Blackberry wins arbitration case against Qualcomm

Blackberry has won an arbitration case against Qualcomm and was given a preliminary $814.9 million in royalty payments that were made to Qualcomm. Blackberry asserted that it overpaid Qualcomm in royalty payments.

As a result of the victory, Blackberry shares jumped more than 18% while Qualcomm shares dropped by more than 2%. Sullivan & Cromwell LLP were the lawyers of Blackberry.

John Chen, Blackberry Executive Chairman, and CEO, said, “BlackBerry and Qualcomm have a longstanding relationship and continue to be valued technology partners. We are pleased the arbitration panel ruled in our favor and look forward to collaborating with Qualcomm in security for ASICs (application-specific integrated circuit chips) and solutions for the automotive industry.”

Qualcomm said that they do not agree with the decision but acknowledged that “it is binding and not appealable.” The company said, “The arbitration decision was limited to prepayment provisions unique to BlackBerry’s license agreement with Qualcomm and has no impact on agreements with any other licensee.”

Qualcomm has patents relating to modern mobile technology. This allows them to get royalties from mobile phone makers, regardless if it uses its chips or not. The majority of Qualcomm’s profits come from these royalty payments.

Blackberry and Qualcomm agreed to the arbitration last April 2016. Blackberry asserted that it overpaid royalties to Qualcomm relating to sales of subscriber units made between 2010 and 2015.
May 30 is the day when the final amount of the award will be announced.

Michael Walkley, Canaccord Genuity analyst, said that the award won by Blackberry will boost its balance sheet and increases the chance the company will be able to acquire companies for its growth in its software business. He upgraded the target price of Blackberry from $8 to $9.50.

Early this year, Apple sued Qualcomm, arguing that Qualcomm is “charging royalties for technologies they have nothing to do with.” Apple’s suit also asserts that Qualcomm is “attempting to extort” Apple into blocking investigation relating to the monopolistic practices of Qualcomm. Apple alleged that Qualcomm was charging at least five more times the market rate for patents on cellphones.

Earlier this week, Qualcomm countersued asserting that Apple was breaching its contract with Qualcomm as well as damaging Qualcomm’s reputation.

Also, the U.S. government accuses Qualcomm of using anti-competitive strategies to have a monopoly over particular semiconductors in mobile devices. The U.S. government said that Qualcomm was forcing mobile phone manufacturers to sign to unfair licensing terms.

Last December, Qualcomm was fined by South Korea’s antitrust regulator for antitrust laws violations.

In 2009, Blackberry once had almost 20% market share of mobile phones, but due to intense competition, now only has less than half a percent market share in mobile phones.

Blackberry has a $5.45 (Canadian) billion market valuation while Qualcomm has a market capitalization of $81.75 (U.S.) billion. Last year, Blackberry made $1.31 in revenues while Qualcomm had revenues amounting to $23.5 billion. Blackberry’s cash was at $1.7 billion based on its most recent earnings report. This arbitration case victory will boost further its cash position for strategic uses such as acquisitions.

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