Patent Market 2017: Buyers, Sellers, Motivations & Prices?

Business Sense • IP MattersBusiness Sense • IP Matters 1
Patent Market 2017:
Buyers, Sellers, Motivations &
Prices?
Kent Richardson & Michael Costa
February 13, 2017
Contact Information:
+1 (650) 967-6555
kent@richardsonoliver.com
Copyright 2015 ROL

Business Sense • IP Matters
Agenda
Solving the
Patent
Challenge
Case example of building and buying patents to address the
challenge
Patent
Market
Trends and
Forecast
The brokered patent market
Market prices for patents today and trends
Who is buying and who is selling
Litigation rates
How to Buy
Effectively?
Corporate patent buying overview
Copyright 2015 ROL 2

Case Study: Why Trade in Patents?
•LinkedIn’s revenue grew very quickly (from $<50M to >> $1B)
in the course of a few years
•Successful IPO
•Revenue continues to grow
•Almost no patents (< 50)
•Patents were not pursued and were not a strategic focus
•LinkedIn faced the risk of defending against significant patent
assertions
•NPEs (IV, small NPEs)
•Corporate patent asserters (Microsoft, IBM…)
The story of LinkedIn – the challenge
•IBM ~$1B/Year in IP licensing revenue for ~25 years
•Samsung pays Rambus $900M to settle patent and antitrust
claims
•Yahoo licenses Google for $260M in stock (2004) realizing a
$1.4B gain on the deal
•LTE royalties on Samsung Galaxy = ~$55/phone (2014
estimate)
How big a challenge?
Examples Companies With
Similar Challenges
Copyright 2015 ROL

Company A’s
Patents
Company A’s
Revenue LinkedIn’s Revenue
Product A
Product BProduct C
Typical Patent Defense Considerations
4
Company to Company
Copyright 2015 ROL
• Revenue generation
• Create freedom to operate – remove patent risk
• Strategic/business interference
Patent asserter’s goals
Patents

High Tech Patent Licensing Dynamics Revisited
AssertCo Mindset
Many
questions
What price point for a deal? How much can they
pay?
What’s my risk of being sued?
How tough is DefendCo?
What non-monetary benefits are we getting?
…
How do I
achieve
the affect
I want?
…
How is the rest of my portfolio perceived?
How many patents do I need to show are infringed?
DefendCo Mindset
Do we
really
have a
problem?
Asserter’s reputation? Capability, commitment, resources?
Price point?
What is our reputation and past experience?
How is our business doing?
…
What do I
have to
do and
show to
avoid a
deal or
get the
best deal?
…
What damages models?
How much diligence do I need to perform until I’m comfortable?
Other stakeholders?
How long can I engage the asserter?
What else is in the asserter’s portfolio? What’s in mine?
What do I have to show my team to convince them that a deal
makes sense? What patents do we “infringe”?
5

LinkedIn’s Ecosystem of Patent Risk
6
Patent threats come from LinkedIn’s near ecosystemWhat is LinkedIn’s business ecosystem? Corporate asserters
LinkedIn’s potential patent
risk
Copyright 2015 ROL
Partners
Suppliers
Competitors
Customers

LinkedIn’s Ecosystem of Patent Risk - Filtered
7
LinkedIn’s potential patent risk
?? ? ?? ? ?
LinkedIn
Which risks is LinkedIn going to address?
Copyright 2015 ROL

0
200
400
600
800
1000
1200
1400
Pre-2012 2016
Portfolio
Internal Purchased
?
LinkedIn’s Patent Strategy Planning and
Execution
• Ecosystem risk analysis
• Identify target organic patent
development and patent purchase
technology areas
• Develop budgets and authorization
process
Planning
• Substantial increase in organic filings
• Directed patent purchasing program
to fill in gaps in LinkedIn’s counter-
assertion portfolio
• Ongoing continuation practice of
current portfolio
Execution
8Copyright 2015 ROL

Target Filing Rate (Based on R&D Spend)
9
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
No Defined Goal Product Coverage to Deter Copying Freedom to Operate Outbound Licensing
Fillingsper$MR&D
Goal of Patent Program
Target Patent Filings per $1M of R&D Spend
2.0
LinkedIn’s Target
Filing Rate

