BlackBerry has completed the sale of substantially all of its non-core patents and patent applications to Malikie Innovations Limited (“Malikie”), a wholly-owned subsidiary of Key Patent Innovations Limited.
Under the terms of the sale, unchanged from those previously announced, BlackBerry received $170 million in cash at closing.
The transaction included the sale of approximately 32,000 non-core patents and applications, and excluded those necessary to support BlackBerry’s current core business operations.
BlackBerry has retained all existing revenue generating agreements, and approximately 2,000, primarily standards essential, patents relating to mobile devices.
BlackBerry says that the transaction will not impact customers’ use of any of BlackBerry’s products, solutions or services.
The deal marks the second attempt by the company to offload the bulk of its intellectual property after a US$600-million sale fell apart last year.
It structured a complex earnout deal that will see it receive a growing share of profits from Key’s efforts to squeeze more returns from the divested patents. BlackBerry will get 8 per cent, or $40-million, of the first $500-million of profits Key generates, 15 per cent of the next $250-million, 30 per cent of the following $250-million and half of all subsequent profits – to a point.
BlackBerry’s royalties will be capped initially at $700-million, but that can increase every year by 4 per cent of the remainder of the US$700-million it has not yet received.
BlackBerry will receive a license back to the patents being sold and the transaction will not impact customers’ use of any of BlackBerry’s products, solutions or services.
The company announced the first attempted patent sale 14 months ago. Catapult IP Innovations Inc., a Baltimore-based, Delaware-registered entity, agreed to buy the IP with US$400-million of conditional debt provided by a syndicate led by Toronto-based Third Eye Capital.
Catapult needed to raise US$90-million in equity to access the loan and complete the deal. But last June BlackBerry said it was no longer under exclusivity with Catapult given how long the deal had taken to close and said it was exploring other options.
By August Catapult still hadn’t raised the equity, and Third Eye pulled out with the rest of its syndicate. BlackBerry terminated the deal in December.