PRIVILEGED AND CONFIDENTIAL Invitation to join LOT Network Ken Seddon CEO, LOT Network Sept 30, 2015...

PRIVILEGED AND CONFIDENTIAL

Invitation to join LOT Network

Ken SeddonCEO, LOT Network

Sept 30, 2015

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Ken Seddon - CEO, LOT Network

Ken Seddon comes to LOT with over 20 years experience managing all areas of intellectual property. Ken has worked at some of the largest patent holders the world including Apple, Micron, Motorola, Intel and most recently as the Vice President of IP at ARM.

A resident of Phoenix, Arizona, Ken graduated from the Georgia Institute of Technology, with a bachelor's degree in Computer Engineering. He also earned a master’s degree in Solid State Device Physics and a Juris Doctorate from Arizona State University.


The Patent Assertion Entity (PAE) problem

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PAE problem getting worse

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Patent Suit Filings Continue On Record Pace, Report SaysBy Matthew BultmanLaw360, New York (July 14, 2015, 6:30 PM ET) -- More than 3,100 new patent cases have been filed in federal court so far this year, a record-breaking number that could put patent filings in 2015 at an all-time high, according to a report released Tuesday.

PAE litigation is on the rise!

2015 likely to be a record based on 1st half actuals

PAEs are responsible for 84% of high-tech patent litigation in the US!


PAEs - hurting innovation

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PAE litigation is on the rise!

2015 likely to be a record based on 1st half actuals

PAEs are responsible for 84% of high-tech patent litigation in the US!

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

1000

2000

3000

4000

Number of PAE initiated lawsuits per year1

PAEs84.1%

15.9%

PAEsOperating Companies

7

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The PAE problem is getting worse

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US Patent Office: number of patents and new applications by year

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0

175

350

525

700

Issued PatentsNew applications

The number of patents issued by the US Patent

Office is growing!

(Over 300,000 new patents in 2014 alone)

(thousands)4


The PAE problem is getting worse

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Over 50% of patents sold last year relate to

software

PAEs acquired over 15,000 patent assets in

2014 alone

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Where are the PAEs getting their patents?

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Companies provide PAEs with most of the patents

Operating Company

81%

19%

Operating CompanyInventor/University

81% of patents acquired from PAEs come from

companies 7

Source of Patents


PAEs target small/medium sized software companies

9You are not too small to get sued.

62% of target companies have < $100m in revenue

3

Revenue <$100 m

62%

3%7%

16%

12%

Revenue <$100 m> $50b$10b-$50b$1b- $10b$100m - $1b

Defendant Revenue Profile

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PAEs target small/medium sized companies

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62% of the patents used by PAEs in litigation are software patents

The average annual revenue of an PAE target company is $10.8 million/year

On average a software company pays $3.32 million for each lawsuit from an PAE

PAEs cost companies over $29 billion/year in direct accrued costs

Small or medium sized companies pay 37% ($10.73 billion) of those costs

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2

8

2

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Overview of LOT

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A network of companies that are working to address the problems of PAEs.

Members give each other a license to patents so ALL LOT members are “immunized” from patents that leave the network and fall into the hands of PAEs.

LOT Summary

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LOT Members are still allowed to:Assert their patents directly against other LOT membersAssert their patents directly against non-LOT membersSell their patents to operating companies (LOT agreement does not apply)Sell their patents under spin-out/M+A activity

There is no burden to membership:LOT members are not required to report if they sold a patentLOT members do not have to give notice before they sell a patent

You may withdraw anytime. Future patents not impaired

LOT believes in traditional uses of Patents

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How does LOT work?

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Illustration of the LOT Agreement's Operation

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21Today: Companies 1 and 2 join the LOT Agreement.

21LOT

Future: LOT membership immune from sold patent, regardless of the owner. 21

LOT

3

X

4

X

Over 325,000 WW assets

Over 99,000 US assets

Tomorrow: Company 2 sells a patent to Company 3. Company 3 is not in LOT. 21

LOT

3

$License to LOT

membership automatically

becomes effective.

