A sharp spike in legal expenses during the second quarter of 2013 has Ottawa-based patent licensing company Wi-LAN Inc. (TSX:WIN) looking to reduce the amount of money it’s spending on lawsuits.
© Mark Holleron
WiLAN CEO Jim Skippen.
Litigation expenses jumped from US$5.8 million during the same three months last year to $14.6 million during the most recent quarter, the results of which were announced on Thursday. That increase in part accounted for the firm posting a loss of $762,000 for the time period.
But while reducing this line item is a priority for the company, president and CEO Jim Skippen wouldn’t say whether this means it will be in court less frequently in the future.
“Do I think that we’ll be more likely (to settle out of court)? It’s hard to say,” he said Thursday in a conference call with investors.
“We think it makes more sense to settle so ... we think most of the time that we’ll settle, but it is possible we can go to trial and I can’t really predict easily whether it’s more likely or less likely we’ll go to trial in the future.”
He said he hopes the litigation expenses announced for the second quarter will be the “high water mark” and will start going down from here.
The firm has several other ongoing court cases, including those with Research in Motion, Bluetooth Technology and Toshiba. Most of its cases are set to go to trial in 2014, Mr. Skippen said.
He declined to go into specifics about how a recent loss in court will inform future litigation decisions.
A U.S. district court in Texas in July ruled against WiLAN in an ongoing patent dispute with Alcatel-Lucent USA Inc., Ericsson Inc., HTC Corporation and Sony Communications.
“Every case is a case-by-case situation,” he said.
Mr. Skippen’s comments came after the company announced that it exceeded its projected revenues for the three-month period that ended on June 30.
The firm generated revenues of US$19.9 million during the second quarter, $2.4 million more than the $17.5 million the company had forecast. That was also lower than the $20.8 million generated during the same time period in 2012.
Cost of revenues have nearly doubled over the past year – going from $12.8 million in the second quarter of 2012 to $22.5 million this year.
The company blamed increased litigation costs for the company’s adjusted earnings falling from eight cents per share during the second quarter of last year to a loss of one cent per share in that period this year.
WiLAN is optimistic it can get back into the black during the next quarter, however. The company expects its earnings will be somewhere between a loss of $650,000 and a $500,000 profit during the third quarter of 2013, with revenue of at least $20.7 million.
The firm is particularly excited about some of the agreements signed earlier this year.
"During the quarter we signed five new licenses including a broad Digital TV and Display portfolio license with Panasonic and an early license renewal with Samsung,” said Mr. Skippen in a statement.
“We look forward to further strengthening our business relationship with Samsung and seeking opportunities to work together in the building of more valuable patent portfolios."
It announced licensing agreements with five companies in total during the quarter, Mr. Skippen told investors, bringing the total number of licences to 270.
The three months that comprised the second quarter was a busy time period for the WiLAN. In addition to losing in U.S. district court, the firm bought a portfolio of patents from California-based company Cypress Semiconductor and settled patent litigation with Dell.
On Thursday it also announced that two of its ongoing cases against Research in Motion Ltd. were consolidated into one in U.S. district court in Florida. The trial in that case is set to begin in March 2014.