Blackberry's US$600 million patent sale
Catapult IP Innovations Inc. has big plans for its newly-acquired trove of BlackBerry Ltd. patents.
The Delaware-based company, formed specifically to acquire substantially all of the former smartphone maker’s non-core portfolio of so-called “legacy” intellectual property, agreed Monday to pay US$600 million in a deal set to close later this year.
Catapult will be acquiring roughly 38,000 issued and pending patents related to BlackBerry mobile devices, messaging and wireless networking technologies, according to the deal’s primary financier.
“This is probably among the largest [patent] portfolios ever sold,” Arif Bhalwani, chief executive officer of Toronto-based alternative lender Third Eye Capital, said in an interview.
The dollar value is just a fraction of the US$4.5 billion fetched from a consortium of tech players in 2011 for the patent portfolio of bankrupt Canadian telecom giant Nortel Networks Inc. - that consortium included a US$770 million contribution from BlackBerry under its former name Research In Motion. However, the sheer number of inventions Catapult is buying is fully six times the size of Nortel’s portfolio of roughly 6,000 patents.
Bhalwani declined to name specific members of the Catapult management team, but said the company boasts “extensive experience in the IP space,” having previously “dealt with portfolios from Microsoft, IBM and other major technology companies.”
Notably, he said, Catapult has no intention of following the so-called “patent enforcement” business model.
“[Catapult] is not a patent troll and it doesn’t use aggressive legal tactics to try and enforce patent rights,” Bhalwani said. “It is not going to try and bully people into entering into licences based on bogus claims or things like that, that is not the plan here.
“The most important premise of this transaction is helping emerging companies and growth companies access this treasure trove of IP,” he said. “BlackBerry wasn’t able to unlock all these licences because they had channel conflicts. You can’t ask your customer to get licensed when you’re already doing a cross-licensing deal with them.”
Bhalwani said several BlackBerry employees would be joining Catapult as part of the transaction, though BlackBerry did not respond to a request for confirmation of that claim.
Rather than being legally-focused, Catapult is “backed by a team of inventors and entrepreneurs,” Bhalwani said.
Third Eye is leading a syndicate to provide Catapult with a US$450-million senior secured term loan to finance the acquisition, which is equal to the cash payment BlackBerry said it would receive in up to seven months, once the deal passes U.S. and Canadian regulatory reviews. The rest of the money will come in five US$30-million instalments starting three years after the deal closes.
Other members of the syndicate include a “major Canadian pension fund and an insurance company,” Bhalwani said, though he declined to name them specifically as they have yet to publicly disclose their involvement.
“A lot of lenders, banks in particular, don’t have the expertise to lend against IP - they perceive that as, at least on a discreet basis, as being too risky,” Bhalwani said, adding Catapult “reached out to us through one of the other lenders that is in our syndicate” because Third Eye is among the few lenders willing to secure loans against intangible assets such as IP.
“They needed somebody to lead the financing, take a meaningful stake [and] we are the majority of the syndicate,” he said.
BlackBerry is famous for having pioneered the mobile email messaging market, though it is also infamous for its experience with mobile email patents. In 2006, the company was forced to pay US$612.5 million to NTP Inc., which was founded by the late inventor Thomas Compana Jr. and lawyer Donald Stout, for having infringed on Campana’s wireless email patent.
In the future, Bhalwani said Catapult intends to ensure its trove of BlackBerry patents can be put towards the greatest possible use. The company intends to operate out of offices in Canada and the United States, he added.
“We think this allows all of that to be more broadly accessed by new markets, new industries and a lot more companies,” Bhalwani said. “Hopefully what it does is spin out a lot of new Canadian businesses that are now able to access that technology.”