IP turn of Events - not impressive - details - DNRHow to revive a STALE (2 years) Deal in 3 minutes. Sense of Humor required - the below read will upset the author or shareholder
https://www.business2community.com/sales-management/revive-stale-deal-3-minutes-less-0734050
BlackBerry hints at restart for licensing business as patent sale stalls BlackBerry CEO John Chen, frustrated that the company’s sale of 38,000 legacy patents to Catapult IP Innovations is taking so long, revealed this week that the company is "finalising our plan to re-start the monetisation engine ourselves, should that be necessary”.
However, Chen claimed to be optimisitic that Catapult will still lock down financing to close the sale and made clear that he firmly believes selling the portfolio is best for shareholder value. The assets are “still relatively fresh”, he emphasised, and read on technology that is “not related to our core business”.
Catapult pledged in January to
pay $600 million for BlackBerry’s patents and was supposed to make a $450 million upfront payment, followed by five instalment payments within three years. It scored a major milestone in March by winning Canadian and US
government regulatory approval, but then stumbled in August when lead financing partner
Third Eye Capital backed out. This led to the dismantling of a group of US and Canadian investors behind $400 million of debt financing that was
conditional upon raising $90 million in equity investment.
“We believe the turmoil in the financial markets created unexpected challenges for their original financing syndicate. However, there has been much interest from other parties wanting to step in to take their place, and Catapult is currently working to lock down their final syndicate,” Chen stated. “In parallel to this, we are actively working on an ordinance where financing is not a contingency.”
Because
Catapult failed to raise the $90 million in equity to unlock its conditional debt by a deadline last spring,
BlackBerry exited its exclusivity period.
Chen said in June that other buyers were expressing interest,
which makes it surprising that he announced on Tuesday that the company may re-start its own licensing business instead.
That unit has seen a dramatic fall in income since BlackBerry paused licensing activities in late 2020 for the pending sale. Royalty revenues declined by 77% from fiscal year 2021 to 2022. Income from 1 June to 31 August –
its 2023 fiscal year second quarter – stood at only $6 million. This represents a 60% year-over-year decline and a steeper 94% drop if compared with the same quarter in 2021, when BlackBerry’s licensing business was still active.
It is no small task to re-start the licensing business. BlackBerry employed up to 85 IP professionals, but since 2017 most have left and the
team now numbers 15 or less. Licensing director Bryan Yearwood’s career in IP monetisation, licensing and litigation spans back to 1996, giving him the experience to run a revamped operation. But success would depend upon re-building the company’s patent prosecution and assertion teams – something that could involve between 20 to 40 new hires.
Chen stated in past earnings calls that BlackBerry has already picked the “low-hanging fruit” by licensing its assets to “big name” licensees.
“Now the business needs to go cultivate a pipeline for smaller names, which typically takes a little longer and a lot more back-and-forth. Big names do too, but big names at least get big numbers,”
Chen explained to an analyst in April.
Further monetising the portfolio means examining smaller players in new markets. This presumably excludes mobile communications and automotive, considering that BlackBerry has already penetrated those markets as a licensor via Avanci and through its relationship with Teletry, both of which run out of Marconi. Automotive may further be off limits as a licensing target, considering BlackBerry needs to maintain good relations with OEMs who are customers in its ongoing QNX vehicle operating system business.
That said, there are plenty of new markets to explore, including: consumer electronics; enterprise software; gaming and gambling; cybersecurity and browser technology; point-of-sale terminals; digital signage display companies; and other IoT segments. However, going after licensees in these sectors will take a significant investment of time, money and energy.
Making the necessary hires and building out the new licensing programmes could take many years. What's more, doing this would run counter to BlackBerry’s past statements: Chen has noted the patent sale was meant to generate cashthat could be ploughed into BlackBerry’s current focus on its IoT and cybersecurity business units. He certainly did not plan major investments in a licensing push involving the 38,000 legacy assets covering social media and messaging, enterprise security, enterprise collaboration and consumer voice and security technologies.
Viewed through this lens, Chen’s comments may be a signal to shareholders that the company is “not stuck with one option” – something he also stated in the past when noting that
other buyers have interest in the portfolio (he did not repeat this line during the latest earnings call). But other bidders weren’t willing to pay $600 million, while Catapult apparently failed to convince equity investors to put their money behind such a significant debt load.
If BlackBerry wants to sell the assets, it may now require accepting a lower price or a new deal structure requiring less cash up-front in exchange for a slice of future licensing revenues.
It would be a surprise ending to see the company ditch the whole process and start anew with in-house licensing.