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RIM could spin off patents into separate company to take on Google

Source: The Canadian Press

BlackBerry-maker Research In Motion should split off its thousands of technology patents into a separate, publicly traded company as another way of competing against rival Google, which expects to own a trove of patents with its acquisition of cellphone maker Motorola, say analysts.

Evercore Partners analyst Alkesh Shah said the importance of technology patents has increased in recent years due to popularity of Google’s Android operating system for smartphones and Apple’s iPhone smartphones.

“What’s really caused this new focus on patents and litigation is that you had Apple and Google, brand new entrants, come in and take significant share,” Shah said, adding it “woke up everybody.”

Companies then wanted to protect their technology and “you suddenly had everybody suing everybody else,” he said, noting for years that Nokia, Motorola and Ericsson were the three large mobile device patent holders.

Google recently missed out on acquiring wireless network patents developed by Canada’s former tech company Nortel Networks.

RIM, along with Apple and other tech heavyweights paid US$4.5 billion to acquire thousands of patents from bankrupt Networks, which also placed increasing importance on patents and their value.

Shares of RIM (TSX:RIM) closed up 9.5 per cent, or $2.30, to $26.59 after Google Inc. announced it was paying US$12.5 billion to acquire Motorola Mobility Holdings Inc. and its 17,000 patents and 7,500 patent applications.

The Waterloo, Ont., company has been under intense competition from Apple’s iPhone and iPad tablet computer and smartphones by various manufacturers that use the Android operating system.

Shah said RIM has 10,000 to 15,000 patents in advanced wireless technology, security, enterprise mobility and software.

“RIM, right now, is obviously focused on its product portfolio,” Shah said from New York.

“But as they get their product portfolio in place over the next six to nine months, they can potentially, after that, look at other potential revenue streams and their intellectual property certainly can be one,” he said.

RIM could potentially license its technology to new players in the tablet market that don’t have intellectual property in wireless technology, software or security, he said. Or, RIM could license its technology to established software player Microsoft, which is interested in advanced wireless technology, or even to competitor Apple, Shah said.

“The opportunities that RIM may have near term is maybe being more aggressive on the licensing front of their current portfolio.”

Patents not only protect technology but create revenue, Shah said. He used IBM as an example of a company with a significant revenue stream from the licensing of its technology.

Northern Securities technology analyst Sameet Kanade also said RIM can become more valuable by creating a separate company to license its patents.

“You spin it off,” Kanade said in a phone interview from Toronto.

Then it will let “shareholders decide where they want to participate. Do they want to participate in RIM’s IP (intellectual property) growth or do they want to participate in RIM’s operating growth?”

Kanade said RIM could spin off its patents into a company similar to technology licensing companies Wi-LAN (TSX:WIN) and Mosaid (TSX:MSD), both of Ottawa.

Queen’s University professor John Pliniussen doesn’t agree with the idea that RIM should spin off its patents into a publicly traded company and said it would be difficult to put a value on how much the patents would be worth.

“That’s not their expertise,” said Pliniussen, associate profess or innovation and Internet marketing at Queen’s in Kingston, Ont.

“They should take all of their energy and really focus on marketing their new line of BlackBerry phones, which are the best they’ve ever made,” he said.

While the declining value of RIM’s stock over the past three years has fuelled speculation that it could be a takeover target, Kanade said Google’s purchase of Motorola will make it less interested in buying the BlackBerry maker.

He suggested a Chinese player wouldn’t likely be able to pass the Canadian regulatory hurdles.

He added that a U.S.-based private equity player could be a possible suitor at some point and it would likely spin off RIM’s patents into a separate company, too.

There are reports that software giant Microsoft may want to buy cellphone maker Nokia, which uses Microsoft’s latest mobile phone operating system in its smartphones, which might make a bid for RIM less likely.

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