they got, when we – we’re like you – everyone is sort of guessing what the structure is at the end of the day and whether it’s a single rate for all technologies and whether there’s a different rate for WCDMA versus CDMA 2000, and whether it declines over time or – you know, there’s a thousand different ways you can…

As you mentioned, we can’t get into the details of the report. But let me give you a sort of three bullet points with respect to the staff opinion. One is obviously we strongly disagree with where the staff landing on this. Second, I think this is a very, very complicated case. And staff is not blessed with a lot of resources. And it’s – I think it can be – it’s not unusual in a complex case without sort of enough resources to bring to bear that you can kind of get on the wrong track. And third, actually we would – I think it would be helpful at the end of the day if the staff opinion actually got published, because I think we would love to answer your questions because I think we’ve got some very compelling reasons as to why staff went off track. And so maybe that happens at some point and we could be a little bit more upfront about it. But fortunately we are kind of tied to the protective order the case. But I can assure that having read the opinion and heard the evidence at trial, and heard our own assessment of the case, we are very confident that case went in well and we’ve got a really good position going forward. Tom Carpenter – Hilliard Lyons: I was there for part of the first day and heard the staff brief one or two sentence. Statement on his opinion and we were there for most of the Samsung opening presentation. Unfortunately for the IDC presentation we were asked to leave the room. But based on what the staff and Samsung said when I was in the room, that there was – perhaps there was a violation or infringement on some matters, but in overall summary, the staff was not recommending a 337 ban. I know the judge has the final say, but can you respond to those things that were at least publicly available?

I think that – again, that’s correct that the staff is not recommending a 337 violation, but again you probably also had an opportunity to observe the judge. He’s a very, very good judge. We’re in front [ph] down there, who is a type of person who is definitely going to make up his own mind on things, was very prepared, has lots of good questions. And I was at least – for the period of time when I was observing things down there, I was very encouraged with what I saw going on there. At the end of the day, I think these cases – the biggest in these cases and this is typical of any type of litigation. It’s claim construction at the end of the day. And you get the right claim construction, everything falls into place. And we think we’ve got very good position with respect to claim construction. And if the judge agrees with us on, and he doesn’t have to agree with us on every patent. He just has to agree with us on one. I think given that, as I said, we remain very confident in that case going forward because I think our case went in nice. I think our experts did a real good job, and these patents were picked because they are that we think particularly strong patents. Tom Carpenter – Hilliard Lyons: Okay, fantastic. I’ll get back in the queue. Thank you.

We’ll go to Michael Cohen, Pacific American Securities.

Are you there, Michael? Michael Cohen – Pacific American Securities: Can you hear me?

Yes, we hear you. Michael Cohen – Pacific American Securities: I said congratulations with regard to Samsung getting clarity on the 2G amount. Switching to the 3G amount, if hypothetically you weren't able to get an exclusion order through the ITC, I imagine your next step would be probably go forward with the district case – that’s in the district of Delaware. Have you sent any letters of infringement on regard to any patents that aren’t in the district court of Delaware? Yes?

With respect to Samsung, you have a couple options. You have – certainly the district court is one option. And you’re right that there is an infringement component in that case. And so we could – that could move forward. There’s always an opportunity for our subsequent ITC case. So we have a lot of different avenues left. Frankly at this point that will – again we remain pretty confident that ITC case is going to go well for us and those other things will not be necessary. As far as the communications you sent out to prospective licensees, and it can from time to time not aware at this point since other folks are handling that, what exactly has gone out. But there’s all sorts of discussions that take place with parties as to different patents and how those patents they relate to the standards. Michael Cohen – Pacific American Securities: You mentioned just now the possibility with subsequent ITC action. Are there other areas of 3G technology that you think are in the standards that are likely infringed that you haven’t yet asserted to either the ITC or district court?

