Mass Aggregators, NPEs and Patent Trolls: Threat, Opportunity or Both for University TTOs…

1. Mass Aggregators, NPEs and Patent Trolls:Threat, Opportunity or Both for University TTOs… Live webinar – July 27, 2012 www.technologytransfertactics.com

2. Your Team of Presenters Jiaqing (Jack) Lu, PhD, CFA Senior Economist and the Director of Economic Analysis Applied Economics Consulting Group, Inc. Mr. Lu’s expertise includes business valuation, intellectual property valuation, competition assessment, and market analysis. Jack has substantial experience in economic research and financial modeling for IP management and monetization, and has helped clients in developing and implementing IP investment and divestiture strategies across major technology-intensive industries. A well known IP economist and financial analyst, Jack’s research in Intellectual property, patent market, financial markets and other economic issues have been widely published. His most recent research can be found at his SSRN author page at http://ssrn.com/author=230071. He is a Chartered Financial Analyst (CFA) charter holder, and is a member of CFA Institute, National Association for Business Economics, and Licensing Executives Society. He has been actively involved in these organizations, Including serving on the Executive Committee of 2011 LES High Tech Royalty Survey. www.technologytransfertactics.com

3. Your Team of Presenters Marc S. Kaufman Partner Reed Smith Mr. Kaufman specializes in assisting his clients in managing and monetizing their intellectual property assets. He has developed structured procedures for defining and executing intellectual property strategies that are aligned with overall business objectives, for a wide variety of business entities. He has deep experience in procuring and enforcing IP rights both in the United States and abroad, as well as structuring and negotiating intellectual property transactions. Specifically in the area of patents, Marc has developed and managed patent portfolios that have been widely licensed by major corporations. Often times, he guides his clients in the sale of patents that are no longer relevant to core objectives. Marc has spoken across the country, authored several articles, and has been quoted in notable publications such as the New York Times with respect to a variety of intellectual property issues. Presently, he is serving as a chair of the Law Seminars International Conferences on patent monetization, which are held across the U.S. to provide updated education and industry insights to business consultants and in-house counsel. www.technologytransfertactics.com

4. Patent Monetization in the NPE-Driven Patent Market Jack Lu, PhD, CFA Chief Economist and Senior Director IP Market Advisory Practice (IPMAP) Applied Economics Consulting Group, Inc. Economic Decision-makings for University TTOs www.technologytransfertactics.com

5. 1. NPE Business Model: Economics and Controversies 2. Technology Transfer in NPE-Driven Patent Market: Major Economic & Financial Decision-makings 3. Interpret and Use Market Price Information for Patent Monetization www.technologytransfertactics.com

6. 1. NPE Business Model • NPE is a legitimate business model; Troll is a market inefficiency. - NPE vs. Troll When a NPE trolls, it’s a troll; When it doesn’t, it’s a licensor. - Troll Identity vs. Troll Conduct Focus on conduct and solution, instead of labeling www.technologytransfertactics.com

7. 1. NPE Business ModelThe Emerging of NPE and Defensive Patent Aggregators(DPA) An Economic Perspective: Supply/Demand and Specialization Explosive growth of patents Patent thickets New reality in the new economy: Innovating and In-licensing (I & I) Demand for identifying & acquiring complementary patents NPE specializing in patent portfolio building and licensing DPA specializing in risk management www.technologytransfertactics.com

8. 1. NPE Business ModelThe Emerging of NPE and Defensive Patent Aggregators(DPA) A Financial Perspective: Capital Moves Upstream in Innovation Chain and Chases Higher Return Invest in patents & tech developments Invest in start-ups Invest in securities www.technologytransfertactics.com

9. 2. NPE, DPA, and Technology Transfer DPA Freedom to operate $$ Patents $$ (3) Licenses Products Practicing Com $$ TTO $$ Market Patents Services (1) (2) Patents $$ $$ Licenses NPE • Acquiring production/marketing capacity; • Acquiring portfolio building/licensing capacity; • Acquiring risk management capacity. www.technologytransfertactics.com

10. 2. NPE, DPA, and Technology Transfer Licensing assessment: In-house or outsourcing Litigation assessment: In-house or outsourcing Negotiation failed or succeed Sell or license Litigation or withdrawal Succeed Withdrawal In-house License Failed In-house Net NPV Net NPV Net NPV Net NPV Net NPV File lawsuits Sell Outsourcing Outsourcing Pricing Deal structuring Payment Scheduling Pricing Deal structuring Payment Scheduling Pricing Deal structuring Payment Scheduling NPE NPE NPE/DPA PE Major Economic and Financial Decision-makings www.technologytransfertactics.com