LinkedIn Addresses Patent Deficit with Bought
and Organic Growth
Pre Implementation: Gap Between
LinkedIn and Likely Asserters
Post Implementation: Organic Filings and
Patent Purchases Address the Challenge
10Copyright 2015 ROL
0
500
1000
1500
2000
2500
3000
3500
4000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
#ofAssets
Portfolio Growth by Priority Year
Organic Portfolio Large Corprate Asserter
Projected Organic Portfolio
0
500
1000
1500
2000
2500
3000
3500
4000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
#Assets
Total Portfolio by Priority Year
Acquired Portfolio Organic Portfolio
Large Corprate Asserter
Thisisbad
Muchbetter!

Asserting Company's 2003
Organic Filings
LinkedIn's 2013-2016
Targeted Buying
#ofPatents
Targeted Buying
Not applicable to current negotiation
Valuable to current negotiation
LinkedIn’s Actionable Results
Prepared Counter-assertion Strategy
Company Pre-Program
Strategy
Today’s Strategy
Company1 Assumed Low Risk Business Relationship
Company6 Unknown Risk Key Patents Identified
Company7 High Risk Key Patents Identified
Company8 High Risk EOUs Created
Company9 High Risk EOUs Created
Company10 Unknown Risk EOUs Created
Company11 Unknown Risk EOUs Created
•Actionable response strategies for licensing approaches were created for companies of
concern
•Facilitated by targeted buying to build playbooks with EOUs on companies of concerns
•Targeted buying makes our portfolio relevant to licensing negotiations; comparable
proportion to the asserter’s organic portfolio in many instances
Playbooks
11

Agenda
Solving the
Patent
Challenge
challenge
Patent
Market
Trends and
Forecast
Litigation rates
How to Buy
Effectively?

Patent Buying Ecosystem
Patent
Market
Buyers
• Apple, Amazon, Facebook,
Google, Intel, Microsoft,
Qualcomm
• Intellectual Ventures, Acacia
• RPX, OIN, AST, Unified
Patents
Sellers
• SMEs, Cisco, Yahoo!, ATT,
Verizon
• Intellectual Ventures, AST,
RPX
Deal Makers & Brokers
• Richardson Oliver Law Group
• Quinn Pacific, ICAP, Patent
Profit
• Bankers, law firms, IAM
managers

How Big Is the Patent Market?
14
•Since 2011 we have tracked over $11B in patent packages across more than 90,000 patent assets
•Over 100 technology categories represented across hardware, software, communications; including automotive-specific categories
Substantial market
•772 packages, over 11,000 assets
•Number of sales and sales rate may be dropping
•Takeaway: Monitoring the market enables cost effective risk mitigation
2016 market robust, but...
Copyright 2016 ROL
$0
$2
$4
$6
$8
$10
$12
$14
2011-Q12011-Q22011-Q32011-Q42012-Q12012-Q22012-Q32012-Q42013-Q12013-Q22013-Q32013-Q42014-Q12014-Q22014-Q32014-Q42015-Q12015-Q22015-Q32015-Q42016-Q12016-Q22016-Q32016-Q42017-Q12017-Q22017-Q3
Cumulative sum of asking prices ($B) - brokered and private market
Cum Sum Asking Price (Entire Market) Cum Sum Total Asking Price (Sold)
Predicted Cum Sum Asking Price (Entire Market) Predicted Cum Sum Total Asking Price (Sold)

Introducing the Brokered Patent Market
• Quasi-public market for patents supplied by patent brokers and regular
sellers
• Patents are business assets and trading in them is a natural extension of
patent strategy complementing business strategy
• If patents can be traded, a value and price can more easily be defined
Why the brokered patent market?
• It’s where patents are assigned a price
• Market dynamics are not well understood – clients want to answer these
questions:
• Am I getting a good price?
• Are these good deal terms?
• Are there better patents available?
• Few companies have substantial information about the market, which gives
them an advantage
• NPEs have more information - Intellectual Ventures, Acacia
Why study the brokered patent market?

