New deal structure suggests WiLAN has its eye on further semiconductor patent acquisitions
16Jan18

WiLAN, now part of the Quarterhill family of companies, kicked off 2018 with two patent deals with major Asian operating companies, TSMC and Panasonic.  On January 8th, the NPE announced its wholly-owned subsidiary Cetus Technologies had acquired patents related to DRAM technology, as well as NAND flash memory, from Panasonic.  The announcement was made four days after another deal with TSMC, which the company hailed as a “new type of transaction”. 

WiLAN’s press release described a seven-year deal with TSMC as an “intellectual property framework agreement”.  This includes a patent licence related to semiconductor process technology and assignments to unspecified patents based on mutual selection and consent.  Furthermore, the agreement contains a new element beyond patent licensing and sales – a subscription model that allows TSMC to obtain rights to some semiconductor process technology patents acquired by WiLAN in the future. 

We don’t have any concrete details beyond that, and at the time of writing WiLAN had not elaborated.  But there are a few preliminary observations to be made. 

WiLAN is building on a multiyear on-going relationship with both companies.  TSMC received rights to the Polaris portfolio through a license agreement with WiLAN in April 2016.  That remains intact and this new deal covers a new range of patents.  If the Polaris portfolio were a first step for the partnership, the new seven year framework certainly indicates TSMC’s intention to continue working with WiLAN in a way that will involve a wider scope of patents.  The same goes for the new patent transfer from Panasonic.  It is not the first time that WiLAN has picked up assets from the Japanese company.  As far as Western licensing companies go, Jim Skippen’s team has a good track record in Asia. 

WiLAN has framed this model as a subscription service.  Chief Operating Officer Michael Vladescu said the deal is: “Not only structured based on portfolios we own today but also includes a framework for future acquired portfolios.  We hope this represents a mutually beneficial way to handle the business of patent licensing which we can apply in other situations.”  A mechanism for adding new assets to an existing licensing framework seems like it could reduce transaction costs; further details on pricing might give some hint as to how much of a win-win this might be. 

Subscription services normally stipulate a fixed price over a certain period of time.  Will TSMC automatically get access to new semiconductor portfolios WiLAN adds to its existing portfolios with one fixed annual fee?  Has TSMC paid a premium upfront in order to obtain access to all the new relevant semiconductor patents acquired by WiLAN in the future?  Or will the annual subscription fee be revisited and altered based on future patent buys by WiLAN? 

This agreement contains elements of patent licensing, assignments and a framework for future licensing.  This echoes remarks made by TSMC’s chief IP counsel Billie Chen, who told IAM that the company prefers comprehensive hybrid transactions.  Moreover, recent data shows TSMC is once again on the list of 2017 top 10 US patent recipients.  The world's largest semiconductor foundry continues to supplement its proactive filing programme by using licensing deals as opportunities for third-party acquisitions. 

Quarterhill, like many PIPCOs, has made efforts to diversify its business in a difficult environment for patent licensing.  Just 10 months ago, executive chairman Jim Skippen toldIAM: “We’re not sure that investing significant amounts of capital in patents really makes sense.”  But while Quarterhill overall may continue investing in IoT and other technologies, the two recent deals by WiLAN show that the patent licensing unit is not getting out of the patent buying market just yet.  The framework deal with TSMC is a strong signal that WiLAN has a defined acquisition strategy for the chip sector over the next several years - whiel the asubscription element indicates that it may be looking to build some kind of membership-based entity.  What kind of assets WiLAN adds will tell us a lot; and Asia in particular might prove to be a key hunting ground.