Brokered Patent Market 2014

Business Sense • IP MattersBusiness Sense • IP Matters Attorney-Client Privileged & Confidential 1
Brokered Patent Market 2014
Kent Richardson
November 18, 2014

Business Sense • IP Matters
Overview
• Market softening: lower % sales, sold at lower
price
• 618 estimated packages
• 7801 estimated assets
• Estimates sales rate of 22%, down from 51%
Key facts
• $260M 2014 vs. $283M 2013
• 173 people employed WW in 58 brokerages
Market size estimate
Attorney-Client Privileged & Confidential 2

Sales Rate: Market Worsening
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
<1 <2 <3 <4 <5 <6
Cumulative%Sold
Time from Package Listing Date to Sale Date (years)
Cumulative Sales by Years from Package Listing Date
2009
2011
Predicted 2013

Sales Rate: Market Worsening
• Chance of selling a package has decreased
• Listed in 2009: 51%
• Listed in 2011: 33%
• Listed in 2014: 22% estimated
• Drop reflects difficulties we hear
• Brokers are having selling packages
• NPE funding issues
Results
• 961 packages sales, data analysed by year listed
• Sales data necessarily lags (up to 18 months) behind the
actual
Comprehensive dataset

0%
5%
10%
15%
20%
25%
30%
35%
1 <=5 <=10 <=25 <=50 <=100 <=200
%ofpackages
Number of assets per package
Distribution of Package Sizes (Total Assets)
% Assets 2013 Market
% Assets 2014 Market
More Smaller Packages
• Smaller packages (<5 assets) have a higher sales rate
Sales

• Heavily skewed towards software and cloud computing
• Impact on packages post CLS Bank v. Alice?
• The most common three categories
• Represent almost 50% of packages
• Application software,
• Cloud computing
• System infrastructure
Cloud focus
Packages are Focused on Cloud
113
68
56
55
48
40
37
33
29
17
16
12
3
2
2
0 20 40 60 80 100 120
Applications Software
Cloud Computing
System Infrastructure Software
Semiconductor
Communication Services
Wireless
Application Development and Deployment SW
Miscellaneous
Consumer Electronics
Communication Equipment
Components
Computing Equipment
Imaging
Displays
Service Provider Networks
Package Distribution By Tech Category

Asking Prices per Asset
• Average asking price per asset dropped by 12%
• 2013 Market: $305K to 2014 Market: $269K
• Average asking price per US patent has dropped 23%
• 2013 Market: $467K to 2014 Market $360K
Asking Prices per Asset
• No pricing impact
• 25% better chance of a sale if there is an EOU
Impact of EOUs
All packages, top and bottom 5% of data points
from each set removed
Packages with EOUs, top and bottom 5% of data
points from each set removed
US$ per asset US$ per US Patent US$ per asset US$ per US Patent
Average $269 $360 $280 $367
Min $31 $50 $39 $63
Max $750 $1,425 $750 $1,071
StdDev $219 $258 $219 $244
NumData 419 410 190 188

More Lower Priced Packages
110
146
74
41
29
10
0
20
40
60
80
100
120
140
160
<$500K $500K-1M $1-2M $2-4M $4-10M $10-20M
Distribution of Asking Prices (top and bottom 5% removed) $US

Public Deal vs. Brokered Market
0
100
200
300
400
500
600
700
800
900
<$500K $500K-1M $1-2M $2-4M $4-10M $10-20M Public Deals
Public Per Asset Price (US$K) in Relation to Broker Asking Price
Per US
Per Asset
Public Deals 2012-Present
Public Deals 2010-Present
• Public prices dropping too
• 2010 to 2014: $827K average per asset
• 2012 to 2014: $673K average per asset
• Public deals still well ahead of brokered market and not representative
Public deal vs. brokered market

Average Asking Price per US Issued Patent by
Tech Category (US$)
• Tech categories are strong drivers for asking price
• Communication services demanded 207% of the asking price per US issued patent for semiconductors
Pricing by tech category
• Includes both high-end and low-end assets
• Average asking price per US issued patent including outliers: $304K
Wireless pricing
$470
$445
$404
$388
$367
$344
$314
$309
$293
$276
$227
$186
$- $50 $100 $150 $200 $250 $300 $350 $400 $450 $500
Communication Services
Cloud Computing
Communication Equipment
Applications Software
System Infrastructure Software
Computing Equipment
Consumer Electronics
Application Development and Deployment SW
Components
Miscellaneous
Semiconductor
Wireless
Average Asking Price per US Issued Patent by Tech Category

