quarter 2009. Although third quarter 2009 per unit royalties declined 6% on a year-over-year basis, these royalties increased 17% sequentially.
Technology solutions revenue increased to $2.5 million in third quarter 2009 from $2.2 million in third quarter 2008, attributable to increased royalties earned on the company's SlimChip modem IP in third quarter 2009. In third quarter 2009, 64% of total revenue of $75.5 million was attributable to companies that individually accounted for 10% or more of this amount, Samsung (34%), LG (19%), and Sharp (11%).
Litigation and Arbitration
Please see Note 6, "Litigation and Legal Proceedings," in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a full discussion of the following matter and other matters:
Nokia USITC
In August 2007, InterDigital filed a USITC Complaint against Nokia Corporation and Nokia, Inc. (collectively, "Nokia") alleging that Nokia engaged in an unfair trade practice by selling for importation into the United States, importing into the United States, and 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 fourth patent, respectively, 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.
Nokia then unsuccessfully sought to terminate or stay the USITC investigation against it on the ground that Nokia and we must first arbitrate an alleged dispute as to whether Nokia is licensed under the patents asserted by InterDigital against Nokia in the USITC investigation. After that effort failed, Nokia sought and obtained a preliminary injunction in the U.S. District Court for the Southern District of New York preventing us from proceeding in the USITC against Nokia. Shortly after the issuance of the preliminary injunction, the Nokia USITC investigation was stayed, and the Nokia and Samsung USITC investigations were de-consolidated, which permitted the Samsung USITC investigation to move forward.
In July 2008, the Second Circuit reversed the preliminary injunction obtained by Nokia. In September 2008, the Administrative Law Judge lifted the stay in the Nokia USITC investigation. In March 2009, the U.S. District Court for the Southern District of New York dismissed Nokia's claims relating to its alleged license dispute.
The evidentiary hearing in the Nokia USITC investigation was held from May 26, 2009 through June 2, 2009. On August 14, 2009, the Administrative Law Judge issued an Initial Determination finding no violation of Section 337 of the Tariff Act of 1930. The Initial Determination found that our 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 Administrative Law Judge 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 August 31, 2009, we filed a petition for review of certain issues raised in the August 14, 2009 Initial Determination. On that same date, Nokia also filed a contingent petition for review of certain issues in the Initial Determination. Responses to both petitions were filed on September 8, 2009.
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 Administrative Law Judge's determination of no violation and terminated the investigation.
If we choose to do so, we have 60 days from the Commission's October 16, 2009 decision to file an appeal of the Commission's decision to the United States Court of Appeals for the Federal Circuit. In such an appeal, we can raise any of the issues raised in our August 31, 2009 petition, except for the construction of the term "synchronize" on which the Commission took no position. The issue of validity, on which the Commission also took no position, likewise cannot be raised in such an appeal.
We are considering whether to file an appeal of the Commission's decision to the United State Court of Appeals for the Federal Circuit. Comparability of Financial Results
When comparing third quarter 2009 financial results against other periods, the following item should be taken into consideration:
• Our third quarter 2009 operating expenses were reduced by $4.0 million based on revised expectations for the anticipated payout associated with a long-term performance-based incentive program, this adjustment reduced third quarter development expense, selling, general and administrative expense, and patent licensing and arbitration costs by $2.4 million, $1.1 million, and $0.5 million, respectively.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in our 2008 Form 10-K. A discussion of our critical accounting policies, and the estimates related to them, are included in Management's Discussion and

Analysis of Financial Condition and Results of Operations in our 2008 Form 10-K. There have been no material changes in our existing critical accounting policies from the disclosures included in our 2008 Form 10-K. Refer to Note 1, "Basis of Presentation," in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for updates related to new accounting pronouncements.
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, but have not had a significant debt or equity financing in over 10 years and do not anticipate a need for such financings in the next twelve months. 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, and any stock repurchase programs that we may initiate in the next twelve months. Although our existing revenue streams have been affected by the recent global economic downturn, our near-term revenues are partially insulated from market swings since approximately 63% of our recurring patent license revenues were based on fixed payments in first nine months 2009. Cash, cash equivalents and short-term investments At September 30, 2009 and December 31, 2008, we had the following amounts of cash and cash equivalents and short-term investments (in thousands):

