Wi-LAN Patent Case Entering Critical Phase

Wi-LAN Inc.'s (WIN.T) patent-infringement case against a number of tier-one tech companies is nearing a critical phase that could result in a big payday for the Ottawa patent-license firm.

Wi-LAN sued 22 companies in October 2007, alleging infringement of several wireless patents. Defendants include Apple Inc. (AAPL), Dell Inc. (DELL), Intel Corp. (INTC), Hewlett-Packard Co. (HPQ) and Texas Instruments Inc. (TXN), to name a few. Some of the companies originally named in the suit, such as Research In Motion Ltd. (RIMM), UTStarcom Inc. (UTSI) and Infineon Technologies AG (IFX.XE), have already settled with Wi-LAN. Terms of the settlements weren't disclosed.

The case with the remaining defendants is scheduled to go to trial in the Eastern District of Texas on Jan. 4, 2011. The parties are currently holding court-ordered mediation talks, which are scheduled to end Oct. 20. Given the approaching trial date, the ongoing mediation and the fact that most patent cases settle before trial, a settlement some time in the next two months is a distinct possibility.

In an interview, Wi-LAN Chief Executive Jim Skippen said he is open to a settlement provided the terms are fair and reasonable. He declined to say what he considers fair and reasonable, and he also declined to provide an update on the mediation talks.

Skippen did say that Wi-LAN won't hesitate to assert its intellectual property rights, as evidenced by its latest infringement suit announced last week. The company sued Alcatel-Lucent USA Inc., Sony Ericsson Mobile Communications AB and LG Electronics Inc. (066560.SE), among others, alleging infringement of a different set of wireless patents. Wi-LAN holds hundreds of wireless patents.

Wi-LAN generated C$35.4 million in revenue in 2009 and analysts are forecasting revenue of C$50 million this year. If the company prevails in the upcoming trial or settles the case, annual revenue could double, triple or even quadruple.

Fraser Mackenzie's Dev Bhangui is projecting settlements in the range of C$500-C$700 million. Wellington West's Sean Peasgood said in a recent note that he believes settlements could add C$750 million-to-C$1 billion dollars over a five-year period. If Wi-LAN announced settlements totalling just C$500 million over the next five-year period, Peasgood said his target on the stock would increase to C$10.00 from C$4.80 currently.

In the last 12 months, Wellington West or its affiliates have received compensation for investment banking and related services from Wi-LAN.

While Wi-LAN's stock could surge if it announces a favorable settlement, some or all defendants may choose to try the case. If they prevail, Wi-LAN's stock, which is up 68% this year in anticipation of a favorable resolution of the case, could get hit. In Toronto Thursday, Wi-LAN is down 1.8%, or 8 Canadian cents, to C$4.41 on 81,398 shares. The stock hit a 52-week high of C$4.50 on Oct. 8.

Even if Wi-LAN wins at trial, the defendants could appeal, putting off a potential Wi-LAN payday for the foreseeable future.

Still, shareholders are optimistic. If analyst estimates on settlement value are in the ballpark, the company could add at least 50 Canadian cents a share to earnings in each of the next five years, said Robert McWhirter, portfolio manager at Selective Asset Management, a Toronto money-management firm and long-time Wi-LAN shareholder. Analysts are forecasting net of 11 Canadian cents in 2010 and 26 Canadian cents next year. "Needless to say" a 50 Canadian-cent-per-share lift to earnings "would be quite significant," McWhirter said.

Company Web Site: http://www.wi-lan.com

-By Stuart Weinberg; Dow Jones Newswires; 416-306-2026; stuart.weinberg@dowjones.com

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