What I Learned Reading Research In Motion Ltd (BBRY)’s Annual Report

Sad amusement aside, I did find this footnote alarming. Research In Motion Ltd (NASDAQ:BBRY) has valued its patent portfolio at $3.26 billion representing nearly 35% of the company’s book value.

But this valuation could be in serious jeopardy.

Last week, U.S. President Barack Obama started efforts to crack down on patent trolls by ordering tighter scrutiny of overly broad patent claims. This could significantly reduce the value of patent portfolios for both BlackBerry and other technology companies.

Google Inc (NASDAQ:GOOG)‘s Motorola Mobility acquisition may be a case in point. Two years ago, Google paid $12.5 billion primarily for the Motorola’s 17,000 patents and 7,000 patent pending applications.

So far, Google Inc (NASDAQ:GOOG)’s efforts to assert these patents to protect its Android operating system have failed. Earlier this year, a judge ruled for Microsoft to pay Google $1.7 million per year due to violations of its Wi-Fi and video encoding patents. This settlement was much less than the $4 billion per year Google Inc (NASDAQ:GOOG) originally demanded.

This means Motorola’s patents might not be worth anything close to what was originally estimated. The $12.5 billion Google spent may have been wasted.

Foolish bottom line

So what should investors make of Research In Motion Ltd (NASDAQ:BBRY)?

In spit of the risks highlighted in this post, the stock is still an attractive bet. Even if you heavily discount the firm’s patents, the company is still priced below liquidation value with the market almost completely discounting any possible success of BB10.

If BB10 is successful, BlackBerry will once again be valued as a going concern.

If BB10 flops, the company is liquidated near its current price.

Looks like a good risk/reward to me.

The article 3 Things I Learned Reading BlackBerry’s Annual Report originally appeared on Fool.com.

Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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