By KRYSTLE CHOW
Published in the Ottawa Business Journal newspaper and website.
Aug. 22, 2011 (Aug. 23 on OBJ.ca)
Click here to view this article on OBJ.ca.
Tech sector debates whether Ottawa’s most valuable company is killing innovation – or just doing good business
There was a time not so long ago when Wi-LAN Inc. was a bruised and battered technology company with no revenues and only a few hundred thousand dollars in the bank.
“WiLAN was beaten down because people took the intellectual property we developed and didn’t pay for it, which is what often happens with many companies,” says CEO Jim Skippen.
The tables have turned as WiLAN now fights, quite successfully, to defend the technology its founders created. But some say that, in the process, WiLAN’s become much like the parasites at whose hands it once suffered.
The firm is Ottawa’s most valuable technology company, with a market capitalization of roughly $850 million. Just last week, it announced plans for a $480-million, all-cash hostile takeover bid for fellow local patent licensing firm MOSAID Technologies Inc.
The move indicates things have come full circle, since Mr. Skippen left MOSAID in 2006 to join WiLAN after a decade of working on what he said was “Canada’s most successful patent licensing program” – at least, until WiLAN’s rise.
Merging the two companies would create an intellectual property powerhouse with a portfolio of more than 4,200 patents covering wireless, wireline, consumer electronics and semiconductor technologies – a powerful arsenal with which to seek additional licensing agreements, or settlements, especially when taken with their combined cash holdings of almost $300 million.
Despite the healthy numbers, it’s no secret that WiLAN has its fair share of detractors that label it a “patent troll” and accuse it of profiting off the research of others, without actually contributing anything to the tech ecosystem.
John Ogilvie, who runs the Bifrost Group software consulting and development company, is a vocal critic of WiLAN’s business model. He says patent licensing firms are the “zombies of the tech industry” that are more about litigation than innovation.
“What WiLAN is doing is … giving Ottawa an international profile as a has-been tech centre, that we lost the race and we’re no longer Silicon Valley North, but we’re going to sue the bastards who won,” says Mr. Ogilvie.
He points to blog posts on Techdirt and Gizmodo referring to WiLAN as a patent troll suing “everyone and their mom” as examples of others in the industry who agree with his assessment.
Mr. Ogilvie says this type of firm is, in fact, an impediment to innovation.
“The success of the patent litigation business model really puts a chill on startups,” he says. “If you’re starting to build traction, it becomes worthwhile to sue you. The normal approach is to settle with them, which takes money and management time, and that is one of the top five reasons I personally would not do a startup now.”
“THE VALUE IS IN THE PATENTS”
Mr. Skippen’s retorts that firms like his actually give companies a strong incentive to do R&D. “Every patent comes from R&D. If there’s no value in patents, I think there’s very little value in R&D … At the heart of it, I think, is the fact that these days it’s not so hard to manufacture a product – that’s why China is so successful, because it’s about who can do it the cheapest. The real value is in who owns the underlying patent,” notes Mr. Skippen.
“All of Nortel’s assets went for less than the patents did, so where was the value? In the patents.”
WiLAN’s argument is it provides a service to technology companies that wish to monetize or utilize intellectual property, whether it’s a firm that decides to sell or cross-license its patents to WiLAN because it doesn’t think it’s getting enough mileage out of its research, or one that wants a one-stop shop for the technology licences it needs to make its products.
As such, agrees OCRI chief executive Claude Haw, there’s a true merit for WiLAN’s business. “Business is about creating value for shareholders; if there’s an opportunity to take something that people aren’t fully valuing and creating value from that, that’s a valid business,” he says.
There seems to be much support for that argument today. The importance of intellectual property is in the spotlight following the US$4.5-billion sale of Nortel’s patent portfolio in July, which attracted the attention of such big names as Google, Research In Motion and Apple.
Analysts have also pointed out that patents were likely a major factor in Google’s $12.5-billion acquisition of Motorola Mobility.
The focus on patents’ power as both a defensive and offensive weapon isn’t new, of course, taking off in the 1980s with companies such as IBM, Texas Instruments and AT&T, says Mike McLean, senior vice-president of intellectual property rights and professional services for UBM TechInsights. The Ottawa-based firm works with patent holders to validate their intellectual property rights.
But the recent events and the rise of companies such as WiLAN and MOSAID indicate a burgeoning opportunity in patent monetization – as well as Ottawa’s role as a hub of intellectual property expertise, Mr. McLean says.
“And really, with those big companies buying those patents developed by Nortel, is that any different from what WiLAN does in some cases? It’s benefited (Nortel’s) creditors and pensioners, and there would be a lot less money otherwise,” adds Mr. Skippen.
“It’s sort of unfair to pick on WiLAN.”