IAM News ItemWiLAN buying portfolios, striking licences in first year as private monetisation firm Angela Morris 25 June 2024
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Canadian patent licensing company WiLAN recently celebrated the one-year anniversary of its new ownership. In an exclusive interview with IAM, WiLAN CEO Andrew Parolin reports its new owners are “bullish on us to grow the company” by acquiring new patent portfolios.
“We are very happy the company is doing very well,” Parolin shares. “It has been a really successful year for us.”
He revealed that the wireless and semiconductor licensing company has hired business development staff since 15 June 2023, when former owner
Quarterhill Inc sold it to Owlpoint IP Opportunities JVF LP, a joint partnership between Arena Investors and Owlpoint Capital Management. Only
two weeks after the transaction, Parolin pledged that a capital infusion from WiLAN’s majority owners would open new opportunities. Now it is clear they’ve made good on that promise.
Parolin discloses that WiLAN is placing a major emphasis on acquiring new patent portfolios. For example, Parolin says the firm has purchased a 200-patent semiconductor technology portfolio. The company has up to four offers pending for other patent assets. Because it’s always seeking opportunities, WiLAN keeps a pipeline of 30 to 40 portfolios to review.
When asked what he would like to achieve in a perfect world, Parolin replies: “It would see us buying two or three portfolios a year, and within a few months of buying each portfolio, we are actively licensing those portfolios and getting to a point where we had to add additional licensing people to continue to grow the company.”
He mentions that WiLAN has succeeded in signing licences at a regular pace. The company focuses on potential licensees in semiconductors, medical devices, software, video games, televisions, wireless, IoT and more. WiLAN issued announcements in the fall of 2023 about a renewal with
LG Electronics and new licence with
Broadcom Inc (which resulted in US and German litigation dismissals).
“We tend to soft-license first and that is where we start. For me, it is so much better when we can resolve things amicably without litigation. But at the end of the day, sometimes litigation is required,” Parolin comments.
Recently, one of WiLAN’s subsidiaries, IPA Technologies dismissed with prejudice a US lawsuit against Microsoft Corp that asserted patents related to the Siri voice assistant. The dismissal emerged after
IPA won a $242 million verdict against Microsoft in mid-May. Parolin declined to comment when asked whether it settled its dispute. But generally, a patent holder only voluntarily dismisses litigation with prejudice if it has received a good settlement.
“Things are going really good for us having licences signed every quarter. It is not uncommon for licensing companies not to sign a licence in a quarter,” Parolin says.
When it comes to licensing, Parolin mentions he has seen the benefit of being a private company compared to WiLAN’s past life as one subsidiary of a public company. Quarterhill ran a lot of subsidiaries – some products and services companies – and WiLAN’s focus on patent licensing meant “there was not really a synergy and understanding there sometimes”, he says. But he adds that today, WiLAN’s new owners “let us run the company” with oversight from its board of directors.
Public companies must report their earnings each quarter and their executives push their teams to close deals within a certain quarter. Parolin reveals that during his 17 years at WiLAN when it was public, he always felt quarterly pressure to close deals. But this has changed now that WiLAN is private.
“There is less quarterly pressures as a private company. There is still pressure to perform financially,” Parolin states. “With a private company, it is a more long-term look at the financials, so I have not felt pressure to get licences signed before a particular quarter ends.”
It helps him know WiLAN can hold out a little big longer to achieve the most reasonable deal on a licence, Parolin says.
Revenue milestones Owlpoint’s deal to buy WiLAN from Quarterhill included a complex deal structure.
The buyers paid C$48 million ($36.3 million) cash for 90% of the business, and Quarterhill retained a 10% stake. The deal was structured to provide further payments to Quarterhill if WiLAN meets revenue milestones, shown in Table 1.
Table 1: Deal structure of WiLAN sale | Revenue milestone | Compensation due to Quarterhill |
| Cash payment at closing | C$48 million ($36.3 million) |
| First revenue milestone | C$8 million ($6 million) earn-out; and
C$15.4 million unsecured promissory note |
| Second revenue milestone | C$13 million to C$16 million ($9.8 million to $12.1 million) to purchase Quarterhill’s 10% stake |
Part of the first milestone was an unsecured promissory note. Typically this is a debt. Unlike the earn-out, which is a set amount due contingent on performance, WiLAN will owe the note and interest on the debt. There is a risk that Quarterhill will not get paid for its 10% stake in WiLAN. Those funds will only emerge if WiLAN meets the second revenue milestone and chooses to exercise its option to buy back the 10% shares.
When asked whether WiLAN has met its revenue milestones, Parolin replies that he cannot comment on it.
Quarterhill’s earnings reports for 2023 and 2024’s first quarter indicate that it has not received additional compensation yet.
Its 2023 annual report said it collected net proceeds of C$54.9 million ($39.8 million) in cash and equity consideration. It added that Quarterhill valued its 10% stake in WiLAN at more than C$3.8 million ($2.8 million).The report said Quarterhill had a net income loss from discontinued operations of C$21.8 million ($16 million).
“Included in the net loss for the year ended December 31, 2023 is a [C$11.5 million] loss on sale of WiLAN,” the annual report stated. It included a breakdown of the sales losses.
Source: Quarterhill 2023 annual report Quarterhill’s earnings report for 2024’s Q1 recorded WiLAN revenues of $0. The report said that as of 31 March, Quarterhill’s 10% stake in WiLAN was C$2.9 million (down more than C$900,000 from 2023’s fair value).
WiLAN’s investor relations staff did not respond to an email seeking comment before deadline.