Brokers
• 58 brokers this year, 55 last year
• 16 brokers listed 10 or more
packages
• Accounted for 72% of the listed
packages
• Top 4 brokers accounted for 33%
of listed packages
• Little technology specialization
amongst brokers
• Exception: brokers affiliated with
semiconductor reverse
engineering houses
Results about brokers
Brokers with 10 or More
Packages
Adapt IP Ventures
Global IP Law Group
ICAP
Iceberg
Intellectual Asset Group (IAG)
Intellectual Profit
IP Offerings
ipCapital Licensing Company
IPInvestments Group
Munich Innovation Group
N&G Consulting
Patent Profit International
Quinn Pacific
Tangible IP
ThinkFire
Tynax

Reason for passing 2013 Market 2014 Market
Technology area does not fit 64% 70%
Actual market adoption is too small 6% 12%
Evidence of use fails to map
properly
13% 5%
Pricing 4% 5%
Unresolved prior art 7% 4%
Remaining asset life too short 4% 3%
Bids due too soon 2% 2%
Clients Focus on Efficient Filtering
• Being selective early in diligence is beneficial to everyone
• Buyers spends less time and money analysing a package on which they will pass
• EOU analysis and prior art searches are more labour-intensive costly than other
diligence activities
• Evidence of use fails to map properly: 2014 Market: 5%, 2013 Market 13%
• Unresolved prior art: 2014 Market: 4%, 2013 Market: 7%
Results

Distribution of Seller Type by Sale Year
2013 and 2014 All Years
Operating Company 62% 64%
Inventor 21% 20%
NPE 11% 8%
University/Research 4% 3%
Defensive Aggregator 1% 3%
Investment Bank 0% 1%
Unknown 2% 1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%

Distribution of Buyer Type by Sale Year
2013 and 2014 All Years
University 0% 1%
Inventor 1% 1%
Defensive Aggregator 15% 13%
NPE 38% 43%
OpCo 46% 43%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%

Conclusions
• Price down 12%
• 6-18 month lag in the data
• Trending lower
• Brokers asking for upfront fees
Price dropping – tougher market
• 556 packages
• > 7000 patent assets
• Good time to be a buyer
Robust, viable market
• Continued focus on efficient filtering packages to identify patents of interest
• Analysis of actual sales data
Next steps

Summary of Data
Summary of Data
Packages studied June 2013 to May 2014 556
Number of issued US patents 4271
Total assets 7021
Packages old enough to have sold Q1-Q3 2013 351
Percentage sold in first nine months 10%
Asking price per US issued patent US$360,000
Asking price per listed patent asset US$269,000
Percentage packages selling 32%
Average number of US issued patents per package
(excluding packages with over 200 assets)
12.6
Median number of US issued patents per package
(excluding packages with over 200 assets)
3
Percentage of packages with 10 or fewer issued US
patents
81%
Annual sales US$260 million
Number of people employed as brokers (est.) 173

Business Sense • IP Matters Attorney-Client Privileged & Confidential 17
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.

Business Sense • IP MattersBusiness Sense • IP Matters
Backup

Market Size Methodology
To derive the market size, we first estimated the number of new packages brought to the market in a year (764 as
discussed above). We then used the 36-month sales rate (22% sell), recognizing that the number could be as high as
32% (predicted above). As noted above, sales rates calculations are delayed by the sales window and assignment data
(up to 18 months), so we decreased the expected sales rate based on our current estimates of 22%. We used this same
practice in last year’s paper, reducing the sales rate from 50% to 30%, and our estimate was confirmed by this year’s
numbers being 32%. Then, we discounted the sales price from the asking price (65% of the asking price).
We believe that the actual sales price is one of the more difficult areas to estimate because so few transactions are
reported. We adjusted the number of US issued patents per package to 10.45 to take into account the large number of
small packages and the pricing differences of big packages versus small packages. While the average number of US
issued assets per package is 12.6, the median is only 4, and smaller packages are more likely to sell. We believe that the
price and number of assets could be 50% below or above this number. Using the adjusted number of issued US patents
per package brings us to a total market of $260 million per year.
Using an average commission rate of 20%, the revenue from this market for brokers is $52 million per year.
We back-tested the market size by estimating the average loaded labor rate per broker ($300,000 a year). This gives 173
brokers. Assuming that four brokers work in each brokerage shop, this results in 58 brokerages (our data shows 58).
Each brokerage would bring about 13 packages to the market per year; however, our data shows a few brokers bring
many packages to the market, with the majority bringing a few packages.
This 2014 Market size estimate seems to foot with a comparative calculation base on the estimated 2013 Market size in
last year’s paper. Last year we estimated the 2013 Market to be 624 packages per year; therefore, we are seeing a 22%
increase, to 764 packages, in package flow as discussed above. On the surface, this appears to be a drastic increase in
the market size, but the number of packages is only one element in calculating market size. Other factors include: the
smaller packages size and lower prices. After accounting for the 16% decrease in average US issued patents per package
and the 12% decrease in asking price per US issued patent, and the result is that the total value of the market
decreased by 10% from the 2013 Market to the 2014 Market. This would produce a 2014 Market size of $254
(compared to $283M in 2013).

