August 18, 2011 / 1:04 PM / 6 years ago

Mosaid deal would create global patent power: WiLan

TORONTO (Reuters) - A proposed combination of two Canadian patent-holding companies would make it easier to extract lucrative licensing deals from technology giants in areas ranging from wireless to semiconductors, would-be buyer WiLan said on Thursday.

In fact, the race among tech giants to scoop up intellectual property to protect their businesses is heating up so much that WiLan may not be the only bidder for Mosaid’s patent portfolio, present in all Wi-Fi-enabled devices.

“I can’t predict who in the patent world might make a bid. It could be anybody, it could be nobody,” WiLan Chief Executive Jim Skippen told Reuters in an interview.

And if the bid for Mosaid is successful, Skippen said WiLan could soon be facing an unsolicited bid of its own.

“I think that a combined company will be very attractive, whether for investors or whether as an acquisition. It’s going to be very valuable so it wouldn’t shock me if somebody down the road tried to buy the combined company.”

WiLan, which makes money by developing and licensing intellectual property for the communications and consumer electronics markets, has offered C$38 a share for Mosaid just as tech majors increasingly pay huge sums for patents to use as weapons in litigation and cross-licensing.

The unsolicited offer values Mosaid at C$480 million, with a 20 percent premium to Wednesday’s closing share price.

Mosaid asked shareholders on Thursday to take no immediate action on the offer.

The companies know each other well and are practically neighbors in Ottawa. Skippen was Mosaid’s senior vice-president for patent licensing and general counsel before leaving in 2006 to reinvigorate WiLan.

“I‘m in a very unique position to know an awful lot about the company without doing due diligence,” Skippen said.

SKYROCKETING VALUATIONS

The perceived value of patents has skyrocketed in recent months. Apple, Microsoft, Research In Motion and others paid $4.5 billion in July to thwart Google’s attempt to snare thousands of bankrupt Nortel’s patents.

Google, needing to beef up its patent portfolio to protect its Android mobile phone software from legal attack, said on Monday it would pay $12.5 billion for Motorola Mobility to gain access to one of the mobile phone industry’s largest patent libraries.

Two-thirds of Mosaid’s revenue stems from licenses relating to semiconductors and memory, while it has a growing wireless licensing business focused on short-distance Wi-Fi technology.

WiLan has settled a string of legal battles this year with companies it says were using its patented technology without paying licensing fees, including Intel, Cisco Systems and Texas Instruments.

Skippen is confident the combined company can come to terms with companies like Intel and Cisco that have signed deals with WiLan and are being sued by Mosaid.

Since the terms of settlements are typically confidential, analysts say it is hard to value Mosaid’s worth.

“The reality is that most patents are worthless, some are worth a fair bit, and a small number are worth a great deal,” BMO Capital Markets analyst Brian Piccioni said in a note to clients as he raised his price target on Mosaid to C$40 from C$32.

He also said the cost and hassle of valuing the portfolio might discourage others from launching a rival bid.

Shares in Mosaid jumped 24 percent to C$39.22 on Thursday, suggesting investors consider a higher bid or competing offer a possibility. WiLan shares were down 5.9 percent at C$6.67.

Both WiLan and Mosaid develop and acquire patents with the main aim of winning licensing deals from companies that use the technology, rather than using the intellectual property in their own products.

WiLan has approached Mosaid about a takeover several times over the last few years, most recently this week when Skippen informed them before announcing the latest proposal.

“The door is very much open and the ball is very much in their court,” said Skippen.

($1=$0.99 Canadian)

Editing by Janet Guttsman and editing by Rob Wilson

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