A presentation on dos and don'ts on selling patent portfolios.

1. INTELLECTUAL
PROPERTY
ANALYTICS
Patent Portfolio Monetization I
Issues to debate before creating a corporate monetization strategy

2. INTELLECTUAL
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ANALYTICS
Agenda
• Common patent portfolio Issues
• Monetization program goals & objectives
• Patent family value drivers
• Deal structures to consider
• Monetization mistakes
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3. INTELLECTUAL
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ANALYTICS
Common Portfolio Problem #1: Evolutionary Fugue
• Unclear patent holdings due to mergers, acquisitions,
divestitures, lost records, and lack of a useful grading scale
• Patent value confusion from changing court and PTO decisions
and processes, and a lack of a simply stated inventive distinction
and the PTO limitation(s) for each patent family
• Lack of precision regarding technology and product line areas
covered by each family, and how they read on adverse parties
• Lack of database tools to easily manage the portfolio for BOTH
product line and IP departmental success
• Suspicion that substantial $$ wasted on maintenance fees for
worthless patents, but no easy way to determine which ones
Result: lack of portfolio alignment with business objectives
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“Fugue Blanket,” by www.nemobott.com

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Common Portfolio Problem #2: Cultural Confusion
• The IP department is typically a cost center, not a P&L center, so
portfolio management is under-resourced and “budget-adjustable”
• Ad-hoc portfolio organization, planning, and decision-support systems
(e.g. spreadsheets, licensing agreements, patent family growth,
maintenance payments, product line issues, etc.)
• Product line groups subconsciously think of a patent as a long term
asset to be kept in a safe place for defensive emergencies
• IP Dept. subconsciously thinks a patent is like like dry ice in the sun,
so it needs to be used before it vaporizes over time
• IP Dept. has no engineering resource; product line groups have it, but need it to maintain
product line sales growth; both suffer from lack of portfolio knowledge
Result: Inability to properly address threats and opportunities, and
efficiently manage the company’s patent portfolio
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Corporate Patent Portfolio Perspective
• When Nortel went under, the company was sold off in pieces
• Business divisions were sold:
§ Ericsson (CDMA & LTE assets) = $1,130m
§ Avaya (Enterprise Solutions) = $900m
§ Ciena (Metro Ethernet Networks) = $770m
§ Ericsson (GSM Business) = $100m
§ Genband (Carrier VoIP) = $100m
§ Ericsson (Multiservice Switch) = $65m
Total sale price for all 7 = $3.065B
• Nortel’s residual 6,000 patents sold for $4.5 Billion— 50% more than all of
its business divisions put together!
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6. INTELLECTUAL
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ANALYTICS
Strategic Corporate Program Goals
• Leverage exclusionary rights:
u Protect competitive advantage
u Maintain freedom to operate
u Create powerful negotiating chips for
competitive IP issues
• Enhance profitability via monetization:
u Maximize ROI on development $$
u Minimize maintenance fees
u Recoup $$ outlays for inbound license fees
u Maximize company’s valuation
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Monetization Objectives To Support Strategy
• Analyze, grade, and organize patent families such that:
u Inventive distinctions and critical limitations are identified for each family
u Product lines and IP Dept. can mine the patent database easily
u Identify technology areas with too many or too few good patent families
u Monetize excess good patent families in oversupplied areas
u File or acquire good patents in areas of deficiency
u Find & abandon patents of no value
§ Before the 11.5-yr $7400 maintenance fee for the parent patent + foreign fees…
§ Before the 7.5-yr $1600 fee for each child patent + foreign fees
• Create Innovative deal structures to leverage company’s IP
• Transform IP Dept. to a P&L operation that can afford:
u Resource levels to consistently weed and feed the the company portfolio
u Outside analysis and reverse engineering expertise to analyze patent families and
determine which company patents are being infringed, and by whom
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8. INTELLECTUAL
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Value Drivers
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Patent Family Value Ranges
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Patent Rating Chart Parameters*
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*Techinsights, an Ottawa reverse engineering company, broadly distributes this chart—a good way to rank patents for further diligence

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Monetization Deal Architectures to Consider
• 2-stage private auction (6 mo.)
• Stalking-horse bid invitation preceding private
auction (8-9 mo.)
• Directed 1-on-1 negotiated transaction
• Recording bid (buyer proposes X families—
seller rejects Y, & X-Y families ~ relate to $ bid)
• Privateer model
• Syndicated transactions
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12. INTELLECTUAL
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ANALYTICS
Operating Companies Pursuing a Privateer Model
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Operating Company
Sponsors
IP Privateers serving
Operating Company
Palm (Under HP today) Smartphone Technologies LLC
Hitachi / SANDISK Solid State Storage Solutions LLC
ETRI SPH America LLC
HP/Cisco, others? AMBATURE LLC
Nokia/ Sony MMI LLC
Alcatel Lucent Multimedia Patent Trust LLC
GE CIF Licensing LLC
Hitachi Mednis LLC
Micron Technology Round Rock Research LLC
SHARP SHARP Technology Venture

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Multi-Lot Parallel Patent Auction Strategy
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Negotiations carefully timed to avoid negotiation overlap

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Monetization Mistakes
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Showstoppers for Patents Chosen for Monetization
• High encumbrance load on the chosen patent families
• Restrictions mandated by company (e.g. No NPE’s)
• Degraded quality of patent families selected:
u Less than 15-20% good Evidence of Use charts for number of patent families
u Poor litigation/licensing history
u Reexamination in process
u Terminal disclaimer to patent not in the portfolio
u Examiner limitations that narrow applicability to a small market
u Government investment in IP creation
u Complex technology + horrible claim language (poor English)
u Intervening rights
u Low apportionment factor
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16. INTELLECTUAL
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Typical Seller Mistakes
• Hang on to patents they don’t need until close to expiration
• Selling leftovers after filtering out the good stuff
• Hide vulnerabilities hoping none are discovered
• Unrealistic price expectations
• Internal changes to patent list late in the process
• Monetization goals not supported by management
• Unrealistic PPA terms (buyer drafts PPA, seller warrants facts)
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