                                            September 30, 2009        December 31, 2008        Increase/(Decrease)
Cash and cash equivalents                  $            265,771      $           100,144      $             165,627
Short-term investments                                  163,952                   41,516                    122,436

Total cash, cash equivalents and
short-term investments                     $            429,723      $           141,660      $             288,063

Our cash, cash equivalents and short-term investments increased $288.1 million in first nine months 2009. The increase was primarily due to our receipt of the first two of four $100.0 million installments from Samsung under our patent license agreement signed in January 2009 and new prepayments from two existing licensees totaling $182.4 million. After using those and other receipts to fund our operations, working capital requirements and share repurchases in first nine months 2009, we invested the excess in short-term investments. Cash flows from operations
We generated the following cash flows from our operating activities in first nine months 2009 and 2008 (in thousands):

For the Nine Months Ended September 30, 2009 2008 Increase/(Decrease) Cash flows from operating activities $ 332,502 $ 105,795 $ 226,707

The positive operating cash flow in first nine months 2009 arose principally from receipts of approximately $492.0 million related to patent licensing and technology solutions agreements. These receipts included the first two of four installments of $100.0 million from Samsung under our January 2009 license agreement. We also received prepayments of $182.4 million from two existing licensees, per-unit royalty payments of $61.6 million from other existing licensees, other fixed-fee payments of $37.1 million, and cash receipts from our technology solutions agreements totaling $10.9 million, primarily related to royalties associated with our SlimChip modem IP. These receipts were partially offset by cash operating expenses (operating expenses less depreciation of fixed assets, amortization of intangible assets, non-cash repositioning charges and non-cash compensation) of $92.0 million, cash payments for foreign source withholding taxes of $40.7 million related to Samsung and Pantech cash receipts, an estimated federal tax payment of $4.0 million, and changes in working capital during first nine months 2009.
The positive operating cash flow in first nine months 2008 arose principally from receipts of approximately $257.7 million related to 2G and 3G patent licensing agreements. These receipts included the third of three $95.0 million payments from LG, a new prepayment of $29.6 million from an existing licensee, $51.4 million of prepayments and $81.7 million of current royalty payments from existing licensees, and cash receipts from our technology solutions agreements totaling $3.1 million, primarily related to royalties associated with our SlimChip modem IP. These receipts were partially offset by cash operating expenses (operating expenses less depreciation of fixed assets, amortization of intangible assets and non-cash compensation) of $112.6 million, an estimated federal tax payment of $3.0 million, foreign source withholding taxes of $15.9 million, payment of $23.0 million to post a bond for the Federal Insurance Company arbitration award and changes in working capital during first nine months 2008.
Working capital
We believe that working capital, adjusted to exclude cash, cash equivalents, short-term investments, current maturities of debt, and current deferred revenue provides additional information about assets and liabilities that might affect our near-term liquidity. Our adjusted working capital, a non-GAAP financial measure, reconciles to working capital, the most directly comparable GAAP financial measure, at September 30, 2009 and December 31, 2008 (in thousands) as follows:

                                                        September 30, 2009          December 31, 2008          Increase/(Decrease)
Current assets                                          $           718,249        $           241,021        $             477,228
Current liabilities                                                (244,091 )                 (126,537 )                   (117,554 )

Working capital                                                     474,158                    114,484                      359,674

(Subtract) Add
Cash and cash equivalents                                          (265,771 )                 (100,144 )                   (165,627 )
Short-term investments                                             (163,952 )                  (41,516 )                   (122,436 )
Current portion of long-term debt                                       586                      1,608                       (1,022 )
Current deferred revenue                                            193,527                     78,646                      114,881


Adjusted working capital                                $           238,548        $            53,078        $             185,470

