How can you be sure you are conducting proper diligence on IP assets when evaluating large patent portfolios during a potential merger & acquisition? Kent Richardson presents with several other IP experts as to how to conduct and budget diligence regardless of asset number, patent families or tech landscapes.

1. Richardson Oliver Law Group
IP Driven M&A - Diligence
March 6, 2012
Jeremiah Chan – JDSU
Kent Richardson – ROL Group
Hoo-Min Toong – IP Vision
Duane Valz – Google

2. 2
Agenda
• Diligencing big portfolios – Hoo-min Tong
• How to integrate diligence resources – Duane
Valz
• Learnings and gotchas in IP M&A – Jeremiah
Chan
• Back to the basics – how to stop wasting time
early on in diligence – Kent Richardson

3. In The Wireless Space
Most of the Players Have Large Patent Portfolios
Let’s take the Motorla Mobility portfolio

5. 7300+ Motorola Mobility US Patent Matters
High-Level: Gain an Understanding for the “Value” of the Portfolio
Deeper-Level: Find the 100-200 “Best” Motorola Mobility Patents
for Expert Review (Will vary by Objective)
?
?
?
How do we go
from here…..
…… to here

6. 7300+ Motorola Mobility US Patent Matters
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?
?
ANALYTICS TOOLBOX
Metrics:
Claims Analysis
Seminal Patents
Patent Family Size
Number of Foreign Filings
Portfolio Strength
Competitor Analysis
Due Diligence:
List of Patent Families
List of Foreign Equivalents
Assignment Analysis
What IF?:
Key Inventors
Technology Landscape
Citation Relationships
Cluster Analysis
General Analytics
How do we go
from here…..
….. to here
High-Level: Gain an Understanding for the “Value” of the Portfolio
Deeper-Level: Find the 100-200 “Best” Motorola Mobility Patents
for Expert Review (Will vary by Objective)

7. High-Level: Gain an Understanding for the “Value” of the Portfolio
FILING HISTORY
GRANT HISTORY
KEY INVENTORS
CITATION ANALYSIS
CLAIMS ANALYIS (expert system)
FOREIGN FILINGS ANALYSIS
These analytics are supporting Inputs to the “Valuation Process”
Deeper-Level: Find the 100-200 “Best” Motorola Mobility Patents
for Expert Review
By Technology or Objective (eg. Speech Processing)
BEST CLAIMS
SEMINAL PATENT ANALYSIS
PATENT FAMILY ANALYSIS
LICENSING OPPORTUNITIES
ASSIGNMENT ANALYSIS (expert system)
These analytics support the Attorney and Expert review

8. Moto Mobility Claims Analysis Broad vs Narrow Claim Case Law Impact
(16,347 Claims) (A, B, C) (1 to 5)
Expert
System
13%
VS:
Nokia
RIM
Apple
MS

9. 93 Apple Patents
Citing to
25 Motorola Mobility Patents
In
Batteries and TouchScreen

10. Patent Family Map
Of
6,009,130 - Rader et al.
“Multiple access digital
transmitter and receiver”

11. 11
Agenda
• Diligencing big portfolios – Hoo-min Tong
• How to integrate diligence resources – Duane
Valz
• Learnings and gotchas in IP M&A – Jeremiah
Chan
• Back to the basics – how to stop wasting time
early on in diligence – Kent Richardson

12. Integrating Diligence Resources
• Determine what array of skill set expertise will be need to properly
evaluate the patents relative to a clearly understood desired
outcome or level of insight
– Attorneys only?
– Employees?
– Outside technical/financial/regulatory experts?
• Impact may be influenced by factors not evident from the portfolio
itself
• Conduct industry and marketplace research alongside portfolio-
specific analysis
– e.g., try to understand likely encumbrances; if that information is not available
to you, from news and Web searching

13. Integrating Diligence Resources (cont’d)
• Valuation is tricky and more of an art than a science
• Driven by sound analysis, but significantly impacted by whether
interest in the portfolio is:
– competitive vs. unilateral
– driven by monetization vs. strategic objectives
– complimentary to existing holding vs. filling portfolio white spaces
– etc.
• VALUATION OBJECTIVES SHOULD FRAME THE DILGENCE
METHODOLOGY!
– To the extent there is no such thing as a fully objective and standard
valuation model, understanding a deal’s key goals and value drivers
should inform how diligence is organized and undertaken

14. How does a prospective patent buyer efficiently diligence a very
large portfolio (i.e., thousand of patents)?
• Tradeoffs = quality/comprehensive analysis vs. cost/time
constraints
• Software tools are good aids for comparative portfolio heat
mapping, product technology clustering, rough cutting and
other high level analytics
• Software tools, however, must be used wisely alongside
human/professional judgment and analysis
– true claims quality, marketplace relevance, standards relevance,
etc. are hard for software to determine

15. How to diligence a very large portfolio (cont’d)?
• Particularly when time is a factor, it is good to define a
methodology that will include both software tools as well as
evaluation by legal and technical experts, and also identify
weaknesses/limitations/caveats for that methodology
• Results must be accompanied by an understanding of the degree of
bluntness or refinement that they embody
– Sometimes it is enough to understand a rough value of a large corpus of
patents as a whole, and sometimes, e.g., one needs to understand a precise
valuation of the best patents in the portfolio relative to specific use cases
– At times, only one or two segments of several in a portfolio may be of interest
to a buyer and that helps to focus the analysis and make the best use of time
available

16. 16
Agenda
• Diligencing big portfolios – Hoo-min Tong
• How to integrate diligence resources – Duane
Valz
• Learnings and gotchas in IP M&A – Jeremiah
Chan
• Back to the basics – how to stop wasting time
early on in diligence – Kent Richardson