Sales Rate Continued
•2011 Listings
•No sales from packages listed in 2011 have been recorded in the past year
•6% of listed packages sold in the second year on the market
•15% of 2009 packages selling in their second year
•3% of listed packages sold in the third year on the market
•13% of 2009 packages. Sold in their third year
Timeframe
•Buyers are making decisions more rapidly
•Suggests buyers are establishing formal evaluation processes
Takeaways
•First year sales rate was determined by sales of packages listed in 2013 that had been on the
market for more than 12 months
•Listed January 2013 through May 2013 on the market. Then, the sales rates from packages
listed in
•2011 and 2012 were used to determine how quickly sales would fall off in subsequent years
•Again, we believe the market is actually worse than these numbers show
2013 estimates

Package Sizes
• All packages <200 assets listed in the 2014 Market (6/1/2013 to 5/31/2014) vs.
<200 asset packages in the 2013 Market (6/1/2012 to 5/31/2013)
Dataset
• In the 2014 Market, the average package size decreased significantly
• 2014: Average package contained 12.6 total assets and 7.8 US issued patents
• 2013: Average Package contained 18.0 total assets and 9.3 US issued patents
• The percentage of packages with 10 or fewer assets was similar from 2013 to
2014
• increased from 68% to 71%
• Significant growth in the number of packages containing 11 to 25 assets
• Drop in total assets on the market despite increase in number of packages
• Does not appear that large packages were broken up into smaller ones
• Possible that the assets that we previously put in larger packages are no longer
being brought to the brokered patent market.
Results

Distribution of Asking Prices
•2014 Market: 83% of packages contained pricing guidance
•Slight decrease from the 2013 Market: 87% of packages had pricing guidance
•Likely that this decrease is due to our methodology change
•Additional packages we now capture that are outside of our client’s buying areas are
discussed less with brokers; therefore, there are fewer opportunities for pricing
guidance to be added after the initial receipt of the package.
•Significantly higher than historical numbers (56% in the 2012 Market)
•Receiving this pricing information with more ease
•Brokers often give pricing information to us in the initial email or package
documentation
•Brokers are more likely to provide it in response to email requests
•Previous years many brokers would only provide pricing via phone calls
Pricing guidance
•The distribution of package prices has shifted significantly to lower priced packages
•2014 Market: 62% of packages had an asking price of less than $1M
•2013 Market: 53% of packages had an asking price of less than $1M
•2014 Market: no $20M+ packages.
Results

% of Sales with EOUs by Sale Year
25%
43% 43%
51%
75%
57% 57%
49%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014
No EOU
With EOU

EOU Impact on Sales
• Broker providing an EOU does not increase asking price
• Broker providing an EOU increases the chance of sale
• Packages with EOUs provided accounted for more
than half of the sales in the first five months of 2014
• Distinct advantage considering that most of these
sales came from the 2013 and 2014 Markets
• Likelihood of an EOU being provided was 33% in
2013 Market and 41% in 2014 Market
• A broker has about a 25% better chance of a sale if
there is an EOU
• In the tougher market, including an EOU seems prudent
Pricing by tech category

