Jamie Sturgeon, Financial Post · Monday, Mar. 1, 2010
TORONTO -- It was in early 2006 when Wi-LAN Inc.’s board was forced to make a bold decision. Faced with a fast-approaching bankruptcy, the Ottawa-based telecommunications equipment maker moved to radically alter course and once and for all sever its deteriorating manufacturing operations.
“There were no employees left, very little cash in the bank and debts were more,” said Jim Skippen, Wi-LAN’s chief executive. “It was a desperate situation.”
Wi-LAN approached the would-be CEO, then working for cross town rival Mosaid Technologies, and persuaded him to help purge the firm of its business lines and focus solely on obtaining licensing royalties from its small but powerful patent portfolio.
“That was the only possible option, the manufacturing had not worked out very well and the company was in serious financial straits,” he said in an interview.
In the four years since the brush with near-collapse, Wi-LAN has seen its growth profile rise steadily. Now, the firm of roughly 40, comprised mainly of engineers and lawyers, is on the brink of its biggest financial windfall to date. An upcoming hearing in a long-running litigation process against some of the largest handset and wireless device makers in the business including Apple Inc. all but promises to net the firm tens of millions in recurring revenue, analysts say.


The size of Wi-LAN’s telecom patent portfolio is less than a third of Nortel’s. About 50 of those form the nucleus of what Wi-LAN developed over a decade and a half as an operating entity. Through numerous licensing deals, Wi-LAN has grown into a thriving concern. Its biggest came in 2007, when Finnish handset maker Nokia Corp. signed an agreement worth US$49-million, which included handing over of some additional patents to Wi-LAN.
Now, two nondescript patents named 222 and 802 pertaining to local-area WiFi and CDMA cellular networks, respectively, lie at the heart of a dispute with nearly 20 manufacturers of wireless products, including Apple.
On March 11, the company will attend a so-called Markman hearing in a Texas court that will define the parameters of what the two patents cover. The Markman will give Apple and others, including PC makers Dell and Hewlett-Packard a sense of whether the court believes those firms are willfully infringing on Wi-LAN’s patents.
Failing a financial settlement, a trial is scheduled for next January. Most companies simply will not take the risk. Instead, Mr. Skippen says more than 90% of patent cases are settled “on the courthouse steps.”
Sean Peasgood, equity analyst at Wellington West Capital Markets, says the date will serve as a “catalyst” for Wi-LAN’s bottom line. The public firm is expected to generate between $28-million and $50-million in revenue this year. But the analyst suggests the firm could bring in as much as $100-million as settlements are signed.
That does not approach the billions of dollars a company the size of Nortel generated during its heyday, but revenues in that range and higher collected on a patent portfolio of a few thousand could go a long way in making creditors whole if they are patient, as well as address pension shortfalls.
Still, in Nortel’s case, the idea of a reborn company may be a pipe dream. “There’s a lot of people pulling for pieces of the company,” said Mr. Peasgood, who has covered Nortel. “Whether the company can move forward and try and monetize those patents, I’m not sure.”
Patience is not a virtue found in most bankruptcy proceedings, he said. “Generally, the rule of thumb is, that on a new licensing program, it can take two years to get up and running.”
As for Wi-LAN, its board pursued the licensing strategy before it ever had to file under the Companies’ Creditors Arrangement Act and therefore was not forced to leave ultimate decision-making powers to a judge, whose main focus is getting as much value back to stakeholders as orderly and quickly as possible.
“It’s much harder to do this once entered into bankruptcy. You don’t have that flexibility,” said Mr. Skippen, who admits that his company would be interested in the event of a formal sale of Nortel’s patents. “[Nortel] waited too long maybe.”

OTTAWA, CANADA--(Marketwire - Sept. 21, 2010) - Wi-LAN Inc. ("WiLAN" or the "Company") (TSX:WIN), a leading technology innovation and licensing company, today announced that Judge T. John Ward of the U.S. District Court for the Eastern District of Texas issued a claim construction Opinion and Order yesterday in ongoing litigations between WiLAN and various defendants including Intel Corporation, Hewlett-Packard Company, Broadcom Corporation, Dell, Inc. and Apple Inc. In the litigations, WiLAN is alleging infringement of four patents including U.S. Patent Nos. 5,956,323 ("the '323 patent") and 6,549,759 ("the '759 patent"). The claim construction hearing, also known as the Markman hearing, with respect to the '323 and '759 patents, was held before Judge Ward on September 1, 2010.
The Markman Order establishes the meaning of the patent claim terms in dispute between the parties. A copy of the Opinion and Order is available at: www.wilan.com/company/Investors/Litigation-Updates/Wi-LAN-v-Acer-et-al-Eastern-District-of-Texas/default.aspx.
Overall WiLAN is pleased with the ruling. WiLAN believes that based on the Court's constructions, WiLAN will be able to demonstrate infringement by many of the defendant's Bluetooth, WiMAX and DSL products.
The trial in these litigations is scheduled to begin on January 4, 2011.