What Is in a Brokered Patent Package?
•Contents
•List of patents for sale, applicable market, infringement analysis (claim chart), background on the seller
•Additional information
•Asking price, bid dates, special circumstances (license back, specific encumbrances)
Typical package
•Confluence Patent Portfolio
•Single family (15 US Patents and 7 open applications) relating to social network data aggregation.
•2006 priority date.
•Received July 2013
•Sold October 2014
•Asking prices: “7 figures”
•Multiple claim charts presented for
•Apple
•Google
•Facebook
•Purchased by an operating company
•Fingerprint Cards AB
Example package from Patent Profit (Will Plut)
•Receive about 50 packages per month covering a broad range of technologies
Package flow

Patent Market Moves Closer to Mainstream
Bloomberg Publishes Patent Market
Data Participates Move to Optimize
• What is the patent market?
To
How do I participate
effectively?
• Can I address patent
problems by buying patents?
To
How do I find the best
patents the fastest and
cheapest?
Narrative shifting from:

What’s Hot in the Patent Market Today

0%
5%
10%
15%
20%
25%
30%
35%
40%
<1 <2 <3 <4 <5 <6
Cumulate%Sold
Time from Package Listing Date to Sale Date (years)
Cumulative sales by years from package listing date
2011
2013
2014
Predicted 2015
Market Context: Sales Rates Are Down
19
•Represents the percentage of patent packages sold (as recorded in the US Patent & Trademark
Office assignment records)
•Sales rates remain down sharply from 2009, with estimated 2014 packages slightly higher
•Packages sell in the first two years à sales data lags listing data by about 2 years
Sales rates are down – Good time to be a buyer
Copyright 2016 ROL
• Source Richardson Oliver Law Group LLP, 2016 Brokered Market Report

Market Context: Data Analysis Reveals Top
Patent Brokers
20
•Not all brokers perform equally well
•Brokers are highly selective
•We can help you focus outreach to top performing brokers
•Difficult time for new brokers because sales from older listings can supplement sales
rates for new listings
Broker performance
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 5 10 15 20 25 30 35 40 45 50
SalesRate
Number of Listings
2015 Broker Sales Rate by Number of Listed Packages (Calendar Year)
Broker's 2015 Sales Rate 2015 Sales Rate 10.4%
2015 Current Sales Rate (10.4%)
Projected is 21%
Copyright 2016 ROL

Market Context: 2016 Pricing Stabilization
21
Asking Prices ($K) 2016 2015
Per Asset Per US Patent Per Asset Per US Patent
Average $197.32 $271.44 $190.31 $273.60
Min $16.67 $36.11 $17.24 $183.82
Max $750 $1000 $925 $1000
StdDev $177.44 $217.53 $181.14 $243.54
NumData 431 416 440 431
•Asking price has stabilized – and is taken more seriously by buyers
•Prices are almost exactly the same as last year
•Standard deviations are smaller
•But, sales rate of 2016 listings is significantly below that of a comparable period last year
•Prices vary substantially by package size
Market pricing
Copyright 2016 ROL

Can You Show Infringement and Why It Matters
22
Per Asset 2016 Per asset with EOU
2016
% difference between EOU
packages and general market +27%
Average $197.32 $251.12
Median $150.00 $166.67
Min $16.67 $19.61
Max $750.00 $925.00
StdDev $177.44 $225.07
NumData 431 200
•An infringement showing or Evidence of Use (EOUs) drive pricing premiums: +27%
•Packages with EOUs are +50% more likely to sell
•Combined benefit 91% increase in expected monetization value
•Per asset prices may obscure underlying pricing dynamics, mix of value drivers and
additional patents to reach a mutually acceptable price point and obscure value driver
patents
•We typically recommend a package with 3-5 families (typically 10-20 assets) with 1-2
value driver families with EOUs
•Pricing sweet spot for a package is $250K-2M
EOU marketing benefits
Combine
with better
sales
Per Asset
2016
Pricing premium +27%
Increased sales rate +50%
91% Monetization Premium
Copyright 2016 ROL

