The last five years have been busy for BlackBerry on the patent front as it has moved from a relatively passive, defence-based strategy to one that is much more focused on monetisation. Most recently, the company announced an agreement with Marconi Group entity Teletry to outsource much of its licensing activity in the smartphone space. In light of that deal, IAM focuses on the Canadian outfit’s patent position to provide an exclusive analysis of its portfolio, an overview of its licensing activity and a look back at key IP-related events.
Patent portfolio breakdown
Among the earliest players in the smartphone market – and at one point a leader in the field – the robust foundation of BlackBerry’s patent portfolio has served as a springboard for its transition to patent monetisation since 2014. In terms of patent strength, BlackBerry remains an industry leader: in IEEE’s Patent Power 2016 – which measures and ranks portfolios based on the number of US patents that have been granted in the previous year, weighted against other metrics of growth, impact, originality and generality – the company comes fourth in the communication and internet services sector. It is only beaten by Google, Facebook and Verizon Communications:
IEEE Patent Power 2016 – top ten companies in communication and internet services (view full-size here):
BlackBerry is the only non-US North American company to make the list. Similarly, BlackBerry was the only Canadian firm to be featured in Clarivate Analytics’s 2015 list of the top 100 global innovators; notably, though, it fell off this list in the 2016 edition of the report.
The size of the BlackBerry portfolio by granted patents, as of December 1st, can be seen below, with the data being provided by IP data and analytics platform, ktMINE. The top five patent classifications for its holding are also listed; its spread of patents among these classifications mostly falls in line with what one would expect from a company that was once a leader in the handset market. It is worth mentioning, though, that in the press release announcing its deal with Teletry, BlackBerry states that it owns approximately 40,000 patents and applications in total.
According to analysis of the BlackBerry portfolio undertaken by patent services and technology intelligence firm TechInsights: “The spread of its patents in ‘materials’, ‘mechanical’, ‘circuit’ and ‘system’ are typical of a mobile company with some history of internal product manufacturing, and no semiconductor fab. There is often a video peak [in the patent landscapes] in today’s mobile companies, but this is not seen in BlackBerry’s portfolio. Instead, its success was based more on text and security. In particular, security appears central to its portfolio.” TechInsights also points to the natural growth of the portfolio: “It has grown organically for the most part, with no acquisition contributing dramatically. Only approximately 11% of contributions come from acquisitions; this is a relatively small number, but still numerous enough to land throughout the portfolio, reinforcing all of its technologies.”
Indeed, BlackBerry’s broad portfolio is one of its key strengths. Speaking to IAM earlier this year prior to his departure from the company, Mark Kokes – formerly the senior vice president of IP, licensing and standards – stressed: “Our patents cover multiple technologies – maybe 40 plus. We have depth in areas like smart grids, gambling, manufacturing, mobile communications, radars and tracking, logistics, and many more.” He also emphasised that the company was constantly mining the portfolio looking at new verticals. Some of the company’s most significant licensing deals in the last few years, such as with Canon, International Game Technology and Cisco, were also outside of the core mobile sector – this illustrates not only the wide-reaching strength of its patents, but also its potential as technologies continue to converge.
Key storylines in the past five years
Below is a timeline of the most salient IP-related developments for BlackBerry since 2013 – before this date, the company was known as Research in Motion (RIM).
At the start of the year, RIM dropped the name it had been using for decades and rebranded itself by adopting the name of its best-known product – BlackBerry. This came as part of a move to reinvent the company as it aimed to expand into new areas.
The following month, in February, one of the largest banks in Canada more than doubled its valuation of BlackBerry’s patent portfolio, based on IAM’s US Patent 100 – a list of the companies with the biggest US patent portfolios. .
However, reflecting the difficult period the company was going through, Thorsten Heins, who was BlackBerry’s CEO, announced that it was open to a licensing deal or even an outright sale of the company, after a disappointing debut for its new line of smartphones.
In September, BlackBerry agreed to be bought by a consortium led by Fairfax Financial Holdings, but that it would continue to explore other options with other potential buyers while negotiations continued. The buy-out never happened.
Near the end of the year, Heins stepped down and John Chen took over as interim CEO. Chen would subsequently help to lead the way in BlackBerry’s IP monetisation drive.
