Mosaid, and its Nokia Patents, Get Acquired by PE Firm

The wheelings and dealings behind the scenes of the wireless patents industry continue unabated, with InterDigital's huge intellectual property rights (IPR) treasure chest still up for sale, and another player, Canada's Mosaid Technologies, falling to a private equity firm for C$590m ($594m). Mosaid would have been regarded as little more than a sideline patent troll until a deal, made in September, which gave it control of about 2,000 patents from Nokia and Microsoft.

Focal Points:

• Mosaid, which was the subject of a hostile bid from fellow Canadian troll Wi-Lan, will now become part of US-based Sterling Partners. Wi-Lan withdrew after Sterling trumped its C$42-per-share bid by $4 per share. Mosaid argued that the earlier offer undervalued it by not taking account of the Nokia/Microsoft deal, which was only concluded after Wi-Lan made its move and was seen by some as a deliberate blocking tactic. Any change in ownership of those 2,000 patents would have to be approved by the two larger companies. The patents include about 1,200 deemed 'essential to the GSM, W-CDMA and/or LTE standards, plus about 800 'wireless implementation' patents.
• Transferring patents to third parties while retaining a measure of control has become a common practice in the wireless sector, offering some protection from lawsuits targeted directly at large players. "Nokia and Microsoft have agreed to deliver consent to change of control, allowing retention of Core Wireless portfolio by Mosaid," Sterling said in a statement. Mosaid paid nothing for the patents, but will bear the cost of licensing them to other companies (pocketing one-third of the value of such deals), and potentially also the cost of defending them in court. However, aggressors are less likely to sue a relatively small IPR holder than a deep-pocketed giant like Microsoft.
• Mosaid says that the revenue from these patents could exceed the total takings it had made throughout its 35-year history, claiming that they are more valuable than those included in the $4.5bn package of Nortel IPR sold to a group including Apple and Microsoft. It expects its annual profit to double within three years from its current C$25m level. Both Nokia and Microsoft are among the largest holders of wireless and mobile software patents in the world, and their close alliance over WP7 potentially unites them in any IPR wars. Microsoft has been chasing Android OEMs for hefty licensing fees for its Linux-related patents, while Nokia recently won a favorable settlement of a dispute with Apple.
• Another major wireless patent holder is InterDigital, which has been looking for buyers for its portfolio since the wave of Android lawsuits sparked off the recent scramble for IPR and consequent goldrush. However, interest in the assets was said to have declined once Google agreed to acquire Motorola Mobility, securing it the major IPR position it needed to defend Android from Apple, Microsoft and Oracle. Last week, announcing third quarter results, InterDigital said it was still weighing the possible sell-off.
• In Q3, its sales and profits were both down on last year, by 17% to $76.5m and by 26% to $26.2m respectively, but results were ahead of analyst expectations. Analysts were pleased that the firm was still considering the sale of its 1,300-strong portfolio. The board "continues to thoroughly explore and evaluate potential strategic alternatives for the company, which may include a sale or other transaction," said CEO William Merritt in the statement. InterDigital has said that its IPR collection is more valuable than the patents auctioned off by Nortel, but the bubble may have burst following the Google-Motorola deal, and with several other portfolios coming to market, including some of Kodak's assets.

Editor’s Note: This article highlights the importance of intellectual property valuation. While the value of IPR is subject to interpretation, it can be very significant and is sometimes separated during an acquisition for many reasons including ownership and to preserve its own intrinsic value.