11. Decision-making Challenges Major Issues to Be Addressed  Selling or licensing Market study and revenue/profit forecast; Ownership  Pre-sales assessment Economic analysis and financial modeling to choose the optimal strategy  Sales structuring/financing that a) minimizes cost and risk; b) maximizes profit and cash flow. Assertion targeting; Product analysis, past revenue/profit estimate, and future revenue/profit License negotiation forecast;  Deal structuring/financing  A portfolio of negotiation strategies based on market dynamics and the targets' competitiveness; Assertion strategy  Royalty determination, cost and fee estimation, risk and undertainty profiling; A mix of alternative deal structures and instruments based on financial modeling, with the amounts and timing of cost, profit, and cash flow clearly illustrated.  Cost and risk analysis Relevant market analysis, industry dynamics assessment, and  Outcome forecast technology competitiveness study; Pre-litigation assessment  Infringing product analysis, past and future damage estimate; Net cash flow analysis  Patent renewal assessment  Technology portfolio analysis; Renewal or Exit Strategy Patent divestiture analysis Economic analysis and financial modeling for optimal exit strategies. 2. NPE, DPA, and Technology Transfer:Major Issues to Be Addressed www.technologytransfertactics.com

12. 3. Interpret and Apply Market Prices Samples of Questions 1. Company X sold #Y patents for $MMM; how could we have never got that kind of high price? 2. #T patents were acquired by Company Z for $NNN last month, with an average price of $P per patent. Can we use this average price per patent as the benchmark for our patent sales negotiation? www.technologytransfertactics.com

13. 22 transactions of patent portfolios, mostly in recent years • Number of patents in each portfolio and the payment • Other data: seller/buyer type, industry, strategic goal, and time www.technologytransfertactics.com

14. A dummy variable regression model is developed to adjust the effects of industry, strategic value, time, and seller/buyer type. www.technologytransfertactics.com

15. How much are Kodak’s 1,100 digital imaging patents worth? Analysts’ views: $1 billion to $3 billion www.technologytransfertactics.com

16. Questions Utilize the chat box to the bottom left of your screen to submit a question to the panel. Please address your question to a specific presenter, if possible. Or Press * 1 on your touchtone phone and this will place you into the phone queue. www.technologytransfertactics.com

17. Selling to Patent IntermediariesMarc KaufmanReed Smith LLP www.technologytransfertactics.com

18. Intermediary Models • Brokers • facilitate transactions in exchange for fee • Defensive Aggregators • purchase patents on behalf of member pool • “Deployers” • generate ROI • various revenue models • various opportunities to participate in profits www.technologytransfertactics.com

19. Four Phases of Patent Monetization • Asset Audit and Analysis “What assets should we monetize?” • Market Analysis “Who would pay for it and how much?” • Business Decisions “What is the best model?” • Transaction www.technologytransfertactics.com

20. Preliminary (and Ongoing) Questions • What are our objectives? • Is there commitment by management? • Whose “buy in” do I need? • What risks are we willing to take? • What resources can we dedicate? • What is our time frame? • Are any assets “off the table”? • Can we tolerate the patents being enforced by the buyer? www.technologytransfertactics.com

21. Phase 1: Asset Audit and Analysis • Identify all available patent assets • Group assets into families • Summarize claim coverage for each family • Determine any encumbrances • Determine selected assets for monetization • non-core assets • assets applicable to non-competitive markets • Detailed coverage analysis for selected assets www.technologytransfertactics.com

22. Phase 2: Market Analysis • Identify markets for selected assets • Identify players in each market • operating companies • intermediaries • Determine pricing of selected assets • infringing products • estimated revenues • apportionment • known pricing models www.technologytransfertactics.com

23. Phase 3: Business Decisions • Outright sale or ongoing partnership • Acceptable intermediary models • Check strategy/feedback to Phase 1 and Phase 2 www.technologytransfertactics.com

24. Partnership v. Outright Sell • Partnership • high revenue • high resources • long time frame • ongoing relationship • ongoing management • Sell • low revenue • low resources • short time frame • one transaction? www.technologytransfertactics.com

25. Phase 4: Transaction • Present valuation evidence • Negotiation • Participation options? www.technologytransfertactics.com

26. Conducting TransactionsIntermediary v. Operating Entity www.technologytransfertactics.com

27. Questions Utilize the chat box to the bottom left of your screen to submit a question to the panel. Please address your question to a specific presenter, if possible. Or Press * 1 on your touchtone phone and this will place you into the phone queue. www.technologytransfertactics.com