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Wi-LAN, Mosaid deal would create patent powerhouse

One of Canada's two biggest patent-licensing companies is making a $480-million offer for the other, highlighting the seemingly unquenchable appetite for intellectual property rights in the technology industry.

Wi-LAN Inc. announced Wednesday it intends to make an offer of $38 per share for Mosaid Technologies Inc. , another patent-licensing company headquartered just a few blocks away. The offer represents a 20-per-cent premium above Mosaid's closing price Wednesday.

The deal would create a Canadian patent powerhouse. Primarily, companies such as Wi-LAN and Mosaid generate revenue by offering to license patents to other companies, and hoping those companies decide the cost of licensing is less of a burden than the cost of litigation. As such, the greater the number and variety of patents a licensing firm has, the more potential revenue sources.

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"Bigger is better in this industry," Wi-LAN chief executive officer Jim Skippen said in an interview. "Sometimes companies think they can avoid paying and may want to litigate instead. That's a less attractive offer when facing a bigger company with more resources and patents that may be applicable to their business."

While companies in a variety of industries have stocked up on patents for decades, in recent years the major players in the technology industry have become much more aggressive about collecting and enforcing patent rights.

This week, Google made a $12.5-billion (U.S.) offer for Motorola Mobility – a move by Google to beef up its patent portfolio by acquiring Motorola's Mobility's stable of more than 17,000 patents. A month earlier, a consortium led by Apple, Microsoft and Waterloo, Ont.-based Research In Motion entered a winning bid of $4.5-billion for a suite of 6,000 Nortel patents.

"Right now there's a global move in North America to create IP powerhouses and to find significantly undervalued baskets of patents," said Northern Securities analyst Sameet Kanade.

But while companies such as Google and RIM have been collecting patents as a defensive measure against litigation, Wi-LAN and Mosaid generally acquire patents with the specific intent of pushing companies to enter into licensing agreements.

Combined, Wi-LAN and Mosaid would have a portfolio of almost 5,000 existing and pending patents. However the sheer number of patents held is not as important as those that actually generate revenue, which for many patent-licensing companies can be as low as 3 per cent to 5 per cent of the total.

With Mosaid, Wi-LAN would get access to patents in several key industries, including dynamic random-access memory and wireless communications. Wireless patents have become especially important in recent years, as the tech industry's biggest companies focus their attention on manufacturing mobile hardware such as smart phones and tablets.

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Mosaid would not comment on the Wi-LAN offer late Wednesday, but a statement from the company was expected within 24 hours.

Besides their geographic proximity, the two Ottawa companies have plenty in common. Before taking the top job at Wi-LAN, Mr. Skippen was an executive at Mosaid. He said the increased attention that major tech companies are now paying to patent rights is long overdue.

"I've been saying patents are really important for 25 years," he said. "I'm surprised it has taken this long for people to figure this out."

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