WiLAN prepares for fight of its life

Elizabeth
Elizabeth Howell
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It took years for WiLAN Inc. to get this far – a court date in early January that observers say could result in a larger-than-usual payday for the Ottawa technology licensing firm.

WiLAN CEO Jim Skippen (File photo)

WiLAN has taken an aggressive stance since converting from a telecom hardware company to an IP protection and monetization firm in 2006. It’s launched action against a slew of companies that, WiLAN says, were using its patents without permission. Many were settled out of court.

With 970 patents, WiLAN has initiated six major actions since 2006, with three scheduled to come to trial so far in 2011.

In its first volley in January, the small firm will take aim at the big guys: Apple, Best Buy, Broadcom, Dell, Hewlett-Packard, Sony, Toshiba, and others all in one, sweeping lawsuit.

“For us, this is the ‘show-me’ time of the story,” said Peter Imhof, an investment strategist at Sprott Asset Management. It’s had WiLAN stock in its portfolio for a decade.

“But 90-per-cent of these things settle before they go to trial,” he added.

In a November research note to investors, analyst Sean Peasgood from Wellington West Capital Markets advised investors to snap up WiLAN stock before the trial.

“Negotiations are currently ongoing, with the endgame expected in January 2011; licensing agreements could provide significant upside for the stock,” wrote Mr. Peasgood, who was unable to do an OBJ interview due being involved in an open financing round at WiLAN.

At a district court in Marshall, Texas, in early January WiLAN will allege the firms are infringing on three U.S. wireless patents through selling items that include the technology, including base stations and mobile devices.

“There’s a lot at stake, because these companies are very well-known,” said Jim Skippen, chief executive of WiLAN.

“A lot is riding on the case, but we feel very optimistic about it as we continue to review our position. We do know there is always uncertainty when you go to court … but we’re feeling very good about it.

“At the same time, there are a lot of settlement discussions underway, and it’s possible that we might have some settlements.”

Years ago, few could have predicted WiLAN’s trajectory. The company, founded in 1992 and publicly traded by 1998, was initially invested in the equipment business.

Things went well until the dot-com bust – their stock price reached a high of $82 in early 2000.

But by 2005, they turned a gross fiscal-year profit of just $8,601 and shares were trading below a dollar each.

In February 2006, the company let go of its former chief executive and admitted in investor statements that its equipment business just wasn’t profitable any more. It announced it would shift its business to intellectual property.

“(The company) was in pretty desperate shape,” Mr. Skippen recalled, “and was no longer really functioning as a company. It had basically no employees.”

That’s when Mr. Skippen was tapped for chief executive. He had built a solid reputation with 10 years’ work at MOSAID, a company that had found itself in a similar situation as WiLAN.

Once known for its chip design and testing, MOSAID had turned to patent licensing as well and Mr. Skippen was selected to head that department.

“I learned that this is a business that requires a lot of patience. I learned it’s important to remember that patents have a limited life, and if you want to continue in this business you have to continue filing new patents, or you have to acquire other patents. That is something, in hindsight, I wished we’d done earlier.”

He added, “You fast forward four years, (WiLAN) has 240 licenses. We have $100 million in the bank. We have no debt. We have had consistently growing revenues.”

Though their share price is nowhere near the heights of a decade ago, the company was consistently trading above four dollars a share in December.

In late November, WiLAN targeted $21.8 million in a bought-deal arrangement through issuing five million shares at $4.35 a share. Four firms backed the offering, which is expected to close Dec. 17.

The vote of confidence from its investors has Mr. Skippen confident in his company’s approach to take its patent disputes to trial.

The company will diversify its revenue in 2011 through research and development as well as advising smaller firms that also find themselves in patent disputes.

“If a big company has more productive muscle and marketing muscle than little WiLAN did, is it really fair now that WiLAN doesn’t get credit for its intellectual property? Because if it did, then intellectual property is meaningless.”

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THE CASE

The plaintiff: WiLAN Inc.

The defendants:  Acer Inc., Apple Inc., Atheros Communications Inc., Belkin International Inc., Best Buy Co. Inc., Broadcom Corp., Buffalo Technology (USA) Inc., Circuit City Stores, Inc., Dell Inc., D-Link Corp., Gateway Inc., Hewlett-Packard Co., Infineon Technologies AG, Intel Corp., Lenovo Group Ltd., Marvell Semiconductor Inc., Netgear Inc., Sony Corp., Texas Instruments Inc., Toshiba Corp., Westell Technologies Inc., and 2Wire Inc.

Court date: Jan. 4, 2011

The case: WiLAN claims the firms infringed U.S. patent nos. 5,282,222, RE37,802 and 5,956,323 by making and/or selling various products, including wireless routers, modems and personal notebook computers that use.  

Source: WiLAN

Organizations: Best Buy, Broadcom Corp., Dell Inc. Hewlett-Packard Co Sony Corp. Toshiba Corp. Sprott Asset Management Wellington West Capital Markets Acer Inc. Apple Inc. Atheros Communications Inc. Belkin International Buffalo Technology Circuit City Stores Link Corp. Gateway Inc. Infineon Technologies AG Intel Corp. Lenovo Group Marvell Semiconductor Netgear Texas Instruments Inc. Westell Technologies Inc.

Geographic location: U.S., Marshall, Texas

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Recent comments

  • David Boles
    December 23, 2010 - 18:41

    Give credit when credit is due... The deal with LG Electronics is exactly what investors were waiting for! This could into Skippen's master stroke as the domino effect should be triggered!

  • David Boles
    December 15, 2010 - 22:32

    Sure, if Wi-LAN delivers on the Nortel 4G patents I believe that long term retailers will embrace the deal and all will be forgiven. But that's a BIG IF! In the interim the stock was diluted 20%. That's not peanuts - do the math and if your holding any kind of volume then that's a ligitmate concern. this is the third time that Wi-LAN - since I have held this stock - utilized this financing tool. Each time diluting the stock with the impact being that the small retailer takes the lion's share of the hit. Plain and simple the talking and PR stuff is over, it's time for results and Wi-LANs long suffering investors to finally be rewarded.

  • Colin Bhowmik
    December 15, 2010 - 15:48

    As a long-term investor, I am for the bought deal as it is for the purchase of additional patents. My guess is that Wi-Lan will take part in the bidding process of critical 4G patents that are being auctioned off by Nortel. That said, not sure how successful they will be seeing Apple, Google and some of the big telecoms will be involved also.

  • David Boles
    December 13, 2010 - 14:35

    I'm not so sure that he got that vote of confidence on the bought deal. From what I can tell the large majority of retail investors are very upset about it especially the long term holders.