66%
17%
10%
3% 2% 1%
Distribution of seller type by sale year 2015-2016
Operating company
NPE
Inventor
University/research
Defensive aggregator
Other
Distribution of Seller Type by Sale Year
23
•Operating companies represent over 66% of the patents
on the market down from 71%
•NPEs increased their sales up last year, this has continued
- 17% up from 16% - likely as a result of difficulties
enforcing their patents
•Cross-licensing prior to competitor patent sales is a
benefit
Operating companies dominate the market
Top Sellers by Package Count
Alcatel Lucent
Allied Security Trust (AST)
ATT
BAE Systems, Inc.
British Telecom
Caveo
Elizabeth Dyor
Empire IP, LLC
Harris Corporation
IBM
Imation Corporation
Intel
NEC
Netsocket
Nokia Solutions and Networks (NSN)
Panasonic Corporation
Petnote LLC
QinetiQ Limited
Rockstar
Rovi Corporation
TP Lab, Inc.
Tyco Electronics
Verisign, Inc.
Verizon
VideoMining Corporation
Xerox/PARC
Copyright 2016 ROL

48%
34%
15%
3%
Distribution of buyer type by sale year 2015-2016
Operating company
NPE
Defensive aggregator
Other
Distribution of Buyer Type by Sale Year
24
•NPE buying is down to 32% (from 42%) – but still
significant buying
•We expect that remaining NPE’s are more sophisticated
•Monitoring the market continues to be valuable step in
fighting the NPE problem
•IV buying dropped to only 13 packages (down from 40)
•How successful are IV’s licensing and sales?
•RPX is top single buyer
Operating companies now top buyers
Top Buyers by Package Count
9051147 Canada Inc.
Alliacense Limited Llc
Allied Security Trust (AST)
Beijing Xiaomi Mobile Software Co., Ltd.
Carlow Innovations LLC
Commscope Emea Limited
Domo, Inc.
Empire IP LLC
Facebook, Inc.
Finnavations LLC
Gemalto SA
Google Inc.
Huawei Technologies Co., Ltd.
Intellectual Discovery Co., Ltd.
Intellectual Ventures
Knapp Investment Company
Linkedin Corporation
Marking Object Virtualization Intelligence,
LLC
Microsoft Technology Licensing LLC
Open Invention Network, LLC
Optimum Communications Services, Inc.
Palo Alto Networks, Inc.
Rakuten, Inc.
Red Hat, Inc.
RPX Corporation
Taiwan Semiconductor Manufacturing Co.,
Ltd.
Twitter, Inc.
Uniloc Luxembourg S.A.
Copyright 2016 ROL

Litigation Analysis: You Can Model Your Risk
Has Litigation (2012-
2016 market year
packages)
Has IPR (2014-2015
market year packages)
Package
Type
Prior to
listing date
After
listing date
Prior to
listing date
After
listing date
Sold
packages
5.4% 10.2% 0.0% 3.0%
All
packages
3.8% 3.5% 0.0% 1.4%
25
• 10.2% of sold packages are litigated so now you can build a risk model reflecting your risk of being sued
• Previous litigations also increase likelihood of sale
Litigation
• Monitoring the patent market for sales allows for strategic/preemptive IPRs
IPRs
• However, risk is significantly more concentrated in the sold packages
• Defensive aggregator value may be greater than anticipated
• Pursue licenses (or license on transfer) before an OpCo starts listing its portfolio
Both sold and unsold packages are litigated post listing
Copyright 2016 ROL

Q0 Overall
NPE 96% 86%
OpCo 4% 14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
%ofLitigations
Distributions of OpCo vs NPE Litigations
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Cumulative%ofNPELitigations
Quarters from Sale Date
Cumulative distribution of time from sale to
filing date for each case for litigated packages
NPE Plaintiff
Litigation Analysis: Sold, All Litigations Timing
26
•NPE’s account for vast majority of litigated cases
•NPE’s file quickly, and file multiple cases
•Half of NPE litigations filed within 6 months of
sale
•Operating companies buy for future risk
•>50% of OpCo litigations are filed more than 18
months after the sale
For litigated sold packages
Copyright 2016 ROL
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Cumulative%ofOpCoLitigations
Quarters from Sale Date
OpCo Plantiff
* Plaintiffs were analyzed, OpCo’s were identified; all other entities are classified as NPE’s for this analysis
50% of
Litigations
50% of
Litigations
Time

Agenda
Solving the
Patent
Challenge
challenge
Patent
Market
Trends and
Forecast
Litigation rates
How to Buy
Effectively?