Sales by Package Size
•All data referring to sales is viewed by calendar year, not market year
Note on all sales data
•Small packages sell more frequently across all years
•2013: 84% of packages sold had fewer than 25 assets
•Sales distribution is disproportionally high for small packages relative to the
distribution of packages by size listed the same year
•Not only are small packages more commonly listed, but also that they have a higher
rate of sale
Results
2014 2013 2012 All Sales
# Assets All Assets US Issued All Assets US Issued All Assets US Issued All Assets US Issued
1 23% 38% 19% 31% 35% 39% 24% 36%
2 to 5 35% 27% 34% 25% 27% 25% 34% 27%
6 to 10 15% 15% 19% 17% 12% 14% 17% 16%
11 to 25 10% 6% 12% 9% 8% 11% 10% 8%
26 to 50 8% 8% 10% 6% 8% 0% 8% 5%
51 to 100 4% 2% 5% 5% 8% 0% 5% 2%
101 to 200 4% 4% 2% 6% 4% 11% 3% 5%

Time to Bid on Packages that Sold
•We also analysed how much time a buyer really has to bid on a package. While there is no pressure to bid quickly on
undesirable packages, we wanted to focus on packages that have sold in order to calculate when buyers need to make
buying decisions.
•Sales shown to center in range of 4 to 6 months after the bid due date (sales occurring in recent years)
•Sale date is the recorded date of USPTO assignment
•Bids are placed significantly earlier
•Average is around a 3 month delay in recording assignments
•Additional 2 week timeframe between reaching an agreement and closing the sale
•Center of the curve shifts from 5 months after the bid due date to closer to 1.5 months.
•For sold packages:
•25% chance that the agreement between the buyer and seller was made on or around the bid due date
•50% chance that an agreement was made by 1.5 months after the bid due date
•Buyers must now get their bids in on time or request additional time from the broker to not miss opportunities
•Due to the operationalization of buying programs, the packages that sell are selling fast
Results
Sold 2014 Sold 2013 Sold 2012 All Sales
Months Receipt Date Bid Due Date Receipt Date Bid Due Date Receipt Date Bid Due Date Receipt Date Bid Due Date
Sold before 2% 2% 0% 8% 0% 5% 1% 5%
Same month 0% 4% 3% 2% 0% 20% 1% 6%
1 to 3 16% 23% 16% 30% 21% 15% 16% 25%
4 to 6 18% 26% 21% 21% 32% 20% 20% 22%
7 to 12 35% 26% 43% 34% 32% 30% 35% 29%
13 to 18 20% 13% 14% 2% 7% 0% 15% 6%
19 to 24 6% 4% 0% 0% 0% 0% 6% 3%
>24 2% 2% 3% 4% 7% 10% 5% 4%

Repeat Sellers
• Despite the slight increase in NPEs selling their
assets, no NPE sold more than one package
• 9 nine entities sold more than one package from
1/1/2013 to 7/7/2014
• 7 of these entities were operating companies
• These sales account for
• 21% of sold packages
• 32% of sold assets, and
• 35% of sold US issued patents
• Average sales rate, sold packages/listed
packages, of these 9 companies is 69%
• More than twice the expected rate of sale on
the open market
Results about sellers
Repeat Corporate
Sellers
Alcatel Lucent
NXP Semiconductors
AT&T
Cypress
Semiconductor
Earthlink
Leap Wireless
UT Starcom

Who is Buying
• Listed the buyer for all sold packages
• Categorized every buyer into a type
• Analyzed the distribution of these types by year sold
Methodology
• Sales occurring from 1/1/2013 to 7/7/2014:
• Operating companies: 46% of purchases
• Last year’s paper: 35% of sales listed prior to 2013 were purchased by operating companies
• NPEs: 38% of purchases
• Last year’s paper: 56% of sales were purchased by NPEs
• The decrease in NPE purchasing activity likely relates to a decrease in buying by Intellectual Ventures Inc.
while waiting to fund their “Invention Investment Fund 3.” We have started to see Intellectual Ventures
resume buying, so we may see the NPE number rise in the coming year
• Defensive aggregators: 15% of purchases
• Last year’s paper: 8% of sales were purchased by defensive aggregators
Results
• From 1/1/2013 to 7/7/2014
• 59 buyers purchased 112 packages
• 14 buyers purchased multiple packages
• Repeat buyers account for 58% of the purchased packages
• Top 4 buyers accounting for 35% of the purchased packages
Repeat buyers

Package Frequency by Month
0
10
20
30
40
50
60
70
80
June
July
August
Septem
ber
October
Novem
ber
Decem
ber
January
February
M
arch
April
M
ay
NumberofPackages
2013 Market
2014 Market

Brokered Patent Market 2014

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