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BlackBerry settled a lawsuit with Kik Interactive over its BlackBerry Messager program on Oct. 7, 2013.J.P. MOCZULSKI/The Globe and Mail

BlackBerry Ltd. has settled its lawsuit against Kik Interactive, a company started by one of its former co-op students which developed a rival instant messaging application to its BlackBerry Messenger that eventually surpassed it in popularity.

In a release late Monday, Kik, also based in Waterloo, Ont., announced the two companies reached a settlement last month that ends all legal action between them. Terms of the agreement were not disclosed. A BlackBerry spokesman declined comment, other than to confirm the case was dismissed.

BlackBerry had sued Kik for patent infringement, claiming it made "false and/or misleading statements" and caused "confusion" in the market between Kik and BBM.

Kik is the brainchild of Ted Livingston, who worked at BlackBerry for a series of co-op placements while he was an engineering and mechatronics student at the University of Waterloo starting in 2007. He originally developed a music application to work through BBM, the first instant messaging app designed specifically for smartphones. When Apple and Android smartphones began to increase in popularity in the late 2000s, Mr. Livingston tried to convince BlackBerry executives to make BBM available on all platforms.

"They absolutely refused and they said, 'No, we won't do that,'" he told The Globe and Mail in a recent interview. "To be fair, from their perspective it was hard. They said, 'People are buying BlackBerrys for BBM. That was a real risk."

So he began developing Kik into a BBM-inspired instant messaging app that could be used on any platform. Mr. Livingston claimed in legal documents that he kept BlackBerry informed of his plans and once even told the company, in March 2010, that he would stop developing the Kik app if BlackBerry would expand BBM into a "cross-platform app." The company held to its original position and Kik launched in fall 2010. It became an immediate hit, registering one million users in its first 15 days.

BlackBerry then sued Kik in November, 2010, suspending it from its online app store – but failing to stop its surging popularity. Today, Kik has 90 million users, with a focus on youth smartphone users, while BlackBerry has only 60 million. WhatsApp and other rival services are even larger. Meanwhile, mobile instant messaging companies have seen a huge influx of venture capital financing, drawing $212-million (U.S.) for 35 deals in the last year, including a $19.5-million investment for Kik led by US venture capital firm Foundation Capital.

"BBM was the killer app, and chat apps are still the killer apps of consumer smartphones," Mr. Livingston said. "I think if RIM had spun BBM out of the company and let an independent company run with it [as a cross-platform service] it would be big enough to rival Facebook."

The success of Kik and other cross-platform instant messengers eventually did compel a group of BlackBerry executives, led by former co-CEO Jim Balsillie, to push internally to make BBM accessible on all platforms and to market it among a suite of services to wireless carriers. The plan was intended to help carriers fight against the steady erosion of their text messaging revenues to "over-the-top" apps which allowed users to communicate via their smartphones without providing carriers with additional revenues. For RIM, it represented a chance to protect and grow its high-margin services business.

But the plan split the senior leaders of BlackBerry over fears that opening up BBM would cut into handset sales, and one of the chief opponents, Thorsten Heins, killed the plan shortly after becoming CEO in early 2012. Mr. Balsillie subsequently resigned from the board as a result of that decision.

BlackBerry finally got around to launching BBM for Android and Apple, but the launch, planned for earlier this fall, has been delayed. Many market observers agree that BBM likely would have been the dominant instant messaging service had it gone cross-platform much earlier and that its latest ploy may not be enough to make up for lost time.

"I think there's a good chance they could have owned this market" by going cross-platform earlier, Canadian venture capital investor Matt Golden said. "BBM was far and away the leader in over-the-top messaging. They helped define the category." Now, he said, "It would be an uphill battle" for BBM to regain its once-dominant position.

In an e-mailed statement, Mr. Livingston said "It's great to finally close this chapter in Kik's history."

Editor's Note: The name of the firm that led Kik's $19.5-million investment has been corrected in the online version of this story.

Follow Sean Silcoff on Twitter: @SeanSilcoffOpens in a new window

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