First of all, the portfolio we have is a good portfolio with respect to its coverage of 3G products. And that’s both with respect to WCDMA and CDMA 2000. In respect – certain patents to bring it to the ITC, certainly – and does not represent all the patents that we have. You pick patents in litigation for lots of reasons, but there certainly are others that we can bring. As Tom Carpenter noted, we have patents issuing all the time as well. And so that they become additional material for those cases. So again, we’re not – at this point, we feel good that the case should – that’s currently before the ITC should be the driving force for resolution between the parties. But if not, there is more to come. Michael Cohen – Pacific American Securities: Okay. And your typical licensing practices that you did choose to settle with Samsung and at some point you typically licensed the entire portfolio?

That’s typically what we’ve done with folks. Michael Cohen – Pacific American Securities: And I guess that answers my questions at this time. Thank you.

Fine, thank you.

(Operator instructions) We’ll go to Kevin Sharbatoni [ph] with Boenning & Scattergood. Kevin Sharbatoni – Boenning & Scattergood: Good morning.

Good morning. Kevin Sharbatoni – Boenning & Scattergood: I know you don’t want to give guidance as to the legal expenses. I was just wondering if you could give us a little bit of color with the Nokia case rolling out of the Second Circuit Court and most likely heading back into the ITC. Are we likely to see more of an offset there? Are the ITC fees expected to be hire just given the scope? Can you kind of give us any color there?

I think it – the reason we normally don’t provide specific guidance there is because the timing and amount of expense related to actions that are not yet fully underway is difficult to predict. I think I was able to comment on our United Kingdom because that’s something where we clearly anticipated some costs in the third quarter that are not going to be there. So – and those were significant. In terms of any additional costs related to our actions with Nokia and Samsung that are not currently underway, as I indicated in my remarks, there is certainly the potential for those costs that we incurred in the third quarter. But it depends a lot on the timing and kind of what happens next. So it is very difficult I think to provide a firm guidance on that number in terms of something we would have confidence at this point. Kevin Sharbatoni – Boenning & Scattergood: Okay, understood. Can you give us an idea of what the pipeline looks like for the SlimChip product line? I guess both that – and in terms of IT, any additional fabless customers in the pipeline and whether or not you see – you mentioned that a lot of the growth this quarter was through the engineering and services revenues. Do you see those continuing or were those more related to startup costs?

Okay. Couple of things on the pipeline. Certainly we see strong interest with respect to the data card product, in particular this package-on-package design that we’ve implemented that is allowing the laptop manufacturers to fit this wireless capability to a fairly small package. So, very encouraged by what we saw there. I think it was an area where we sort of led the market with respect to packaging the technology. So we have a number of companies that are looking at that product and we would hope to see if we can secure design wins on that this quarter or the following quarter. As I mentioned, with the customers – one customer we have signed up and other folks that we are sort of in an advanced stage of negotiation with. Their product launches are scheduled for year-end or beginning of next year. So if they can hit those schedules, we would begin shipping product in some quantity at the end of the year, the quantity growing at the end of the year, that quantity growing in 2009. So that would be – if you look at the revenue line, you’d start to see contributions somewhat in the fourth quarter but probably more in the first quarter 2009 and growing. The other line with respect to revenue coming in from engineering services and royalties from our IT customers, as I mentioned, we have three – we have NXP, Spreadtrum, and Infineon. Those numbers will vary. Certainly at the front end of the contract, you have delivery of the IP and to the extent you have non-recurring engineering charges with respect to that. You will see those charges or that revenue early on in the deal. And then what you want to see then is the revenue – the royalty revenue pick up thereafter. We’re very encouraged by the successes of 3G iPhone. So we would expect to see those contributions coming in and – as well as other wins that Infineon has. And we are hoping for similar success with NXP and then Spreadtrum I think a little later, but again a very well positioned company.

