Nokia, Microsoft tap Mosaid to handle huge patent trove

Canada's Mosaid Technologies Inc. (MSD-T41.150.701.73%) will manage one of the world's biggest troves of wireless patents after being chosen by Nokia Oyj and Microsoft Corp. to manage a huge portfolio of intellectual property.

Mosaid said Thursday that it will acquire about 2,000 patents and applications originally filed by Nokia. Mosaid will split the revenues from patent licensing with Nokia and Microsoft, according to an agreement that was filed with regulators. Mosaid's share will be one-third.

MOSAID Technologies (MSD-T)

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As of Sep 1, 2011 3:59

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Google's Nortel patent pact

Ottawa-based Mosaid isn't paying anything for the patents. Instead, it is expected to earn its money by increasing the income from the patent portfolio by pursuing settlements and lawsuits against wireless companies that are using the patented ideas.

Mosaid expects that the revenue from the new business will exceed “by a long shot” all the revenue it has earned in the past 35 years, which tally up to about $1-billion, Mosaid chief executive officer John Lindgren said in an interview. Over the next five years, he expects that there will be $500-billion of devices sold that will include patents that Mosaid will be able to license.

“This is one of the most valuable patent portfolios ever to change hands,” Mr. Lindgren said.

The patents have an average lifetime of 10 to 11 years as well as applications for new ones. The portfolio includes patents on technology for phones that are currently in use, as well as on technology for the next-generation 4G phones that are in the works.

Given the competition for patents, Mosaid's deal is a big coup for a relatively small company.

In the wireless world, patent enforcement is a source of cash flow that companies like Nokia are seeking to maximize. Companies around the world want to control key patents because of the cash flow and leverage that licensing intellectual property can provide. That's led to a wave of big spending by the top wireless companies as they try to lock up intellectual property.

A group led by Apple Inc. (AAPL-Q381.03-3.80-0.99%) paid $4.5-billion (U.S.) earlier this year to buy the wireless patents of bankrupt Nortel Networks Corp. Google Inc., which lost out in the Nortel auction, then agreed to buy Motorola to get wireless patents it is hoping will solidify its position as a mobile-phone developer.

Mr. Lindgren said that the Nortel portfolio contained 500 patents that were viewed as essential for wireless systems, while in the Nokia package there are 1215.

“This is a portfolio that is phenomenal if you look at the billions and billions that Nokia has put into it” in research, Mr. Lindgren said. “They are one of the great innovators.”

The transaction comes at an opportune time for Mosaid, which has been attempting to fend off a $480-million hostile takeover bid from rival Canadian patent management company Wi-LAN Inc. Mosaid said it has been working on the transaction since March, long before Wi-LAN launched its bid. Mosaid said that under the terms of the deal with Nokia, Nokia could require Mosaid to give up the patents should Wi-LAN's bid be successful.

It's also a boost for Ottawa's technology scene, which lost a big citizen when Nortel Networks went bankrupt and its assets, including a huge patent portfolio, were sold off.