The $185.5 million increase in adjusted working capital is primarily due to our January 2009 patent license agreement with Samsung. Our recognition of the last two installment payments under this agreement, which are due from Samsung within the next twelve months, increased accounts receivable by $200.0 million and our deferred tax assets by $33.0 million for foreign withholding taxes associated with those payments. The decrease in accrued compensation related to our first quarter 2009 payments against our long-term cash incentive and annual bonus obligations further contributed to the increase in adjusted working capital. These items were partially offset by an increase of $33.0 million in foreign taxes payable associated with the Samsung license agreement and the increase of $2.8 million in other accrued expenses primarily attributable to accrued repositioning charges and accrued legal fees.
We used net cash from investing activities of $147.8 million in first nine months 2009 and used net cash from investing activities of $6.4 million in first nine months 2008. We purchased $122.3 million of short-term marketable securities, net of sales, in first nine months 2009 and sold $22.9 million of short-term marketable securities, net of purchases, in first nine months 2008. This increase in purchases was driven by higher cash receipts and lower cash requirements during first nine months 2009. Purchases of property and equipment decreased to $2.4 million in first nine months 2009 from $4.4 million in first nine months 2008 due to the lower levels of development tools and engineering needed in first nine months 2009 as a result of our cessation of further SlimChip product development. Investment costs associated with patents increased from $20.7 million in first nine months 2008 to $21.9 million in first nine months 2009.
Net cash used in financing activities decreased $47.0 million primarily due to our higher levels of stock repurchase activity in first nine months 2008. We also received $3.5 million and $1.6 million more in respective contributions from stock option exercises and tax benefits from share-based compensation as compared to the prior year.
Other
Our combined short-term and long-term deferred revenue balance at September 30, 2009 was approximately $721.9 million, an increase of $462.2 million from December 31, 2008. We have no material obligations associated with such deferred revenue. In first nine months 2009, we recorded gross increases in deferred revenue of $627.1 million primarily related to the $400.0 million received or due from Samsung under the license agreement signed in January 2009, $182.4 million in prepayments from two existing licensees, $21.7 million of stock and $15.0 million of cash from Pantech and $9.4 million in prepayments from new and existing licensees. The gross increases in deferred revenue were partially offset by first nine months 2009 deferred revenue recognition of $133.7 million related to the amortization of fixed-fee royalty payments and $31.3 million related to per-unit exhaustion of prepaid royalties (based upon royalty reports provided by our licensees).
Based on current license agreements, we expect the amortization of fixed-fee royalty payments to reduce the September 30, 2009 deferred revenue balance of $721.9 million by $193.5 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.
At September 30, 2009 and December 31, 2008, we had approximately 2.1 million and 2.9 million options outstanding, respectively, that had exercise prices less than the fair market value of our stock at each balance sheet date. These options would generate $25.9 million and $38.9 million of cash proceeds to the Company if they are fully exercised.
Credit Facility
In light of our current financial position and in connection with the reduction of recurring operating expenses expected to result from our repositioning plan, we elected to terminate our $60.0 million unsecured revolving credit facility on April 2, 2009. Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended.

RESULTS OF OPERATIONS
Third Quarter 2009 Compared to Third Quarter 2008
Revenues
   The following table compares third quarter 2009 revenues to revenues in the
comparable period from the prior year (in millions):

                                                           Third          Third
                                                          Quarter        Quarter
                                                           2009           2008            Increase/(Decrease)
Per-unit royalty revenue                                 $    27.7      $    29.6      $    (1.9 )          (6 %)
Fixed-fee amortized royalty revenue                           44.8           22.0           22.8           104 %

Recurring patent licensing royalties                          72.5           51.6           20.9            41 %
Past infringement and other non-recurring royalties            0.5            1.3           (0.8 )         (62 %)

Total patent licensing royalties                              73.0           52.9           20.1            38 %
Technology solutions revenue                                   2.5            2.2            0.3            14 %

Total revenue                                            $    75.5      $    55.1      $    20.4            37 %

Revenues were $75.5 million in third quarter 2009, compared to $55.1 million in third quarter 2008. Patent licensing royalties of $73.0 million in third quarter 2009 posted a 38% increase over $52.9 million in third quarter 2008, due to the addition of $25.7 million in fixed-fee amortized royalty revenue from patent license agreements with Samsung signed in first quarter 2009, and a partial quarter of fixed-fee revenue related to the Pantech license agreement signed late in the third quarter. This increase was partially offset by a decrease in per-unit royalty revenue related to industry-wide declines in handset sales for comparable second quarter sales. Despite this overall decline in per-unit royalties, certain licensees with concentrations in the smartphone market reported increased sales for the reporting period.
Technology solutions revenue increased in third quarter 2009 to $2.5 million from $2.2 million in third quarter 2008. The increase is primarily attributable to increased royalties earned on our SlimChip modem IP in third quarter 2009.
In third quarter 2009, 64% of our total revenue of $75.5 million was attributable to companies that individually accounted for 10% or more of our total revenue, Samsung (34%), LG (19%), and Sharp (11%). In third quarter 2008, 55% of our total revenue of $55.1 million was attributable to companies that individually accounted for 10% or more of our total revenue, LG (26%), Sharp (16%) and NEC (13%).
Operating Expenses
Operating expenses decreased 31% to $28.9 million in third quarter 2009 from $42.0 million in third quarter 2008. The $13.1 million decrease was primarily due to the following net changes in expenses (in millions):

