BlackBerry Limited declared today that it has reached a deal to sell nearly all of its non-core patents and patent applications to Malikie Innovations Limited (“Malikie”), a recently established subsidiary of Key Patent Innovations Limited (“KPI”), a prominent intellectual property monetization company, for a combination of cash at closing and potential future royalties in the aggregate amount of up to $900 million.
There are no funding restrictions on the deal. A renowned American investment company with more than $30 billion in assets under management has agreed to provide funding.
“We’re extremely pleased to have executed this agreement with KPI, whose industry-leading expertise and experience positions them well to realize the patent portfolio’s potential and enhance returns for BlackBerry,” said John Chen, Executive Chairman & CEO, BlackBerry. “This transaction, once complete, will further strengthen our balance sheet while simplifying our business and enabling increased focus on our core IoT and Cybersecurity opportunities.”
“We are very excited to have completed this transaction with a partner of BlackBerry’s calibre, and we look forward to getting to work to maximize returns from this portfolio,” said Angela Quinlan, Managing Director, KPI.
BlackBerry will get $170 million in cash at closure along with an additional $30 million in cash on the third anniversary of closing, under the terms of the contract. Moreover, BlackBerry will be qualified to earn yearly cash royalties based on the revenues produced by the BlackBerry patents, as follows:
- 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.
The initial ceiling on royalties paid to BlackBerry will be $700 million, with a yearly cap increase of 4% of the amount of the original cap that has not yet been paid to BlackBerry as of the date of the increase. Malikie’s expenses will also be limited when determining earnings made.
Under the deal with Malikie, some 32,000 patents and applications will be auctioned, most of which deal with wireless networking, mobile devices, and messaging. Patents and applications that are required to sustain BlackBerry’s present core business activities are not included in the deal. Moreover, it removes all current revenue-generating contracts and about 120 monetizable non-core mobile device patent families (representing about 2,000 standards-essential patents and applications). Customers’ usage of any of BlackBerry’s products, solutions, or services won’t be impacted by the deal because BlackBerry will obtain a licence back to the patents that are being sold.
The completion of the deal is contingent upon, among other things, the fulfilment of all regulatory requirements under the Investment Canada Act and the Hart-Scott-Rodino Antitrust Improvements Act in the United States.