17. © 2012 JDS Uniphase Corporation | JDSU CONFIDENTIAL AND PROPRIETARY INFORMATION 17
More Than Meets the Eye

18. © 2012 JDS Uniphase Corporation | JDSU CONFIDENTIAL AND PROPRIETARY INFORMATION 18
Inventor Interconnections Cross-Dependencies Claims Analysis
Explore the Unknown

19. © 2012 JDS Uniphase Corporation | JDSU CONFIDENTIAL AND PROPRIETARY INFORMATION 19
Who has the leverage?
How hard can you push?
Deal
Terms
Target
Profile
How does this company
make money?
I need to know the big
ticket items a.s.a.p.
Time
Who is on the Team?
What do they bring to the table?
Resources
START
HERE
Remember the Forest

20. © 2012 JDS Uniphase Corporation | JDSU CONFIDENTIAL AND PROPRIETARY INFORMATION 20
Grab Your Tools
Covenants &
Further Assurances

21. © 2012 JDS Uniphase Corporation | JDSU CONFIDENTIAL AND PROPRIETARY INFORMATION 21
REMEMBER TO ACCOUNT FOR:
q IP Legacy Payout - cost to integrate the old
portfolio (maintenance of issued + prosecution
of pending files)
q Target’s IP growth projections - bake
expected portfolio growth into AOP
q M&A pace - recurring costs associated with
M&A run-rate
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
FY07 FY09 FY11 FY13 FY15 FY17
Approximate Total IP Legacy Cost for 7 Deals
Short Term
Maintenance
Future Projection: 2 deals/yr (no pruning) Total IP Legacy Cost for 7 Deals
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
FY07 FY09 FY11 FY13 FY15 FY17 FY19
Short Term
Maintenance
Expect the Extras

22. © 2012 JDS Uniphase Corporation | JDSU CONFIDENTIAL AND PROPRIETARY INFORMATION 22
Take aways
M ore Than Meets the Eye
E xplore the Unknown
R emember the Forest
G rab Your Tools
E xpect the Extras

23. 23Privileged and Confidential
Agenda
• Diligencing big portfolios – Hoo-min Tong
• How to integrate diligence resources – Duane
Valz
• Learnings and gotchas in IP M&A – Jeremiah
Chan
• Back to the basics – how to stop wasting time
early on in diligence – Kent Richardson

24. Accelerating Patent Diligence
What is the Pain?
24
Few interesting acquisition opportunities in a sea of offerings
• 100’s of incoming naked patent transactions
• Many are not interesting to your business
Time-consuming review
• Buyers want to keep costs down
• This requires early access to information and a “fail fast” philosophy
Inconsistent and incomplete deal information
• Deal format, deadlines, contact information
• Asset list, family information
• Encumbrances, impact (claim charts), market sizing, etc.
Expensive and wasteful process
• In aggregate, gathering basic information is expensive and wasteful

25. Accelerating Patent Diligence
Why Focus on Basic Deal Information?
• Gather information
for deals
• 500 deals/year
Initial Intake
• Basic business analysis
(cost, market, time)
• 50 deals/year
Business Case
• Deep dives in each area
• 10 deals/year
Legal,
Market,
Technology
• Bidding and buying
• 5 deals/yearBuy
25

26. Accelerating Patent Diligence
Version 1 Offering
• Common, electronic patent diligence interchange format (Excel)
• Diligence tiers defined
• Each subsequent tier takes more time for seller to prepare, but provides
more information to buyer
• Goal: 500+ deals distributed using new format in 2012-2013
• Benefits to:
• Buyers: minimum 5-15% decrease in diligence and intake costs to buyers
in 1st year
• Sellers: more eyes on their packages and higher likelihood of buyers
reviewing packages
• Future work:
• Further automation of format, certification of the diligence packet 26

27. Accelerating Patent Diligence
Deal Consensus™ Package Checklist
Item Silver Gold Platinum Included (Y/N)
Cover sheet completed ü ü ü
Excel list of assets provided in Deal Consensus™ format ü ü ü
History of assets ü ü ü
History of inventors Opt Opt
History of owners ü ü
History of offering ü ü
Reason for sale ü ü
Discuss technical problem addressed by patents ü ü
How do the patents solve the technical problem ü ü
Future users and markets ü
Total impacted market (TIM) ü ü
Serviceable impacted market (SIM) Opt
Other market information Opt Opt Opt
Encumbrances - list licenses ü
Encumbrances - list liens ü ü
Expected price range Opt ü ü
Comparable pricing information provided Opt
Are pricing models (e.g. DCF, monetization roadmap) available Opt
Timeline and bidding process described ü ü ü 27

28. Accelerating Patent Diligence
Deal Consensus™ EOU Checklist
Item Silver Gold Platinum Included (Y/N)
Featured patents and claims identified ü ü ü
Working technical definition provided ü ü
EOU has a word-for-word match ü ü
Any assumptions are clearly articulated as assumptions ü ü
EOU read is consistent with prosecution history ü ü
Claim terms are all supported by the specification ü ü
Use of terminology is consist across all EOUs in package ü ü
Background literature search conducted (this is not a prior art
search)
ü
Re-examination and opposition identified ü ü ü
EOU demonstrates that a single party is the infringer ü
Are inventor notebooks or similar materials available ü ü
28
http://dealconsensus.com

29. 29
Commentary & Q&A
• Large portfolios require automation
• Prioritize your diligence
• Components of deal diligence
• Buyers price
• Sellers price
• Impacted market
• Technology adoption
• Prosecution review
• Size of deals
• What happens when the deal size changes
• Does diligence stop deals at $5M, $50M, $250M?