Mimesis Law
16 November 2018

Can Patents Help Right Blackberry’s Ship?

Sept. 23, 2015 (Mimesis Law) — Blackberry’s patent portfolio seems to make the news approximately once every six months. In the summer of 2013, BlackBerry announced that it was looking at strategic alternatives, including a potential sale of the entire company.  Industry analysts, including Markman Advisors, commented that the BlackBerry portfolio had significant value in the marketplace and discussion by investors and commentators about the patent portfolio as a source of capital began around that time. By the beginning of 2014, several investment banks were ready to help transact a sale. By the beginning of this year, rumors circulated that BlackBerry may sell some or all of their patents to Samsung.

That strategy to rely on patents as part of the BlackBerry turnaround was confirmed by CEO Chen last week at the Waterloo Innovation Summit:

“We have today about 44,000 patents. The good thing about this is that we also have one of the youngest patent portfolios in the entire industry, so monetization of our patents is an important aspect of our turnaround.”

BBRY reported a significant jump in patent and software licensing revenue in the first quarter of this year, which signals that there may be some opportunity to leverage patents to generate shareholder value.  To get an idea of the strength of the company’s portfolio and the opportunities that lie within, recall the technical features in BBRY phones have had that provided the company with a competitive advantage in the past, namely push email and security.  The company also has significant numbers of patents related to battery life, general wireless technologies and a significant portfolio of LTE technology patents.  These technologies are as important as ever in today’s smartphone environment and have traded for a premium in the last five or so years during the smartphone patent wars.

That said, the world has changed a lot since 2013 when focus increased on the BlackBerry portfolio as a valuable asset.  The Supreme Court decision in Alice has made a minefield in the world of software related patents, making it much more likely that certain patents will be invalidated if they are enforced.  The maturity of the IPR has made the enforcement process more lengthy and expensive, as most patents that are the subject of litigation are hit with IPR challenges which can cost upwards of $1 million each.  FRAND licensing obligations have seemed to increase significantly, with court decisions by the CFAC and the 9th Circuit of appeals supporting limited damages claims in FRAND situations.  Finally, we have seen widespread criticism of patent enforcement by companies that are seen as too aggressive, including “NPEs”.

You can identify at least the last concern in Chen’s comments, where he expresses the concern that he does not want to turn BBRY into a patent troll.

“If you want to go about monetizing your patents in a non-aggressive, legal way then it takes time, and in a turnaround time is one of the key commodities you don’t have, so balancing those two is very difficult.”

Operating in today’s legal environment, extracting new sources of meaningful licensing revenue while avoiding the “troll” label may be a tough challenge for any patent owner, even an operating company with a history of innovation like BBRY.  With all of the new hurdles placed in front of patent owners, potential licensees should be much more likely to fight as opposed to paying any significant licensing fees.  If BBRY is seen as unwilling to aggressively enforce, there may be little motivation for licensees to even negotiate.  If BBRY is forced to launch a significant enforcement campaign to bring licensees to the table, it is easy to anticipate that the defendants will throw out the troll label.

Disclosures and Disclaimers:

The author of this post is a private fund manager. At the time of publication, funds and accounts managed by the author had no position in the companies discussed herein. Such funds and accounts may buy and sell securities of the companies mentioned in this post, both before and after the publication of this post and without giving further notice to any party. This post reflects the opinion of the author, and does not necessarily reflect the opinions or positions of any other entity.

The information set forth in this post does not constitute a recommendation to buy or sell any security. This post contains certain “forward-looking statements.” When used herein, the words “anticipate,” “intend,” “estimate,” “believe,” “expect,” “plan,” “should,” “hypothetical,” “potential,” “forecast,” “project,” variations of such words and similar expressions are intended to identify forward-looking statements.  All of these statements are subject to various factors that may or may not occur, and may cause the analysis in this post to differ materially from actual events.  This post is based on information that the author reasonably believes is reliable; however, the author gives no guarantee as to the accuracy or completeness of information relied upon.  The author makes no representation as to the accuracy or completeness of the information set forth in this post and undertakes no duty to update its contents.

Main image via Flickr/Maurizio Pesce

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