Will BlackBerry survive this lawsuit?

A new lawsuit against BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) hits at the heart of a key source of revenue that has provided a lifeline for the company of late.

BlackBerry’s ongoing patent battles erupted in another skirmish on Monday as US software and security company MobileIron filed a lawsuit in California on Monday claiming the former smartphone maker had made “spurious and baseless” allegations of patent infringement against MobileIron, amounting to a version of civil extortion under California law.

Reported in the publication Law360, MobileIron, which makes endpoint management and enterprise security products and services for mobile devices, claims that BlackBerry sent a letter demanding that MobileIron license certain patents and that, in reality, BlackBerry has infringed on MobileIron’s own patents in four cases.

“The Blackberry defendants have at all times known that their demands for money from MobileIron for alleged infringement of numerous patents are both objectively and subjectively baseless, but defendants have continued their acts of attempted extortion unabated,” reads the MobileIron suit.

“Due to Blackberry’s shrinking presence in the marketplace, it decided to shake companies down by making countless meritless patent assertions to generate licensing revenue instead of competing in the marketplace,” the suit read.

BlackBerry’s patent business has been a revenue source for the company for years, and its IP goes back decades, involving tens of thousands of patents. Back in the early 2010s as the company’s mobile handset business was being demolished by the likes of Apple and Samsung, BlackBerry started a transformation from hardware to software, with the exploitation of its huge cache of patents playing a role in keeping the company afloat.

How much do patents mean to BlackBerry right now? A lot. Currently, licensing makes up about a third of the company’s revenue.

And BlackBerry has been taking on all sizes of corporations in recent years, suing Twitter, Facebook, WhatsApp and Snapchat on their mobile messaging tech, and garnering accusations of being a ‘patent troll,’ seeking out ways to monetize its IP.

But the company has said time and again not only that its licensing efforts are a way of protecting its assets but that it typically attempts to work with companies out of court to negotiate agreements before resorting to lawsuits.

Last year, BlackBerry started a suit against Twitter , saying the “relative latecomer” to mobile messaging had infringed on six of BB’s patents and “succeeded in diverting consumers away from BlackBerry’s products and services” and toward its own by misappropriating features that made BlackBerry “a critical and commercial success in the first place.”

BlackBerry’s road to redemption in software and security has been praised for its successes in developing innovative platforms like the BlackBerry QNX which is used in connected vehicles and is part of the movement towards integrating more Internet of Things tech into our daily lives. Last year, BlackBerry also made waves by buying US cybersecurity firm Cylance.

But BB’s resurgence seems to have stalled over the past couple of years —or, at least, not progressed at a pace desired by the markets— as its share price has plummeted in response to lower-than-expected quarterly numbers coupled with a perceived lack of clarity on where and when BlackBerry’s revenue ramp will emerge.

BlackBerry finished 2019 down 14 per cent while so far in 2020 the stock is down 28 per cent.