In March, the company reported a net loss of $5.9 billion in its latest financial year. However, the company was pleased with its fourth quarter performance and stated that it was slowly returning to a path of growth and profitability.
A few months later, BlackBerry hired Mark Kokes from InterTrust to be its vice president of IP and standards. Kokes would eventually part with the company, but not before contributing significantly to its patent licensing programmes and strategies. His arrival was followed shortly after by the announcement of the creation of a new technology unit – BlackBerry Technology Solutions. This new unit was designed to pull together a number of autonomous technology centres within the company and to manage its innovative technology assets and extensive patent portfolio.
However, the big story from an IP perspective was without a doubt the announcement of the company’s royalty-bearing patent cross-licensing agreement with Cisco. As argued by IAM, the release of information showing one side paying the other money was unusual and indicated that this was potentially a turning point in BlackBerry’s monetisation programme.
2016 opened with further evidence of BlackBerry’s focus on IP monetisation after court documents filed in Chicago revealed that the company had sold a portfolio of patents for as much as $50 million.
It continued to gather steam in the patent monetisation space with two new deals being locked in place in February: it announced that it had reached deals with Canon and International Game Technology – both agreements looked to contain an element of royalties.
Soon after, BlackBerry began filing a series of patent-related lawsuits. In July, it initiated action against Avaya alleging infringement of eight of its US patents. The next month, BlackBerry filed two lawsuits against BLU.
In an unsurprising development, John Chen confirmed in September that Blackberry would no longer be manufacturing devices; instead, it would outsource hardware development and become a software and services business. In the same month, the company announced its first major software and brand-licensing agreement with joint venture PT BB Merah Putih to license its software and services for the production of handsets for the Indonesia market. Also in September, Fairfax Financial Holdings bought 50 million shares in BlackBerry, bringing its total shares in BlackBerry to 96.7 million, or 18.5% of the total.
At the close of the year, BlackBerry signed a global brand and software deal with China’s TCL Communication.
In February a long-term licensing deal with leading Indian telecom company Optiemus Infracom was announced for the manufacture of handsets in India, Sri Lanka, Nepal and Bangladesh.
In April the company seemingly made its second significant disposal of patents rights in a deal facilitated by Hilco Global. In August, Mark Kokes departed, and he was followed by director of licensing Victor Schubert, who stated in October that he was no longer with the company. Also in October, the company settled all of its lawsuits with BLU and agreed on a patent licensing deal.
The next month, BlackBerry announced its new patent licensing partnership with Teletry. Most recently, news has surfaced that BlackBerry has been ordered by an arbitration court to pay $137 million to Nokia to settle a payment dispute. BlackBerry has subsequently claimed it will pursue a separate patent infringement case against Nokia.
At the beginning of 2011, Brand Finance valued the BlackBerry brand at $4.36 billion. By September of the same year, this figure had fallen to $3.32 billion. To further emphasise BlackBerry’s difficulties, its brand value continued to decline in the following years; by 2013, it even dropped out of Brand Finance’s Global 500 (its position on this table for each year can be seen in the table below) – its brand has yet to make a return to the list as of 2017.
That BlackBerry’s patent licensing programme has become an integral part of the company’s business operations should be apparent from the events of the last five years. As John Chen has emphasised, the company has deliberately shifted away from being a handset manufacturer to focus on other services. He stated on a quarterly call with analysts this year that IP licensing is a key driver for the software business and, despite past sales of BlackBerry patents, that it is very much in a patent licensing mode.
On his most recent quarterly call with analysts, Chen revealed that the company had recognised IP revenues from three other licensing deals with Ford, BLU and Timex, and mentioned an aim of reaching $100 million in IP revenue by the end of the year. In a recent earnings release, the company announced record software and services revenue in the second quarter for the period ending 31st August. To emphasise the success its IP and licensing programme has had, its IP revenues almost doubled compared to the first quarter of the fiscal year, jumping from $32 million to $56 million.
As we previously discussed on IAM, the outsourcing of a significant chunk of its licensing business to Teletry may free up internal resources and allow the company to expand business in other verticals.
All that being said, the sudden departures of Mark Kokes and Victor Schubert, both of whom were key members of the company’s IP and licensing function, could make things tricky in the short term (and may be another driver of the Teletry deal), despite Chen’s claims that BlackBerry’s licensing revenues will remain on track without them.