If I could just add I think on the expense side, what you have seen over the last couple of years is kind of a gradual increase on the development spending related to the product programs. And that was as planned. We have said before that we are kind of at the point, very close to the point where we think that increase will begin to stabilize, and any additional increases above that should be associated with customer opportunities that are revenue generating. And I think I would still make that same point today that if we see material increases in the level of spending going forward, it’s going to be driven by revenue opportunities with customers. One point I would say is we’re also very careful about non-development expenses and work very hard to keep those under control. And also I would add that we are not penny wise and pound foolish that our spending program, although we’re very cautious about the expense line in our capital spending, we are also very strategic in terms of assessing investment opportunities and evaluate our spending levels accordingly. Kevin Sharbatoni – Boenning & Scattergood: Okay. And you touched on the Apple, Infineon relationship. Is there any additional kind of information you can give us on Apple, Infineon, or even RIM in terms of licensing revenues going forward, what your expectations are for those?

First of all, in terms of the near-term impact of any royalties that we might earn from Infineon related to the Apple iPhone, we will report those on a one-quarter lag. So in the second quarter, you really didn’t see much, if any, royalty revenue impact because that is really related to Infineon shipments in the first quarter. So we expect to see that ramp up in the future. We haven’t specifically made any projections about the amount of that, but I think we will start to see the effect of that over the next few quarters. Kevin Sharbatoni – Boenning & Scattergood: Okay. That was all I have. Thanks.

Great, thank you.

And we have a follow-up. We’ll go to Tom Carpenter, Hilliard Lyons. Your line is open, please go ahead.

Are you there? Tom Carpenter – Hilliard Lyons: Janet?

Yes.

Yes, we’re here. Tom Carpenter – Hilliard Lyons: Scott, could you help me understand the UK legal payments a little bit better? I think in the fourth quarter of 2008 you guys had $7.8 million on the income statement, is that correct?

That’s correct. Tom Carpenter – Hilliard Lyons: Now, was that an expense that you paid for InterDigital’s legal services or are you reserving for maybe the losing party pays like they have in the UK, but you lost, you have to pay Nokia’s?

That was primarily the latter. And that was our best estimate at that time. In the first quarter, we did a reversal of that based on some additional information, down to $6.6 million. Tom Carpenter – Hilliard Lyons: Yes.

And in terms of the third quarter impact that I talked about the $2.6 million, that also will relate to that accrual. Tom Carpenter – Hilliard Lyons: Okay. So let me make sure that I understand this correctly. Are you paying 4 point [ph] million of Nokia’s legal fees in the UK? Is that what it nets out?

No. I mean, it’s – that’s really a reflection of the overall settlement. Tom Carpenter – Hilliard Lyons: Okay. And switching gears, on a follow-up on one of the questions that the last gentleman asked. Have you guys come out and explicitly said that Apple is a 3G licensee?

I think we did.

Yes, I did.

Here we go. (inaudible)

Yes, the deal, Tom, was that we were allowed to say, as products began to launch, whether they had a license or not, and now that they have officially launched a 3G phone, we can say that that’s under a license. Tom Carpenter – Hilliard Lyons: Well, I’m glad that’s out of the bag. So when you first announced the agreement, I know there was a lot of uncertainty in the investment community about the deal and how it was structured. With 3G, will they have a pay-as-you-go license or will it be structured more like the 2G deal with them or kind of like that in the LG deal?

If you go back to the original disclosure we did on Apple, that’s really the extent of what we can see with respect to the financial arrangements there. So – and off the top of my head, I don’t remember specifically what we said back then. But that’s the financials that we can disclose at this point. Tom Carpenter – Hilliard Lyons: I can tell you what you said, but I’ll just confuse everybody. So I’ll leave it at that. Thanks guys.

Very good. Thanks.

All right.

And with no further questions in queue, I’d like to turn the call over to Ms. Point for any additional or closing remarks.

All right. Thank you everyone for a nice call and quarter. And I’ll be available if anybody has any follow-up questions and we’ll talk to you guys soon.

Thank you, ladies and gentlemen. This does conclude today’s conference call. You may disconnect at any time.