BlackBerry sells mobile patents for $900 mn to Malikie Innovations

BlackBerry said it would sell patents, primarily related to its mobile devices, for up to $900 million after the Canadian software company scrapped an earlier deal with Catapult IP Innovations.
BlackBerry ClassicMalikie Innovations will buy the patents and pay $170 million in cash on deal closing, and another $30 million three years later. BlackBerry will also get annual cash royalties from the profits generated from the patents, relating to its messaging and wireless networking among others.

Malikie is a newly formed unit of intellectual property monetization firm Key Patent Innovations.

Blackberry said last year it was exploring options to sell its patents as the planned deal with Catapult IP Innovations was taking longer than usual to close, leading to a loss in exclusivity.

“Catapult was unable to secure financing that would have enabled it to complete the previously announced transaction on amended terms that were acceptable to BlackBerry,” Blackberry said in a news statement.

Known for its smartphones with a QWERTY physical keyboard and the BBM instant messaging service, BlackBerry’s core businesses today are cybersecurity and software used by automakers.

Last year, Blackberry pulled the plug on service for its smartphones, a culmination of years of market share loss to Apple’s iPhones and rival Android devices.

Deal details

BlackBerry will receive $170 million in cash on closing and an additional $30 million in cash by no later than the third anniversary of closing. BlackBerry will be entitled to receive annual cash royalties from the profits generated from the BlackBerry patents, on the following basis:

8% of the first $500 million of profits;

15% of the next $250 million of profits;

30% of the next $250 million of profits; and

50% of all subsequent profits.

Royalty payments to BlackBerry will initially be capped at $700 million, subject to an annual cap increase of an amount equal to 4% of the remaining portion of the $700 million that has not been paid to BlackBerry as of the date of the increase.  Malikie’s costs will also be capped in the calculation of profits generated.

Approximately 32,000 patents and applications relating primarily to mobile devices, messaging and wireless networking will be sold in the transaction with Malikie. The transaction excludes patents and applications that are necessary to support BlackBerry’s current core business operations. It also excludes 120 monetizable non-core patent families relating to mobile devices, as well as all existing revenue generating agreements.