BlackBerry No ‘Muscle’ Litigator, but Sees ‘Duty’ to Protect Its IP, Says CEO
BlackBerry CEO John Chen rejected an analyst’s depiction of the company on a Friday earnings call as an aggressive litigator accustomed to “flexing” its “legal muscles" by "going after some big players” with patent infringement lawsuits. Responded Chen: “Compared to some of the people we go after, we really don’t have that much of a muscle.”
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Facebook and BlackBerry are entangled in a legal tit for tat in two federal courts in California involving infringement disputes over a combined 13 patents between the companies. BlackBerry also has outstanding federal patent infringement complaints pending against Nokia and Snap. BlackBerry shares closed 11.7 percent higher Friday at $11.38 after the company reported Q2 revenue and profit results that beat expectations.
Chen believes “our duty” is to be sure shareholders “get a reasonable return on their investments,” he said. “Maintaining and creating an IP portfolio of our size and complexity, and to continue adding IP innovation into it, it’s a pretty costly proposition. Because of that, we believe we need to go after a company that uses our intellectual property.”
BlackBerry’s strong preference is to resolve those legal disputes through negotiations that yield long-term license agreements with recurring royalty revenue, rather than collecting a one-time cash settlement, said Chen. Resolutions come in “all sizes and shapes,” he said. Some companies are “very receptive” to long-term licensing deals, others not so much, he said.
“We absolutely do not want to sue,” said Chen. He thinks lawsuits are “really a waste of time and a waste of money,” he said. “But on the other hand, if people either are just ignoring us or not providing a reasonable resolution, then we have no other choice. For our shareholders, we believe we need to do the minimum.” BlackBerry uses the legal process “very, very carefully,” and in a “very limited” way, said Chen. “We prefer to have a business solution rather than a legal solution.”
BlackBerry draws $200 million in revenue “on an annual run-rate basis” from technology and IP in a licensing business that’s not “that well-understood” in the investment community, said Chen. On the technology side, which represents 30-40 percent of the company’s licensing revenue, BlackBerry provides its “secure embedded handset operating system” and “related security software” to smartphone OEMs, he said.
Royalties from the IP portfolio are the rest of the revenue in the company’s licensing business, said Chen. BlackBerry owns more than 37,000 patents globally, “with an average life of 10 years, which is rather young,” he said. Well more than half of BlackBerry’s current licensing revenue is “recurring,” he said.
The quarterly run rate for total recurring license revenue is $40 million-$50 million, said Chen. The licensing business is “a key component of our total software and services revenue mix,” he said. “We anticipate our licensing business to continue to grow steadily.”