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Wi-LAN's patents include V-Chip, which gives parents control over inappropriate content on television. The chip is held by inventor Tom Collings. Wi-LAN

Mosaid Technologies Inc. is urging shareholders to hang on to their stock for now as it considers a hostile, $480-million takeover bid from patent company rival Wi-LAN Inc., a suitor it has rejected in the past.

"Mosaid's board of directors recommends that shareholders take no action until shareholders have received further communications" from the company, Mosaid (TSX:MSD) said in a brief statement Thursday.

Mosaid has a meeting of its board of directors scheduled for Aug. 24 and has said the takeover offer will be on the agenda.

Wi-LAN (TSX:WIN) announced its all-cash bid for Mosaid after markets closed Wednesday, saying it would take the $38 per share offer directly to Mosaid stockholders after having its overtures rebuffed in the past.

Wi-LAN said the offer represented a premium of about 31 per cent to the closing price of Mosaid stockl on Wednesday.

Shares shoot up 24 per cent

Shares in Mosaid shot up more than 24 per cent on the Toronto Stock Exchange to $39.35 in midday trading Thursday, suggesting that Wi-LAN will have to increase its all-cash offer or that investors believe there could be other bidders.

Wi-LAN argues that combining Canada's two leading two patent licensing companies would make for a stronger company with more global clout and the prospect of fewer lawsuits over patent infringement.

Wi-LAN CEO Jim Skippen said Thursday that the two companies together have a portfolio of more than 4,200 patents in the computer memory chip, micro component and consumer electronics device markets, including mobile phones, digital TVs and devices equipped with short-range Wi-Fi wireless technology.

"When combined, the two patent portfolios are likely to have better coverage internationally than they currently do separately," Skippen told analysts on a conference call.

Combining the two patent licensing companies would also mean fewer lawsuits alleging patent infringement, he said.

"More patents applicable to a product usually makes it easier to secure a licence without litigation."

Wi-LAN noted that Mosaid has rebuffed merger offers a number of times in recent years and Skippen said that if the current bid is successful, Wi-LAN plans to increase its dividend.

Wi-LAN and Mosaid generate most of their revenue by licensing technology rights to large telecom and computer chip makers, which have recently demonstrated they are willing to pay hundreds of millions or even billions for patents.

"It's my belief that to succeed in today's market bigger is better," Skippen told analysts.

"This is because increased scale means a deeper, larger patent portfolio, a larger team and better access to financing. Increased scale makes it much less attractive for potential licensees to litigate rather than taking a licence."