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3 Questions BlackBerry Investors Should Be Asking about the Facebook Patent Case

Gaston Kroub

With BlackBerry's new mega-patent case against Facebook, Instagram, and WhatsApp, the company's long-awaited transformation into a serious patent assertion entity is undoubtedly complete. Even a simple perusal of BlackBerry's complaint reveals that the company has thrown significant resources at the case in the hopes of securing a windfall licensing fee from Facebook. At the same time, it is also clear that Facebook has rebuffed BlackBerry's pre-litigation attempts to license the patents. Considering that the case is likely much more material to BlackBerry investors than to Facebook holders, below are three critical questions that BlackBerry investors should be asking as they evaluate this new development.

1) Why did BlackBerry file the case in the Central District of California, a.k.a Los Angeles and its environs?

This one is easy. Under the new patent venue rules and resultant case law developments since the Supreme Court decided TC Heartland, BlackBerry has to sue Facebook in a place where it has a physical place of business. While suing Facebook in its "home district" -- the Northern DIstrict of California covering Silicon Valley -- may have sent a message of intent that BlackBerry is fearless, prudence probably dictated that BlackBerry take its chances in the Central District, which the data says is more favorable to patentees. While Facebook may decide to protest venue anyway, BlackBerry clearly chose to sue in the forum it considers more favorable.

2) Why didn't BlackBerry move for a preliminary injunction?

Here again, BlackBerry chose to play the odds. Trying to win a preliminary injunction in a patent case is always a tall order, especially in a case like here, where BlackBerry is asserting very broad patents that will surely face serious validity challenges (likely in the USPTO as well, with Facebook filing a barrage of IPR's like it does in many other cases where it has been sued for patent infringement). Further, there may even be a question whether BlackBerry is even a competitor to Facebook at this stage of its history with respect to instant messaging. Rather than waste resources tilting at the quixotic preliminary injunction windmill, BlackBerry appears to have chosen to take the longer route -- and is definitely girding up for a protracted battle, absent settlement.

3) How valuable is this case?

At first blush, this case looks like a proverbial high-risk, high-reward lottery ticket type case for BlackBerry. They have chosen to take on a sophisticated, immensely resourced defendant in Facebook, knowing full well that Facebook has already rejected their pre-lawsuit licensing demands. Further, BlackBerry has retained what is known as a very expensive law firm (Quinn Emanuel) to bring the case, and while it is unclear what kind of fee agreement they have reached with the law firm, the choice of counsel indicates that the company sees this as a mega-bucks case. Absent some kind of leak, however, it is unlikely that we will hear about the size and scope of BlackBerry's demand, at least until the case progresses towards the damages phase closer to trial. Investors would be wise to look for any indications about the amount of money at stake for BlackBerry, or how much of a bet the company is placing that it can recover from Facebook.

We will be watching developments in this interesting case between the mobile giant of the past and the social messaging leader of the present.


Markman Advisors