Wi-Lan Plunges After Apple Wins Patent-Infringement SuitSusan Decker and Dennis Robertson
Wi-Lan Inc. plunged to its lowest price since May 2010 after Apple Inc. won a patent-infringement trial and fended off a demand for $248 million in royalties for wireless technology used in mobile devices.
Wi-Lan fell 90 cents, or 23 percent, to $3.05 at 4 p.m. in New York trading of 2.9 million, 33 times the three-month daily average before today. Apple didn’t infringe a patent for technology used in wireless networking, a federal jury in Marshall, Texas, said yesterday. The jury, which deliberated for just over an hour, also said the two patent claims were invalid.
Wi-Lan relies on royalty payments for all of its sales and said it’s signed more than 270 licenses worth up to $750 million since 2006.
The verdict could “weigh on Wi-Lan’s future negotiating ability,” Robert Young, an analyst with Canaccord Genuity Inc., said in a note today downgrading the stock to “speculative buy” from buy. The company lost a trial in July against Ericsson AB and Alcatel-Lucent SA over different patents.
“The ability to win courtroom battles is extremely important to the business model and hence we believe that the back-to-back litigation losses could place a significant discount on the share price,” Eyal Ofir, an analyst with Clarus Securities, who also downgraded the stock to “speculative buy” from “buy,” said in a note to clients today.
Tim Long, an analyst with BMO Capital Markets Corp. maintained his “market perform” rating today, saying other deals could bring in revenue and lower litigation expenses while more cases will probably go to trial.
Wi-Lan reported a loss of $762,000 in the second quarter on revenue of $19.9 million, with litigation costs accounting for much of its expense. Revenue is expected to be $20.7 million in the third quarter and between $26 million and $28 million in the fourth, Wi-Lan said in a statement.
Wi-Lan, which has 3,000 patents, said in a statement today that the patent in the case expires in three months and it doesn’t believe the verdict will affect previous license agreements.
Yesterday, the company said it was reviewing its options regarding the verdict. It has other patent-infringement cases pending against Apple.
Kristin Huguet, a spokeswoman for Apple, declined to comment.
Apple argued it uses chips made by Qualcomm Inc., which doesn’t use the Wi-Lan technology. Mark Scarsi of Millbank Tweed in Los Angeles told the jury that Wi-Lan valued the patent at $4.3 million in 2006 and now wants a big payout by demanding a cut from every iPhone sold.
The Ottawa-based company reached agreements with HTC Corp., Hewlett-Packard Co. and Novatel Wireless Inc. in the days before the trial for undisclosed terms. That left Apple the sole defendant. BlackBerry Ltd. settled its fight with Wi-Lan, as did Alcatel-Lucent.
The case is Wi-Lan Inc. v. HTC Corp., 11cv68, U.S. District Court for the Eastern District of Texas (Marshall).