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Patent licensing company Wi-Lan doubles its legal expenses and swings to Q3 loss

Patent licensing company Wi-Lan doubled its legal expenses to more than $14 million, swinging to a loss and lower revenues in its third quarter as the Ottawa company considers its future.

Wi-Lan posted a net loss of $6.5 million in the quarter ended Sept. 30, compared with a net and comprehensive profit of $2.2 million in the same period in 2012.

“Even if we lose a trial, the story is almost never over,” chief executive Jim Skippen told financial analysts on a conference call Wednesday.

“As we all should know, or do know, litigation is unpredictable and we expect some courtrooms will occasionally go against us regardless of the merits of our cases,” he said.

Wi-Lan (TSX:WIN) licenses the rights to patents in its portfolio and earns money through royalty payments from companies that use the protected technology in their products and services.

Skippen noted that a U.S. jury recently ruled that iPhone maker Apple did not infringe on a wireless technology patent held by Wi-Lan and called the decision a “tactical setback.” He didn’t say if Wi-Lan plans to appeal the decision but said the company plans to take action to “address what we consider is a mistake.”

The Apple decision sent the company’s stock down almost 23 per cent late last month. Skippen said Wi-Lan has another patent infringement case with Apple scheduled for next year.

Wi-Lan has started a strategic review of the company, which could mean a sale.

“We do not believe that our share price accurately reflects the value of the company,” he said.

Skippen also said he expects litigation costs to go down in the fourth quarter, which should increase earnings.

He noted patent licensing agreements have been signed with telecom equipment maker Alcatel-Lucent and smartphone maker HTC Corp. Skippen said Wi-Lan has requested a new trial with tech companies Ericsson Inc. and Sony Mobile Communications after losing a recent jury decision.

“The path to achieve the end goal _ a licence agreement _ never follows a straightforward line.”

Agreements with BlackBerry, computer maker HP, Novatel Wireless and Sierra Wireless have also been reached to end patent infringement cases. Royalties from these agreements will help improve the company’s performance, he said.

In its financial results, Wi-Lan’s loss amounted to five cents per diluted share, compared with two cents of earnings per share year-over-year.

Revenues were lower at $20.7 million versus $21.2 million year-over-year. Litigation expenses doubled to $14.4 million compared with $7.1 million a year earlier.

Adjusted quarterly earnings amounted to a loss of $300,000 or nil per share compared with adjusted earnings of $9.3 million, or eight cents per share, in the same period last year.

Wi-Lan said it has 275 companies that have licensed technologies from its patent portfolio of more than 3,200 patent and applications, involving wireless technologies for mobile phones, tablets, personal computers, digital TV receivers and broadband routers.

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