Nokia is Well Positioned to Acquire and Monetize BlackBerry Patents

Fresh from its recent deal with Microsoft, Nokia may be well poised to acquire BlackBerry’s patent portfolio in whole or part, if the patents are made available for sale.  Nokia sold its Devices & Service business to Microsoft for EUR 3.79 billion, and licensed its utility patents for another EUR 1.65 billion, for a total transaction price of Eur 5.44 billion in cash (~ US 7.2 billion).

With Nokia exiting the smartphone manufacturing business, the company announced that it is choosing to focus on its NSN infrastructure business, its location services business, and a new division coined “Advanced Technologies”. However, Nokia’s ability to generate future on-going revenue will likely be based on how well the company can monetize its patent portfolio.

In recent years, Nokia has made interesting plays regarding its intellectual property, suggesting that the company has already been exploring aggressive licensing and enforcement initiatives through various joint-ventures.

For example, in September 2011, MOSAID acquired Core Wireless Licensing S.a.r.l., a company that held approximately 2,000 patents originally filed by Nokia. Per the terms of the deal, Nokia and Microsoft would retain two-thirds of the gross royalties from future licensing and enforcement of these patents.  MOSAID is reportedly expecting $3 billion in licensing revenue over the next decade from these patents.

Furthermore, in  August 2012, Vringo acquired 500 Nokia patents in a $22 million deal. Per the terms of the deal, Nokia is entitled to receive a 35% share of royalties after Vringo recoups its initial investment. Vringo has had some success, obtaining a $30 million verdict against Google and AOL, as well as a a $1 million settlement with Microsoft.  It is noted that Vringo had been seeking at least $696 million in damages against Google and AOL however.

In addition to these joint-ventures, Nokia has approximately 40 licensees for its standards-essential patents (SEPs), which are subject to FRAND licensing terms.  It is not clear how many of BlackBerry’s patents are deemed SEPs, however, we believe the actual number of SEPs in BlackBerry’s portfolio is much lower than in Nokia’s, given that Nokia’s US patent portfolio alone is roughly four times the size of BlackBerry’s.

While Nokia historically has not been very active in enforcing its intellectual property, the company is currently in patent litigation directly with HTC in multiple venues around the globe.  Now that it has exited the smartphone space, Nokia is positioned to aggressively seek license terms against potential infringers, and it can be prepared to litigate without the risk of counter-suit that previously existed (assuming there are no indemnification provisions with its deal with Microsoft or liability for its past smartphone operations).

While BlackBerry’s patent portfolio is considerably smaller than Nokia’s, interestingly, BlackBerry’s US patents have a relatively high reverse citation count of 58 citations per patent, versus only 10 reverse citations per patent for Nokia. While not a conclusive factor in determining patent portfolio strength, BlackBerry’s US patents as a whole may stand a higher chance of surviving an invalidity challenge than Nokia’s patents.  This would presumably make BlackBerry’s patents attractive to any firm hoping to monetize the patents.

Additionally, Nokia is no stranger to patent licensing.  The company reportedly earned over $650 million in patent royalties from 2011-2012.  Acquisition of BlackBerry’s patents would strategically fit in line with Nokia’s MOSAID and Vringo ventures, and it would provide Nokia with additional patent assets which may not be as heavily FRAND encumbered as some of its own patents.

 

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