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Wi-LAN updates Hon Hai case, Clarus says stock is undervalued

At market close today, Wi-LAN (TSX:WIN) updated its litigation against Hon Hon Hai Precision Industry Co. Ltd.

On October 1st, Wi-LAN filed a lawsuit against Hon Hai in the Florida State Court concerning Hon Hai’s failure to report sales and revenues as required under a license agreement signed with Wi-LAN in January 2008.

Then, on October 23, Hon Hai filed a suit in New York requesting a declaration that it does not infringe Wi-LAN’s V-Chip patent and to declare the patent invalid. In today’s press release, Wi-LAN said it believes Hon Hai’s action are a “tactical response” to the Florida suit, and not unexpected.

Clarus Securities analyst Sean Peasgood says the Hon Haoi suit reminds him of a similar situation with LG in 2011. Last year, LG won a summary judgement and stopped paying Wi-LAN for use of its 402 patent. That case, however, is now advancing in appeal. Following a recent favourable re-exam of the 402 patent by the USPTO, Peasgood says he believes that ruling will eventually be overturned in WI-LAN’s favour. Hon Hai represents the second V-Chip license in breach of its licensing contract, and Peasgood believes Wi-LAN will collect all licensing revenue from all major manufacturers for the patent. In a research update to clients today, Peasgood reiterated his BUY rating and $7 target on Wi-LAN.

After the thrill ride that was 2009 through part of last year, the time since has been relatively quiet for shareholders of Wi-LAN. Since peaking at more than $9 last summer, shares of the company trickled off, tripping to under $5 this past May. But the company’s trajectory over a longer time frame has been decidedly up. Under the watch of CEO Jim Skippen, Wi-LAN’s revenue has climbed from just over $2 million in fiscal 2006 to the more than $100 million in fiscal 2011. The Ottawa-based company has quietly become one of the world’s top patent acquirers, on par or better than Apple, Google and Samsung in the third quarter of 2011.

Wi-LAN was founded in 1992, commercializing a range of communications and consumer electronics products including routers, 3G handsets and WiMAX base stations. The Company now has more than three-thousand patents, and has already licensed their technologies to blue chip techs such as Cisco, Nokia, Panasonic, Samsung.

Peasgood says that while the potential downside to not receiving Hon Hai revenue in the short term is pretty minimal, the potential upside from success in these trials could be huge. He thinks several large licensees with significant back damages could follow.

Shares of Wi-LAN on the TSX closed today down 3.6% to $5.15.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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