BlackBerry Ltd. sold 90 patents to controversial Chinese tech giant Huawei Technologies Co Ltd., as part of a larger effort by the Waterloo, Ont., smartphone pioneer to offload most of its intellectual property.
US Patent and Trademark Office, or USPTO, records show that BlackBerry ceded ownership of the patents to Huawei on December 23. They represent a tiny fraction of BlackBerry’s 38,000 patent treasury, but cover many key advancements dating back to when it was the leading smartphone maker to protect intellectual property around its portable devices.
While the sale is the latest step in BlackBerry CEO John Chen’s multi-year efforts to refocus the business, it raises questions about the Canadian government’s innovation strategy and its commitment to protect key assets of fall into the hands of foreign companies, especially those whose motives have raised alarm bells among Canada’s national security allies.
BlackBerry seeks to sell majority of its patents as it refocuses
“Canada has a long history of appropriating and retaining intellectual property [IP] acquisitions and cybersecurity threats, ”said Waterloo patent attorney Jim Hinton and co-founder of Innovation Asset Collective, an Ottawa-funded patent collective to help Canadian innovators.
“The acquisition of the Huawei patent appears to include patents related to BlackBerry security. … There are so many creative and clever alternatives to this full sale – like retaining defensive rights for Canadian companies or critical cybersecurity assets – that could have been made in this transaction. But it takes understanding and political will. “
Huawei Canada spokesperson Alykhan Velshi said in an emailed statement: “We do not comment on our business activities. Huawei has been in Canada for over a decade and employs more than 1,000 people here. We remain committed to Canada.
Patents sold include some issued from 2007 to 2009 which cover innovations such as presenting text and images on a device based on its orientation, obtaining GPS data for geotagging digital photos and sharing data. with a group of mobile devices. Other more recent patents cover “the application for access control on a communication device” and “a system and method for transferring data between electronic devices”. The conditions of sale were not available.
A Blackberry spokeswoman confirmed that the company had “sold / transferred 90 US patents to Huawei, authorized under applicable rules.” She called the transaction “very small … and not part of an ongoing arrangement.”
In an interview with The Globe and Mail after announcing his imminent departure from federal politics, outgoing Innovation Minister Navdeep Bains declined to comment on the details of the BlackBerry-Huawei deal, but said the government had a “Strong Investment Canada law that reviews transactions. in matters of national security. We used [it] in the past to support Canadian businesses and to support economic interests as well as our national security interests. … We have the tools and the legislation in place to protect Canadians, ”he said.
The patent deal, along with an additional smaller acquisition by Huawei of 18 patents from Japanese automotive supplier Denso last month, was first reported on Tuesday by intellectual property industry newspaper IAM. .
BlackBerry, the largest patent holder in Canada, has sought to sell tens of thousands of patents, IAM and The Globe reported in November. The patents on the block include intellectual property in areas where BlackBerry was a pioneer but is no longer a player, such as mobile instant messaging and social collaboration tools. The company is expected to retain several thousand more patents as they underpin its current business, which includes cybersecurity and building computer operating systems for cars.
Mr. Chen has tried to lead BlackBerry to renewed success and chart a more rewarding path for investors since joining in 2013. He managed the company’s exit from the smartphone business, cut costs and turned around. to new software companies. But the stock price remained stuck below US $ 10 per share for much of his tenure.
One bright spot has been BlackBerry’s ability to generate cash from its patents by entering into licensing agreements with other companies, typically by negotiating with companies that it believes are using its intellectual property, or by pursuing claims. companies such as Facebook, Twitter and Snap which he said owed the company for the privilege.
But analysts tend to underestimate the value of intellectual property relative to the market value of a business, as license revenues can be spotty and irregular. For example, BlackBerry generated US $ 108 million in “license and other” revenue in its second quarter ended August 31, or 42% of the total. But the following quarter, licenses and other revenues were only US $ 56 million, or 25.7% of the total.
Patent experts speculated that most of BlackBerry’s patents would likely end up being owned by a non-Canadian company and deal a blow to the country’s efforts to boost an innovation-driven economy after interim government measures to improve. Canada’s bad reputation for marketing ideas.
BlackBerry is the only Canadian company to be on the IFI Claims Patent Services’ annual list of the 250 largest patent holders in the world, published Tuesday, ranking 55th. According to Research Infosource, it was one of Canada’s 20 biggest spenders on research and development in 2019 and number one 10 years ago.
The emergence of Huawei as a buyer further complicates the problem. Huawei has grown into one of the world’s most active patent filers in recent years, ranking ninth last year with 2,761 patents issued by the USPTO – ahead of Amazon, Samsung and Google, according to the IFI. Huawei ranks 24th on the list of largest patent owners, advancing four places since 2019.
Huawei, one of the main industrial champions of the Chinese economy, has been accused of profiting from the alleged theft of trade secrets by China from Nortel Networks Corp. He is seen by many in the international intelligence community as closely linked to the Chinese government. to be a major state sponsor of cyber attacks and corporate espionage.
The United States and Australia have banned Huawei from supplying hardware to their next-generation 5G telecommunications networks, fearing its technology could be used for espionage and to exert pressure and control the infrastructure of others. country. Britain has said companies must remove Huawei equipment from 5G networks by 2027. New Zealand has rejected a proposal by a national wireless company to use Huawei in its 5G network, but no has not instituted a general ban against its equipment.
To date, the Canadian government has not followed major allies in banning or restricting Huawei from new 5G wireless networks – despite studying the matter for more than two years – but major wireless service providers including BCE Inc., Telus Corp. and Rogers Communications Inc., have chosen to use 5G equipment from Nokia in Finland, Ericsson in Sweden or Samsung in South Korea.
“It is disappointing to see that here is another example of intellectual property developed in Canada going into other hands, be it Huawei or others,” said James Cumming, Conservative critic for innovation, science and technology. industry.
“In this particular case, the government’s inaction with Huawei, especially in dealing with them in the 5G network and any other security issues that may arise with Huawei, is simply not acceptable. It’s time for them to choose a path and deal with specific Huawei issues and potential security concerns. I think it’s clear our partners [in the Five Eyes national security alliance, the U.S, Britain, Australia and New Zealand] have already made their position clear that they are not going to do business with Huawei in 5G. There is some concern about the security risks associated with dealing with Huawei. “
Relations between Canada and China have been freezing for more than two years since that country’s police arrested Huawei leader Meng Wanzhou on behalf of U.S. authorities, who want her extradited to face criminal charges. allegations that it misrepresented Huawei’s business dealings, prompting world bank HSBC to violate US sanctions against Iran.
Meanwhile, a Globe survey in 2018 found that Huawei had established an extensive network of relationships with leading research universities in Canada to create a constant pipeline of intellectual property that the company uses to strengthen its position in the market. 5G.
“The acquisition of Canadian intellectual property by Chinese companies is certainly not surprising,” said Mr. Hinton. “The intellectual property produced in Canada is some of the best in the world and we have been an easy hunting ground for years.
He added that the patents acquired “can now be used by Huawei, supposedly a partner of more than a dozen Canadian universities, to sue Canadian companies in global markets.” Canada has long since taken ownership and custody of intellectual property seriously through a structured review of intellectual property acquisitions and cybersecurity threats.
With reports from Josh O’Kane in Toronto and Steven Chase in Ottawa
Your time is precious. Receive the Top Business Headlines newsletter delivered to your inbox in the morning or evening. register today.