The Blackberry logo is seen on a smarphone in front of a displayed stock graph, Feb. 5, 2021.Dado Ruvic/Reuters
The company that failed to close a deal to buy BlackBerry Ltd.’s legacy smartphone patents has pulled its legal action aimed at trying to unwind the subsequent sale to another purchaser.
Catapult IP Innovations Inc. last Wednesday voluntarily dismissed its own complaint against Malikie Innovations before the U.S. District Court for the Eastern District of Virginia, after seeking an order this month compelling the defendant “to participate in arbitration to resolve disputed ownership” over roughly 32,000 patents Malikie bought from BlackBerry this year.
In its complaint, Catapult had said its action was “made necessary because of a breach of contract” by BlackBerry, which was not a party in the court matter. The Baltimore-based, Delaware-registered plaintiff had disclosed it also began a separate arbitration process against BlackBerry as laid out in their original contract.
Catapult had stated the Malikie deal was invalid and that BlackBerry breached its original contract. It has asked a New York-based arbitration panel to unwind the deal “and to convey the patents to Catapult instead,” asking the court to compel Malikie to submit to the arbitration panel’s jurisdiction.
But a source familiar with the matter said the panel, which met after Catapult’s initial court filing, rejected Catapult’s request to add Malikie to the matter, meaning neither the buyer nor its transaction would be affected by any panel decision. The Globe and Mail is not identifying the source as they are not authorized to discuss the matter.
BlackBerry spokesman Matthew Chandler declined to comment; he had previously called Catapult’s claims “without merit.”
BlackBerry began exploring the sale of most of its patents in 2020, long after its exit from the smartphone business. The patents still had value: Like other technology companies whose products go into decline, BlackBerry had made a lucrative side business of extracting monies from other companies for use of its technology, either by suing them for patent infringement or reaching licensing agreements. It earned a combined US$886-million in licensing revenue from 2019 through 2021, inclusive.
In January, 2022, BlackBerry signed a deal to sell the intellectual property for US$600-million to Catapult, led by inventor and entrepreneur York Eggleston. The purchase was to be funded by a US$450-million senior secured loan and a promissory note for the balance, secured by a second lien on the patents. A syndicate led by Toronto’s Third Eye Capital provided US$400-million in conditional commitments. Catapult needed to raise US$90-million in equity financing to access the loan.
But five months later, BlackBerry said it was no longer under exclusivity with Catapult and was pursuing other options given how long the deal had taken to close and because the buyer was still securing financing. By August, Catapult hadn’t raised the equity. The lenders pulled out.
In a statement Saturday, a spokesperson for Catapult said “the company is focusing its efforts on the underlying dispute with BlackBerry Ltd. and continues to seek specific performance of the contract and an assignment of the assets at issue, including unwinding the transaction with Malikie. Catapult has preserved its right to later refile against Malikie.”
BlackBerry disclosed last year that chief financial officer Steve Rai had earned a special US$184,863 bonus in part for his “stewardship of the process” that led to the Catapult deal, even though it hadn’t closed and ultimately didn’t.
Last December, BlackBerry said Catapult was working with a financing partner and that they were negotiating definitive closing documents – but that it was also in advanced talks with another, fully financed party.
Catapult had said in its court complaint that it was ready to close on March 14 but that BlackBerry told it a day earlier it wouldn’t close, and then on March 20 “wrongfully terminated” their transaction, which the plaintiff stated was valid and binding. At the time, BlackBerry announced Catapult “was unable to secure financing that would have enabled it to complete the previously announced transaction on amended terms that were acceptable to BlackBerry.”
Also on March 20, BlackBerry struck its deal with Malikie, which agreed to buy the patents for US$170-million upfront and US$30-million in cash by three years after the May 11 closing date. BlackBerry can also receive up to US$700-million in proceeds in a complex earnout deal.