Paradigm research on U.S. patent reform

Here is a relevant piece from Paradigm Capital’s tech analyst. There are some miles left to travel, but U.S. patent reform isn’t a dead end just end.

“Wi-LAN (WIN-T) / MOSAID (MSD-T)

Patent Reform Legislation Gets House Approval

On Friday, the US House of Representatives approved (220-175) legislation for some patent
reform. The bill is designed to make patents harder to receive and to cap the size of damages
in some cases. The bill still requires approval from the US Senate, which could occur later this
fall and will also need to get Presidential approval. Other elements of the bill include a change
in principle from a system based on “first to invent” to a system of “first to file”, which puts the
US system finally in-line with the rest of the world. Overall, we think the changes are designed
to prevent reoccurences of the NTP vs Research in Motion type case, where the patents were
reviewed and ultimately dismissed, but NTP was still successful in holding RIM hostage with
the threat of an injunction for damages that approached $1b ($613m to be precise).

We do not believe that these changes will affect the normal course of business for companies like WIN and MSD, especially given we have never modelled ridiculous amounts like that achieved by NTP and others. Licensing of intellectual property is a daily occurrence in the technology universe and that isn’t going to change with this bill, whether it gets approved into law or not.

We continue to recommend Wi-LAN as a Buy with an $8.50 target (based on a 10 year DCF)
and MSD as a Hold with a $23.00 target.

Analyst: Barry Richards (416)364-4835
brichards@paradigmcapinc.com”

MRM