Intellectual Property

Facebook Has No Likes For BlackBerry

Today’s iteration of BlackBerry is not making many friends on the patent licensing front.

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Lawyers of my generation are conditioned to wax nostalgic when they hear “BlackBerry.” For Biglaw associates in the (now unimaginable) pre-iPhone era, one’s BlackBerry was the equivalent of a medical resident’s stethoscope. You couldn’t play the part without one; these pages famously highlighted the importance of the device in Biglaw, even as late as 2009. BlackBerry’s heyday as a device maker is long behind us, however, and the “new” BlackBerry of today is built on offering software and services in high-growth potential technical areas such as cybersecurity and self-driving cars.

While BlackBerry’s customer-facing focus has shifted over time, one key prong of its current strategy is the monetization of its robust (reported to contain assets in the tens of thousands) patent portfolio. Having witnessed the company’s steady decline on the hardware front, I have long contended (see this article from 2013) that there was significant monetization potential in BlackBerry’s portfolio. Not least because management remains under pressure to generate revenue to compensate for setbacks in the smartphone sales front.

The early returns have been spotty. On these pages last year, I wrote that the company still had the capacity to “create a ruckus with its patent assets,” even as though to that point the company’s patent litigation campaigns to that point had failed to generate “a signature recovery earned as a result of those efforts.”

Nor has BlackBerry managed to earn a headline-generating patent win to date, even as it has announced some success in settling cases filed against Cisco, Avaya, and budget smartphone maker Blu Products. So while patent monetization revenues now make up to a quarter of BlackBerry’s revenues, the amount recouped by BlackBerry’s campaigns to date may not even equal the gargantuan $612.5 million BlackBerry itself paid to NTP back in 2006.

There is more than a hint of irony in how BlackBerry has metamorphosed from unwilling licensee to ambitious licensor in the space of a decade. Put another way, the biggest scalp perhaps ever claimed by a non-practicing patent assertion entity is now trying to establish itself as the most intimidating patent assertion entity of our day.  In fact, the NTP saga remains one of the biggest patent monetization coups of all time, and BlackBerry would surely love to replicate NTP’s success against a current tech giant if it could. And it is trying to.

The juicy target BlackBerry has settled on is Facebook, a company long-famous in the patent world for its pre-IPO patent acquisitions from Microsoft and others, as well as its successful fending off of Yahoo!’s licensing attempts in 2012. More recently, Facebook has established itself as a frequent IPR filer, while cultivating a reputation as a difficult target for prospective licensors. Despite that reputation, Facebook’s cavernous pockets have proved too much of a lure for BlackBerry, which earlier this year filed a patent infringement lawsuit aimed at Facebook’s important messaging assets. Yes, BlackBerry was previously well-known for its BBM messaging service and has a number of patents around messaging features. At the same time, it surely realized that Facebook would respond with force to the indignity of being sued. But it probably hoped that filing suit would bring Facebook to the negotiating table as well.

Well, Facebook has now responded with a lawsuit of its own against BlackBerry, and while the parties may be conducting back-channel negotiations, all we in the public see for now is Facebook fighting back with vigor. In fact, Facebook is apparently reprising the strategy it successfully deployed against Yahoo! — by countersuing as a way of dissuading the would-be licensor from thinking that they would be able to strike a lucrative deal with Facebook. And because Facebook was targeted first, it apparently has no compunction about using acquired patents of its own to counter-sue, irrespective of media criticism that Facebook is using patent troll-like tactics.

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For BlackBerry and its investors, Facebook’s countersuit is perhaps an expected consequence of BlackBerry trying to bring a much larger and resource-rich target to heel. At the same time, the added expense of defending against Facebook’s claims may end up hurting BlackBerry’s balance sheet in the short-term, at a time where the company’s revenues pale in comparison to what they were in the past.

What could be even more costly would be if the presence of the countersuit helped complicate BlackBerry’s attempt to license its patents to other potential targets. In the near-term, however, BlackBerry has no choice to do its best to see its lawsuits through — with keeping them alive the first priority. No easy task in this patent environment. On that front, BlackBerry recently got some good news, as the company got a more-favorable-than-not ruling with respect to Facebook’s (and later-filed against defendant Snap’s) Alice challenges to the asserted messaging patents. Whether BlackBerry can parlay that incremental litigation advance into a favorable deal is an open question.

Ultimately, the pressure is on BlackBerry to generate cash from its case against Facebook. The degree of difficulty is daunting, as Facebook has proven an expert navigator of today’s defendant-friendly patent waters — and surely has the resources to grind BlackBerry’s hoped-for patent blitzkrieg into at best a drawn-out siege. For now, Facebook is fighting back, proving that while former patent litigation associates may recall their BlackBerries with nostalgia, today’s iteration of the company is not making many friends on the patent licensing front. What will matter most of all, however, is whether BlackBerry’s licensing attempts bring in the cash. Because everyone finds a way to like a winner.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

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Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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