Corporate Buying Program - Overview
•Reduce exposure to corporate patent assertions by building a counter-assertion portfolio
•Examples of active corporate asserters include IBM, Qualcomm, Microsoft
•New asserters rise, especially when revenues are down
Primary goal: Defensive counter-assertion
•Buy patents to reduce the risk that those patents can be used against your company
•Other techniques work here too, buying consortium (e.g. AST, OIN, RPX, Unified)
Secondary goal
•Agree on qualities for desired patents
•Buying criteria anchored with business rules can help filter packages quickly and efficiently
•Cost of diligence
•Legal patent diligence can cost $5-50K, other diligence is cheaper and can filter out many
packages
•Over 98% of the packages will not meet your business needs
•Eliminate low value packages quickly
•Bidding and pricing
•Management buy-in
Key challenges

Operational Challenges of Patent Buying
• Too many potential deals (more than 500 per year, ~8K assets)
• Too few deals that will meet your needs
• 1-2% of the deals have the potential to meet your needs
• Looks like a corporate development or VC problem
Problems of abundance and scarcity
• Define success in an actionable way. Define business driven criteria that
automatically eliminates undesirable patents
• Prioritize low cost/high impact diligence first
• Work with Finance to budget and model your program
• Sell your program internally
• Building the community relationships with the brokers and sellers
• Tag and track your deals. Allows you to analyze your program and reduces
duplicate work
• Where problems in otherwise good patents are identified, find answers
• Accept that you will miss some deals
Best practices for patent buying
29

Valueforbusinesspurposesofaspecificbuyer
Proportion of the patent market
Importance of Sequencing Diligence: Value
Distribution in the Brokered Market
30
Goal: Identify high-value patents to
purchase (1-2% of market)
Copyright 2016 ROL
✓

Importance of Sequencing Diligence: Value
Distribution in the Brokered Market
31
Stage 1: General Tech
Filter ($)
Stage 2: Targeted Tech
Filter ($$)
Stage 3: Patent Validity
and Prior Art Analysis
($$$)
Stage 4: Building
and Testing EOUs
($$$$)
X
X
X
X
✓ ✓ ✓ ✓
✓
100%ofthePatentMarket

Process Overview: Example Filtering and
Relative Diligence Costs
32
ROL
package
database
Search
results
candidate
pool
Preliminary
human
filtering
Detailed
filtering
Test
availability
and EOU
creation
Further
testing
Bidding
and buying
2050 500 100 50 10 5-7 1-3
Packages Remaining
Copyright 2015 ROL
$ $ $$ $$ $$$ $$$$ $$
Relative Diligence Costs

Conclusions
• Billions of dollars of patents brought to market every year
• Total 2016 brokered patent market sales $165M
• Private market is much bigger (5-10X)
• Diverse technology areas
• Asking prices have stabilized at $197K per asset
• Sales rates remain relatively low, projected to be 21%
Patents secondary market reflect liquidity of the assets
• Market analysis, litigation analysis, feed risk reduction models
• Models drive ROI analysis
• Combining organic patent development and buying addresses strategy
challenges
• Organic growth addresses long term strategic challenges
• Purchased patents are effective for counter-assertion
Risk mitigation strategy models benefit from market data

Business Sense • IP Matters Copyright 2015 ROL 34
BUSINESS SENSE • IP MATTERS
ROL Group has over 60 years of IP strategy and execution
experience. We ask the business questions first. We
blend in-house and large law firm experience to create
clear steps for success.
We guide companies through unique IP challenges—like
buying and selling patents, developing licensing
programs, defending against patent assertions, and
creating a value-driven IP portfolio. We give direction to
businesses that share our passion for new ideas, creative
problem solving and forward motion.
Contact Information:
+1 (650) 967-6555
kent@richardsonoliver.com

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