Intellectual Property

BlackBerry Friends Facebook

What we know right now is that both sides were able to get to a deal after years of litigation.

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(Photo by Sean Gallup/Getty Images)

Never doubt the power of investor excitement. Or assume that the only value of a patent litigation — especially for a publicly traded company monetizing its patents — is the amount of damages at play. Those two lessons were reinforced by a wild day of trading this past Friday for a legendary hardware company that has become very dependent on its huge patent portfolio for revenue generation. The company? None other than BlackBerry, the maker of electronic companions for a generation of lawyers. At one point Friday, the company’s market cap was up over $1 billion, before fading over the course of the day to close up 8%, or the equivalent of (only) a few hundred million added to the company’s value. In addition to the price swing, over 150 million shares traded hands, capping off a frenzied round of trading right before the weekend.

What set off the fireworks? At first it was rumors about a global patent settlement between BlackBerry and Facebook — rumors that were quickly followed by confirmation that a settlement had been reached. As expected, terms of the settlement were announced as confidential, but that did not stop investors from driving up BlackBerry’s share price, perhaps under the assumption that Facebook had agreed to pay a significant amount of money in exchange for patent peace. The declining enthusiasm for the news, at least as reflected in the fade in BlackBerry’s share price as the day wore on, was most likely a reflection of sophisticated investors recognizing that optimistic assumptions about how much Facebook may have agreed to pay were at best speculative. Yes, perhaps a payment by Facebook was agreed to, but that fact (or the amount) will likely not be confirmed until BlackBerry’s next quarterly investor updates at the earliest. Still, Friday’s action in BlackBerry’s share price is a potent reminder of the potential value generation for publicly traded companies embarking on a patent monetization campaign.

While the terms of the settlement may have been confidential, it is worthwhile to consider what a settlement between BlackBerry and Facebook may have looked like. It is even more worthwhile to evaluate how the moves and countermoves (some of which I chronicled on these pages back in 2018) each side employed over the years of litigation between the parties may have contributed to the result reached this past week. While we can speculate that the settlement may have included a cross-license, as well as a global license to BlackBerry’s portfolio that would preclude future assertions against FaceBook, it is hard to really know what the actual settlement terms are — no matter how interested investors are in knowing the details. What we do know is that both sides were able to get to a deal after years of litigation.

From a timing perspective, it is not surprising that the settlement comes on the heels of a negative ruling for BlackBerry in the Federal Circuit. As reported in TheRecorder, BlackBerry’s attempt to overturn unfavorable Alice rulings in its cases against Facebook and Snap appeared to go well as the “Federal Circuit sounded… as if it might revive” those patents. But despite any optimism that may have arisen from the oral argument, the Federal Circuit panel quickly issued a Rule 36 affirmance of the ineligibility determinations. With that fresh setback in hand, it certainly appears that BlackBerry was motivated to call a halt to its campaign against Facebook before more damage was done to the reputation of its patent portfolio.

Despite the setbacks it faced against Facebook, it would be unfair to call BlackBerry’s campaign a total failure. For one, it did get to the point where it could announce a settlement, with a resulting rise in company value as a consequence. It also showed that it could go toe-to-toe with a very skilled patent defendant — one with the resources and will to execute a textbook activist patent defense strategy, consisting of a countersuit, IPRs, and early validity challenges to the BlackBerry patents asserted against it. In short, BlackBerry managed to hang on and live to fight another day, perhaps against a less inclined-to-fight-back opponent.

Assuming that the settlement did not result in Facebook making a substantial payment to BlackBerry, then it is likely that the money spent on Facebook in its own defense paled in comparison to the financial demands BlackBerry may have made at the outset of the case. Which would make the defense costs, no matter how substantial, money well-spent — both in terms of the financial savings relative to BlackBerry’s demands as well as with respect to the deterrent effect against prospective patent monetization hopefuls. The latter objective should not be underestimated, since if Facebook was able to repel the assault of a (former) technology giant armed with a reputation for innovation and many thousands of patents, what hope does a less-pedigreed patent owner have against the company? Yes, patent owners can and do win against the most-dogged of defendants on occasion. But it remains a risky endeavor, especially against a company like Facebook.

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Ultimately, in addition to serving as a reminder that even a confidential settlement can bring dividends to a patent owner, this case also reminds us that even the most heated patent disputes can and do settle at some point. The balance of power between plaintiff and defendant may shift over time, as court determinations and market factors make an impact. But settlement is always an option, and skilled litigators do well by their clients by keeping that in mind, while also looking to drive the best bargain available once a settlement window opens. If anything, BlackBerry friending Facebook drives that lesson home.

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.

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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