Why Blackberry patents might be worth public backing
Kevin Carmichael is calling on Canada to get serious about intellectual property.
If it's true that Blackberry Ltd. wants to sell a trove of patents worth hundreds of millions of dollars, then Prime Minister Justin Trudeau and Ontario Premier Doug Ford might want to muscle in and insist on the right of first refusal.
Then all of us need to get serious about intellectual property, which is the 21st-century equivalent of oil. We were lucky enough to have access to some crude, but we have been poor at turning our ideas into wealth. Blackberry is a reminder of how far we've fallen behind, because it remains the country's top holder of patents even in its shrunken form.
IAM, a trade publication, and the Globe and Mail have both reported in the past week that the Waterloo, Ont.-based technology company is shopping a significant cache of intellectual property that almost certainly was developed with the help of the federal and provincial governments.
The Globe, citing an unnamed person familiar with Blackberry chief executive John Chen's plans, said the patents could be worth US$450 million. That would be roughly equivalent to the $590 million that Trudeau and Ford gave Ford Motor Co. last month to coax the Dearborn, Mich.-based company to repurpose its plant in Oakville, Ont., for electric-vehicle assembly.
According to the story, Chen is considering selling the patents because they relate to electronic communication, an area that Blackberry once dominated, but eventually ceded to companies such as Apple Inc., Samsung Electronics Co. Ltd. and Facebook Inc.'s various messaging platforms. Blackberry would keep thousands of patents related to cybersecurity and digital operating systems for automobiles, which represent the foundations of the company's current strategy.
Blackberry's stock price had climbed about 10 per cent after IAM first reported the news on Nov. 11, suggesting investors like the idea of Chen swapping out old patents for cash. But the story is bigger than Blackberry, which has shrunk so much from its glory days in the mid-2000s that it was dropped from the S&P/TSX Composite index in June.
Yes, the transaction makes sense from Chen's perspective. The COVID-19 crisis has accelerated the shift to a digital economy, and companies are scrambling to stake their claims. Dax Dasilva, chief executive of Lightspeed POS Inc., a Montreal-based developer of pointof-sale software, described the environment as a “land grab” in an interview earlier this month. Chen has every reason to increase Blackberry's stores of cash.
Still, what's best for Blackberry's shareholders isn't necessarily good for Canada, which has a stake in those patents, since the company would have benefited from the knowledge and talent generated by the University of Waterloo and other publicly funded universities, not to mention the various tax breaks and subsidies that governments provide to encourage research and development.
The possibility that Canada could lose all of that intellectual property shows the limits of a laissez-faire approach to economic development. A recent report by the Business Council of Canada observed that Canada “is nowhere to be seen” in patent filings related to artificial intelligence, even though Canadian researchers are among the field's pioneers.
“Canada can lay claim to impressive R&D capability in AI, but we have yet to translate this into significant commercial outcomes and world-leading firms,” the report said, adding that no Canadian company ranks among the world's 200 biggest spenders on research and development.
A spokesman for Navdeep Bains declined to comment on whether the federal innovation minister had been in touch with Chen or if the Trudeau government felt compelled to intervene.
“We are unable to comment on speculation involving commercial transactions,” John Power said. However, he added, Bains takes intellectual property seriously, citing the National Intellectual Property Strategy from 2018, the first of its kind.
“To turn creative ideas into businesses and well-paying jobs, Canadian entrepreneurs need to understand how to protect and leverage those ideas for commercial success,” Power said. “Intellectual property is a business asset — just like buildings and equipment — but it is often even more valuable.”
Such thinking is a start, but other countries are far more aggressive in acting on the idea. For example, Israel demands some kind of return on investment for any help it provides startups. And why shouldn't it? Letting IP get away is the same as allowing private companies to sell oil without paying royalties.
Blackberry may no longer have a use for some of the technology it developed, but other companies will: that's where the current value lies. At a minimum, the owner of that property can demand rent from whoever wants to use the innovation. Patent rights also give companies “freedom to operate,” a term business consultants use to describe the opportunity to set out a business plan without having to worry about legal harassment by rivals or “trolls” that buy patents only to extort payments from operating companies.
Either of those things would justify a government purchase of Blackberry's patents, assuming the technology still has application. Government could earn the licensing fees and use the revenue to pay for future research-and-development incentives. Public ownership would also give homegrown upstarts a chance to make some headway, rather than have their paths blocked by Apple, Facebook or whatever tech behemoth buys Blackberry's patents if a Canadian government doesn't.
“Taxpayers have contributed to this company,” said Dan Herman, a Toronto-based entrepreneur who served on the Ford government's Expert Panel on Intellectual Property. “Are we willing to let that IP go to the highest bidder?”
It's an excellent question. In recent days, five First Nations in Alberta and Saskatchewan backed TC Energy Corp.'s Keystone XL pipeline with a $1-billion investment; the Quebec government gave Kraft Heinz Co. a $2-million loan to make ketchup outside Montreal; and the federal and Ontario governments shelled out hundreds of millions to keep the big U.S. automakers in Canada.
Those are bets on the present. Time to spend some of the public purse on the future.