Frequently Asked Questions

Answers to a few of the frequently asked questions that WiLAN receives from investors are provided below. Answers to additional questions are given in our Investor FAQ.

Can WiLAN comment on the press release, dated April 14, 2010, that was issued by Patent Calls, Inc. (“Patent Calls”) concerning U.S. Patent No. 5,515,369 which seems to call into question WiLAN’s claims of infringement relating to Bluetooth-enabled products and the 369 patent?
On April 8, 2010, WiLAN announced, by way of press release, that the Company initiated litigation involving U.S. Patent No. 5,515,369 (“the 369 patent”). Three business days later, on April 13, 2010, Patent Calls informed representatives of WiLAN and various defendants in the 369 patent litigation, that a press release announcing the availability of a report analyzing the 369 patent would be issued on April 24, 2010 (the press release was issued on April 14, 2010).

WiLAN questions the quality of the legal and technical analysis conducted by Patent Calls in this case, especially considering the fact that this analysis must have been completed within a period of three business days after WiLAN first made its claims concerning the 369 patent public.    Based on what has been publicly released by Patent Calls, WiLAN has seen nothing that leads it to believe that Patent Calls has demonstrated any non-infringement.   Moreover,  some statements made by Patent Calls on their WWW site and in the April 14 press release seem, to WiLAN, to support a relationship between the Bluetooth standard and the 369 patent.   

Prior to initiating litigation involving the 369 patent, WiLAN and its advisors completed extensive analysis of the 369 patent over a period of many months.  WiLAN remains confident of its position with respect to the litigation involving the 369 patent. 

WiLAN launched litigation against LG claiming, in addition to fraud and patent infringement, breach of contract relating to LG’s failure to pay WiLAN in accordance with a previously signed license agreement.  Did WiLAN recognize, as revenue, any of the payments that it believes it is owed but did not receive from LG? 
No, WiLAN has not recognized any revenues related to this contract.


How are royalty rates in license agreements determined?
Royalty rates consider many factors including the significance of the patented invention(s) to the performance of the product(s), the profitability of the products in question, the number of patents that are applicable, the volume of products that infringe, the geographies into which infringing products are sold, the prospective licensees future sales plans and the prospective licensees’ financial status.   Of course, since royalty rates are negotiated with each licensee, the opinions of the licensee are important too.  In all cases, WiLAN strives to achieve royalty terms that are not overly burdensome to the cost of the licensed product but still offer a fair return to the company.


How is WiLAN paid by its licensees?
Payment terms may consist of: a one-time lump-sum payment, a series of fixed payments over a specified period, or running royalties based on a price per-unit.  WiLAN’s standard model is a long term running royalty with a one-time payment for past sales.   WiLAN is prepared to be flexible and if a licensee’s preference is to sign something other than a running royalty agreement, then WiLAN will consider other models if they make business sense for WiLAN. 

Why does WiLAN disclose limited information in agreements with licensees?
The key reasons WiLAN often provides limited disclosure concerning agreements are:

1. If WiLAN insisted on disclosing the terms of all of its license agreements, this would cause many companies to more strenuously resist taking a  license.  This could result in delay or may even prevent a party from taking a license.
2. Because companies sometimes view taking a license as a negative, they might insist on paying a lower royalty rate if the rate was publicly disclosed.
3. Disclosing the terms of licenses may set a cap or upper limit on future deals.

Without financial terms of license agreements being made available, how can investors assess the financial performance or potential of WiLAN’s business?
Investors can assess WiLAN’s performance against the annual financial guidance that WiLAN provides.  WiLAN provides annual revenue, operating expense and pro forma earnings guidance.  Revenue guidance considers revenue that is expected to be collected in the fiscal year from both signed agreements and agreements that are expected to be signed during the fiscal year.  Certain revenue and expense items that may occur, including unforseen licenses or litigation expenses, are excluded from  financial guidance. WiLAN’s licensing professionals are very experienced in patent licensing and are unlikely to accept terms that are not in the best interests of the company. 


When are insiders permitted to buy or sell WiLAN shares?
WiLAN insiders are very frequently prevented from trading in shares or disposing of shares resulting from an option exercise due to self-imposed blackout periods restricting the trading in WiLAN shares.

Generally speaking, blackout periods begin two weeks before the end of a fiscal quarter and end the day that financial results for a given fiscal quarter are released.

IT IS IMPORTANT TO REMEMBER THAT COMPANY MANAGEMENT MAY BE BLACKED OUT FROM TRADING DURING TIMES OVER AND ABOVE THE PRESET BLACKOUT PERIODS BECAUSE THEY ARE IN POSSESSION OF MATERIAL UNDISCLOSED COMPANY INFORMATION. HISTORICALLY THIS RESTRICTION HAS RESULTED IN MANY MONTHS OF ADDITIONAL BLACKOUT PERIODS.

Upcoming blackout periods (dates are subject to change):
March 17, 2010 – May 6, 2010 inclusive
June 16, 2010 – August 10, 2010 inclusive
September 16, 2010 – November 10, 2010 inclusive
December 16, 2010 – March 2, 2011 inclusive


Is it a cause for concern if a WiLAN insider sells WiLAN shares?
WiLAN strongly encourages its officers and directors to hold WiLAN shares and has implemented policies which encourage share ownership at a meaningful level.    However, insiders may occasionally sell shares as part of an option exercise or simply because of their cash needs at the time, and no investor should consider such a sale a lack of confidence by the insider.  Many times an insider may sell a small portion of their shares, but still maintain a significant investment in the company.

So, as a result of blackouts from trading, an insider may only have a limited period of days or weeks during a year in which he or she can buy or sell WiLAN shares.

Share options are granted to WiLAN employees at the market price at the time of the grant.  It is usually expected that if the stock rises in value that the employee can exercise the option and sell the resulting shares to realize a gain.   This is a form of compensation that is intended to align the option holder with shareholders since both will benefit from a rise in the share price.

Blackout periods may be particularly problematic with respect to share options.  Since share options typically have a limited term, an employee may be required to exercise the options and sell the resulting shares, in order to avoid having the options expire during a blackout period.   

From time to time, employees may be nearing an expiry date for a large number of in-the-money options.   It is often desirable for the employee to exercise a portion of those options and to sell the resulting shares prior to the expiry date, rather than wait until expiry and then be forced to exercise and sell a large block of shares.   Generally, a smaller sale of shares can be absorbed more easily in the routine trading of the market than a large block, which could cause a significant decrease in the share price.

No investor should read any lack of confidence in the company into an exercise of a share option and resulting sale of the share, since this is the manner in which this form of compensation is generally intended to operate.  In fact, the need to fund income tax liabilities that automatically arise when share options are exercised may make it a problem if the employee does not sell a portion of the shares that result from exercising share options.

Like any investor, employees of WiLAN, and members of its Board, are responsible for ensuring the financial well-being of themselves and their families.  This is achieved through responsible financial planning, which for many, requires an investment strategy that ensures proper diversification of an investment portfolio.  Having a significant percentage of a portfolio invested in one single investment is generally not recommended.  It is worthwhile to highlight that for some employees, including members of the management team, the value of their WiLAN holdings can represent a very significant portion of their overall investment portfolio.  As the value of WiLAN shares increase over time, the value of their WiLAN shares, as a percentage of their total portfolio, may become too large.  This may necessitate that the employee reduce his/her WiLAN holdings, at times permitted by WiLAN’s insider trading policy, to restore the proper asset balance of their portfolio.   Again this does not necessarily mean that the employee’s confidence in the company has in any way lessened or that the share price will not increase in the future.