Another major buyer pulls back from patent market as WiLAN plots new business direction

WiLAN announced last week that it will shift from being a patent pure play to become a diversified holding company, enabling it to invest in businesses beyond IP monetisation. While the Canadian NPE is not exiting the scene altogether, its move represents another blow for the secondary market after Intellectual Ventures (IV) confirmed the cessation of its patent buying activities earlier this month.

According to a press release, WiLAN is transforming into “a growth-oriented diversified holding company by acquiring businesses that will operate alongside [its] intellectual property licensing business”. This will involve a restructuring under which WiLAN’s publicly traded company will change its name to Quarterhill and begin to explore opportunities for  “acquiring technology companies in the Industrial Internet of Things (‘IIoT’) segment across multiple verticals… with a broad range of products and services that capture, analyse and interpret data, and that have strong financial performance, excellent management teams, strong intellectual property underpinnings and significant opportunities to develop long-term recurring and growing revenue streams”.

The first of these acquisitions was also announced this week, with the NPE’s purchase of Saskatoon-based smart transportation start-up International Road Dynamics (IRD) for C$63.5 million (US$47.4 million). IRD and future companies acquired will operate independently as subsidiaries of Quarterhill, while the patent monetisation business will be placed in a new subsidiary that will inherit the WiLAN name.

Diversification into other business areas is a strategy that has been followed by several publicly traded NPEs – such as Vringo and Unwired Planet – in recent years as the patent licensing environment has grown tougher. “Over the past several years we have considered multiple options for how to best leverage our capital to grow the business and increase shareholder value,” said Jim Skippen – who has moved from his role as WiLAN’s CEO to become its executive chairman as part of the restructuring – in the aforementioned press release. “This strategy provides an ideal opportunity for us to diversify and inject new growth into the business, while addressing the ‘lumpy’ financial performance that has come to be associated with stand-alone patent licensing businesses. Because the environment for patent licensing companies has changed so much over the past decade, we have concluded that patent licensing as a standalone business will not meet our long-term objectives as a public company.”

Speaking to IAM, Skippen confirmed that while WiLAN would not be abandoning patent monetisation altogether, the onward focus will be on maintaining its IP business rather than growing it. “We will look at patent acquisitions, but more and more we’re not sure that investing significant amounts of capital in patents really makes sense for us,” he said.

“In a public company of our size, you really need a growth story and we weren’t convinced that there was a growth story anymore… In the current environment we just think it has become too difficult.”

Nevertheless, WiLAN’s decision will come as yet another blow for the secondary market in patents, just a matter of weeks after IV announced its effective departure from the buy side.  While not as significant a force as IV in terms of brokered assets, the Canadian NPE has been a key player in the wider market for over a decade, most recently having acquired patents in major private deals from the likes of PanasonicKodak, GlobalFoundries, Rohm, Funai, Infineon and Freescale Semiconductor.

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