BUSINESS
08/17/2011 04:34 EDT | Updated 10/17/2011 05:12 EDT

Wi-LAN bids $480-million for Mosaid, saying bigger is better in patent industry

MONTREAL - Wi-LAN Inc. (TSX:WIN) said Wednesday that it will make a $480-million cash offer to Mosaid Technologies Inc. shareholders in a hostile takeover attempt that would combine Canada's two leading patent companies.

Wi-LAN and Mosaid generate most of their revenue by licensing technology rights to large telecom and computer chip makers, which have recently demonstrated that they're willing to pay hundreds of millions or even billions for patents.

"It is my belief that to succeed in today's market, bigger is better," Wi-LAN chief executive Jim Skippen said in a statement.

Wi-LAN said it has approached Mosaid several times in recent years to combine the two Ottawa-based companies but was rebuffed.

"We will be presenting this offer directly to Mosaid shareholders for their consideration as we strongly believe that the complementary patent portfolios, diverse licensing programs, experienced teams and innovative research and development of Wi-LAN and Mosaid make this a compelling combination," Skippen said in a statement.

Wi-LAN said it will pay $38 in cash for all of the outstanding common shares of Mosaid, a premium of about 31 per cent over the closing price of Mosaid (TSX:MSD) shares.

Since the offer was made as markets closed Wednesday', it will undoubtedly push up the price of Mosaid's stock when trading resumes.

Mosaid spokesman Michael Salter said the company had no immediate comment on Wi-LAN's offer. Salter said Mosaid has a board meeting on Aug. 24 and added, "clearly this will be a lead agenda item."

Mosaid has about 2,800 patents with more than half of them covering semiconductor technology with the rest in areas such as computer networking and wireless technologies, Salter said.

Skippen used to work at Mosaid as head of its patent licensing team and was credited with being instrumental in its success before he joined Wi-LAN as chief executive officer.

"Since joining Wi-LAN, my vision has been to increase the company's scale with a deeper, larger patent portfolio to make it more compelling for potential licensees to choose a license over litigation," he said in a statement.

"While an ambitious goal, we have been very successful. Combining Wi-LAN and Mosaid is the next logical step."

Wi-LAN's origins are in telecommunications, while Mosaid was a leading developer of memory-chip technologies.

Both companies have become expert at asserting their patent rights in court and negotiating payments from companies that require the technology to make their products work.

Patents have become increasingly important in the competitive consumer electronics industry with tech companies routinely suing each other for alleged patent infringements to protect what they've developed.

Google Inc. announced this week it was paying US$12.5 billion to acquire cellphone maker Motorola Mobility Holdings Inc. and its 17,000 patents and 7,500 patent applications.

The search engine giant recently missed out on acquiring wireless network patents developed by Canada's former tech star Nortel Networks. It placed an opening "stalking horse" bid of US$900 million in April.

It lost to a group that included Research in Motion (TSX:RIM), along with Apple and other tech heavyweights that paid US$4.5 billion to acquire more than 6,000 patents from Nortel, which is being liquidated under court superivsion.

The importance now being placed on patents has been driven by the purchase of the Nortel patents, which "shone a bright light" on intellectual property, Skippen said in an interview with the BNN business news television channel.

"With Nortel patents going for $4.5 billion, which was more than all the rest of Nortel's assets put together, it really highlighted just how important and valuable intellectual property is," Skippen said.

In July, Wi-LAN announced it had settled a lawsuit with Texas Instruments Inc. over Bluetooth technology.

Wi-LAN sued Texas Instruments in April 2010 as part of a broader series of suits against several of the world's high-tech heavyweights over allegations of Bluetooth technology infringement.

Apple Inc. (Nasdaq:AAPL), Dell Inc. (Nasdaq:DELL), Hewlett-Packard Co. (NYSE:HPQ), Intel Corp. (Nasdaq:INTC), Motorola Inc. (NYSE:MOT) and Sony Corp. (NYSE:SNE) were among the defendants.

One of the more common uses for Bluetooth technology is to connect a person's headset to a cellphone to allow for hands-free talking.

In its recent financial results, Wi-LAN rebounded to a second-quarter profit as it booked a 137 per cent increase in revenue and a significant decline in litigation expenses.