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WSJ on General Patent & Wi-Lan

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https://online.wsj.com/article/BT-CO-20110926-711500.html

SEPTEMBER 26, 2011, 3:00 P.M. ET
General Patent Sues Wi-Lan Over Collapsed Tie-Up

--Alleges Wi-Lan feigned interest in acquiring General Patent to gain proprietary information
--Wi-Lan says suit is "entirely without merit"
--Alleges executive breached non-compete agreement
By Ben DummettOf DOW JONES NEWSWIRES
TORONTO (Dow Jones)--General Patent Corp. is suing Wi-Lan Inc. (WILN) for fraud, alleging the Ottawa-based company feigned interest in acquiring General Patent to obtain proprietary information to open a new office headed by a former General Patent executive.
The lawsuit comes at a time when Wi-Lan is trying to win support for its hostile C$480 million (US$466 million) bid for cross-town patent-licensing rival Mosaid Technologies Inc. (MSD.T). Wi-Lan's bid expires Wednesday.
A Mosaid representative said the company is aware of the complaint.
In a Sept. 21 filing with the United States District Court of Southern District of New York, General Patent, based in Suffern, N.Y., said it signed a term sheet in April 2011 to negotiate a final deal to be acquired by Wi-Lan.
General Patent's main business is partnering with patent owners to license and enforce their patents in exchange for a share of the licensing fees. Wi-Lan's principal focus is buying and enforcing patents to generate revenue, but it also has a subsidiary, known as Gladios, that competes directly with General Patent.
In the court filing, General Patent alleges that, at the time the term sheet was signed, Wi-Lan "deliberately concealed" facts and circumstances from General Patent that it "knew or should have known" would make it virtually impossible to complete the transaction. It also alleges that Paul Lerner, who joined Wi-Lan this month from General Patent, where he was general counsel, breached a non-compete agreement preventing him from working for a competitor for one year following the termination of his employment.
The court will hold a hearing next month to consider if it should issue a preliminary injunction enjoining Lerner from working with Wi-Lan and enjoining Wi-Lan from using or disclosing General Patent trade secrets.
A Wi-Lan representative said the lawsuit "is completely and entirely without merit and we are responding vigorously."
A General Patent representative declined comment. In the filing, it said that, after signing the term sheet, Wi-Lan was privy to General Patent's business and trade secrets, including a "broad range" of confidential documents relating to General Patent's subsidiary patent holding companies, patent monetization, litigation strategies and market strategies, as well as to its operations and financials.
General Patent learned of some of Wi-Lan's concealed facts on June 10, and about two days later confronted Wi-Lan about this information. Around June 16, about two weeks prior to the deal's scheduled closing, Wi-Lan called off the deal, the filing says.
General Patent doesn't detail the facts Wi-Lan allegedly withheld.
Last month, Lerner told General Patent he was leaving the company to retire, according to the filing.
General Patent alleges Lerner misrepresented his intentions and was either negotiating employment terms with Wi-Lan or had already accepted an offer.
This month, Wi-Lan announced that it had hired Lerner as senior legal counsel to establish an office in Stamford, Conn. Wi-Lan said his appointment would support the growth of its partnership-licensing business.
-By Ben Dummett; Dow Jones Newswires; 416-306-2024; [e-mail]