In early May, BlackBerry completed the sale of “substantially all of its non-core patents and patent applications” to Malikie Innovations Limited—a subsidiary of Irish patent monetization firm Key Patent Innovations Limited—for $200M in upfront and guaranteed payments, plus a profit-sharing agreement. The transaction closed roughly 16 months after BlackBerry announced a tentative agreement to sell the same portfolio to York Eggleston’s Catapult IP Innovations Inc.—which is now seeking to compel Malikie to participate in an arbitration against BlackBerry to unwind last month’s transaction.

The Catapult Deal

In early 2022, after years of shopping its patent portfolio, BlackBerry announced that it had entered into an agreement to sell “substantially all of its non-core patent assets” (described as more than 35,000 worldwide patent assets related to BlackBerry’s “messaging, cybersecurity, telecommunications, and wireless networking technologies”) to Catapult IP Innovations for $600M.

Under the terms of the BlackBerry-Catapult patent sale agreement (“PSA”), completion of the transaction was conditional upon clearing regulatory review in the US and Canada (which occurred in Q1 2022), and it was also subject to certain financing and closing conditions, described as follows in an 8-K filed by BlackBerry:

Catapult is a special purpose vehicle formed to acquire the BlackBerry patent assets. Catapult’s principal funding for the acquisition will be a $450 million senior secured term loan, for which it has received $400 million of conditional commitments from a lending syndicate led by Toronto-based Third Eye Capital that includes a Canadian pension fund. Catapult is required to complete an equity financing for an additional $90 million to be able to draw on the debt financing and complete the acquisition. BlackBerry may terminate the Patent Sale Agreement if Catapult has not secured the required financing commitments within 90 days of the date of the Patent Sale Agreement.

Based on the date of the announcement of the deal (January 31, 2022), and absent an extension by BlackBerry, Catapult appears to have had until early May 2022 to line up the required financing.

That apparent deadline came and went, and in June 2022, BlackBerry issued a press release stating that it was no longer under exclusivity with Catapult, and, given the length of time that the transaction had taken, the company had begun “exploring alternative options”. 

A few months later, The Globe and Mail reported that Third Eye had pulled out of the deal, along with the rest of its lending syndicate. A source told The Globe that “the lenders grew impatient tying up capital as the deal dragged on and as other investment opportunities surfaced”, said The Globe.

According to BlackBerry, it terminated the deal with Catapult in December 2022.

However, in a complaint filed against Malikie Innovations this week in the Eastern District of Virginia—a complaint that does not discuss the aforementioned financing requirements, 90-day deadline, or any extensions of that deadline—Catapult proffers a markedly different timeline, suggesting that the deal was alive and well going into 2023 and claiming that it was scheduled to close on March 14 of this year.

According to Catapult, it had been “ready to close the transaction” on that date, but on March 13, 2023, BlackBerry informed Catapult that it “would not close the transaction”, and on March 20, “BlackBerry wrongfully terminated the Catapult PSA” and purportedly signed a new PSA, this one with Malikie.

Catapult reports having commenced an arbitration on April 6, 2023 against BlackBerry seeking relief for BlackBerry’s alleged breach of the PSA—including “an order requiring BlackBerry to unwind its later transaction with Defendant Malikie, and to instead assign the patents to Catapult on the terms agreed to in the Catapult PSA”.

In its complaint, Catapult claims that the Malikie PSA “required BlackBerry to disclose, to Malikie, the existence of Catapult’s arbitration with BlackBerry, including Catapult’s request for specific performance”.

Catapult seeks an injunction compelling Malikie to participate in that arbitration—or “an injunction ordering Malikie to reconvey the patents to BlackBerry in exchange for BlackBerry returning the purchase price to Malikie”.

The Malikie Deal

Unlike the deal with Catapult, the BlackBerry-Malikie deal—which BlackBerry announced on March 21—was fully financed (by Centerbridge Partners, reports IAM), and closed quickly, on May 11. The firm’s pricing was also significantly different, with guaranteed payments to BlackBerry equal to just one-third of the proposed Catapult deal.

According to public filings, BlackBerry received $170M in cash on closing and will receive an additional $30M in cash by the third anniversary of that date. BlackBerry will also receive annual payments based on the profits generated by Malikie’s monetization of the portfolio, with the profit-sharing agreement structured as follows:

• 8% of the first $500M of profits;
• 15% of the next $250M of profits;
• 30% of the next $250M of profits; and
• 50% of all subsequent profits.

BlackBerry’s profit share is initially capped at $700M, but the cap will increase annually by 4% of the remaining portion of the $700M that BlackBerry has not yet received.

In addition, BlackBerry reports having retained all existing revenue generating agreements as well as approximately 2,000 “primarily standards essential” patents described as relating to mobile devices. 

The numbers here undoubtedly reflect changed economic conditions, especially higher interest rates, but they may also reflect a more sober assessment of the licensing potential of the transacted assets—and perhaps the loss of roughly three years of claims for past infringement of a patent portfolio that has not been substantially refreshed since BlackBerry pivoted its business model.

RPX analysis of the deal, along with background on Malikie and Key Patent Innovations, is available here.

More About Eggleston

Public records, including the PSA between BlackBerry and Catapult IP, identify York Eggleston as the CEO of Catapult IP, which was formed by Keith Machen in Delaware in June 2021.

RPX has tied Eggleston, together with Machen, to more than a dozen patent assertion entities, typically named according to a “slingshot and stones” or “David and Goliath” theme. Eggleston is also behind Jawbone Innovations, LLC, a third-party funded NPE currently litigating former Aliph (d/b/a Jawbone) patents.

Meanwhile, a breach of contract matter springing from yet another failed patent sale, this one involving Eggleston’s Slingshot Technologies LLC, is playing out in Delaware state court. For RPX reporting on that matter, see “Acacia and Transpacific IP Leave No Stone Unturned in Slingshot’s Suit over Failed Patent Deal” (December 2022)”.