                                                        (Decrease)/
                                                         Increase
              Long-term cash incentives                $        (4.8 )
              Personnel-related costs                           (3.5 )
              Consulting services                               (3.5 )
              Depreciation and amortization                     (2.6 )
              Patent litigation and arbitration                 (2.5 )
              Share-based compensation                           1.1
              Arbitration and contingency adjustment             2.7


              Total decrease in operating expenses     $       (13.1 )

The decrease in long-term cash incentives resulted from a $4.0 million reduction to the related accrual for the incentive period from January 1, 2008 through December 31, 2010. This reduction was based on our revised expectations for the payout that will become due under this performance-based compensation program. This $4.0 million adjustment reduced our third quarter development expense, selling, general and administrative expense and patent administration and licensing expense by $2.4 million, $1.1 million and $0.5 million, respectively. The balance of the decrease in long-term cash incentives and the increase in sharebased compensation was due to the structure of our Long-term Compensation Program ("LTCP"), which includes overlapping long-term cash incentives cycles in 2008 and restricted stock unit ("RSU") cycles in 2009. The decrease in personnel-related costs, consulting services, and depreciation and amortization were primarily due to the repositioning announced on March 30, 2009. Patent litigation and arbitration decreased primarily due to the resolution of our various disputes with Samsung. In 2008, we recognized a credit of $2.7 million associated with the reduction of a previously established accrual associated with our contingent obligation to reimburse Nokia for a portion of its attorney's fees associated with the recently resolved U.K. matters.
The following table summarizes the change in operating expenses by category (in millions):

                                                     Third          Third
                                                    Quarter        Quarter
                                                     2009           2008              Increase/(Decrease)
Selling, general and administrative                $     4.9      $     6.9        $     (2.0 )        (29 %)
Patent administration and licensing                     13.3           14.3              (1.0 )         (7 %)
Development                                             10.7           23.5             (12.8 )        (54 %)
Arbitration and litigation contingencies                   -           (2.7 )             2.7         (100 %)


Total operating expenses                           $    28.9      $    42.0        $    (13.1 )        (31 %)

Selling, General and Administrative Expense: The decrease in selling, general and administrative expense in third quarter 2009 was primarily due to a decrease in personnel-related costs due to the repositioning announced on March 30, 2009, as well as the adjustment recorded to the long-term cash incentive accrual discussed above.
Patent Administration and Licensing Expense: The decrease in patent administration and licensing expenses primarily resulted from a decrease in patent litigation and arbitration ($2.5 million) and a decrease in long-term cash incentive accrual expense ($0.5 million), which were partially offset by increases in patent maintenance and amortization ($1.3 million) and other personnel-related costs ($0.5 million).
Development Expense: The decrease in development expense was primarily due to the repositioning announced March 30, 2009, as well as the adjustment recorded to the long-term cash incentive accrual discussed above.
Arbitration and Litigation Contingencies: In third quarter 2008, we recognized a credit of $2.7 million associated with the reduction of a previously established accrual associated with our contingent obligation to reimburse Nokia for a portion of its attorney's fees associated with the recently resolved U.K. matters.
Interest and Investment Income, Net
Net interest and investment income for third quarter 2009 totaled $0.5 million, a decrease of $0.6 million from third quarter 2008. The decrease was primarily due to lower rates of return in third quarter 2009 as compared to third quarter 2008.
First Nine Months 2009 Compared to First Nine Months 2008 Revenues
The following table compares first nine months 2009 revenues to revenues in the comparable period from the prior year (in millions):

                                                    First Nine        First Nine
                                                      Months            Months
. . .