Legend

- Transferred patent(s)


LOT supports traditional uses of IP

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LOT Network members are free to assert their patents offensively or defensively against non-LOT members.

No restrictions on how IP is licensed to operating companies in a cross-license or commercial agreement.

(note, exclusive license to an PAE invokes the license)

21LOT

3


LOT supports traditional uses of IP

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LOT Network members are free to assert their patents offensively or defensively against other members.

No restrictions on how IP is licensed to operating companies in a cross-license or commercial agreement.

21LOT

3


LOT Network is non-profit: Costs

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Current LOT members have divested over 1,200 US assets in last two years. (3,300 ww assets)

H04N - Transmitting imagesH04L - Transmitting Digital InformationG06F - Digital Data Processing H04B - Transmitting signalsH04W - Wireless communications

LOT Members have divested patents

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H04N

B21F

H04L

G06F

H04B

H04W

G08B

H04M

H01QH03M

H03FH04JG02BH05K

H04N B21F H04L G06FH04B H04W G08B H04MH01Q H03M H03F H04JG02B H05K H04N B21FH04L G06F H04B H04WG08B H04M H01Q H03M

Top divested categories

211 patents


Over 99,000 US assets Over 325,000 ww assets

H04N - Transmitting images H04L - Transmitting Digital Information G06F - Digital Data Processing G03G - Storing images G06Q - Data processing system

14 Largest patent categories currently in LOT membership

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H04NA61B

H04L

G06F

H04BH04W

G06TH01L

G03G

G06Q

B41J

G06K

G02B

G03F

H04N A61B H04LG06F H04B H04WG06T H01L G03GG06Q B41J G06KG02B G03F H04NA61B H04L G06FH04B H04W G06T

Top current categories

17,339 assets

PRIVILEGED AND CONFIDENTIAL 21

Overlap of patents by top CPC codes

A61B - Medical Diagnosis B41J - Printing G02B - Optical G03F - Semiconductor G03G - Electrography

G06F - Digital Data Processing G06K - Presentation of Data G06Q - Data Processing Systems G06T - Image Data Processing H01L - Semiconductor

H04B - Transmitting signals H04L - Transmitting Digital Information H04N - Transmitting images H04W - Wireless communications

LOT Network(99,000 US assets)

Social Media Co(3459 US assets)

Over 90% of Facebook’s

portfoliooverlaps with LOT’s Top 14

G01R

H04M

H04B

G06QH04L

H04W

A61B

G02BG03G

G06K

H04NH01L

G06T

G03F

B41J

G06F

PRIVILEGED AND CONFIDENTIAL 22

Overlap of patents by top CPC codes

A61B - Medical Diagnosis B41J - Printing G02B - Optical G03F - Semiconductor G03G - Electrography

G06F - Digital Data Processing G06K - Presentation of Data G06Q - Data Processing Systems G06T - Image Data Processing H01L - Semiconductor

H04B - Transmitting signals H04L - Transmitting Digital Information H04N - Transmitting images H04W - Wireless communications

LOT Network(99,000 US assets)

Top 5 Bank(2154 US assets)

Over 82% of Bank of America’s

portfoliooverlaps with LOT’s Top 14

G07D

G07F

H04BG06Q

H04L

H04W

A61B

G02B

G03G

G06K

H04N

H01L

G06T

G03F

B41J

G06F


Recommendation: LOT for Suppliers

Provided by:

Jeffrey BlumenfeldChair, Antitrust & Trade Regulation

Partner, Tech GroupLowenstein Sandler LLP

2200 Pennsylvania Avenue, NWWashington, DC 20037

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Significant value in adding some SuppliersBoth Suppliers and Customers get protection

from patents outside their bilateral ecosystems

Significant Value in adding suppliers to Membership

LOT NETWORK

Company A Company B Company C

Supplier

Supplier

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Supplier

Supplier

Supplier

Value


LOT does not require members to cross-license each other

LOT does not buy, sell, own, or invalidate patents

LOT does not prohibit members from selling their patents

LOT does not prohibit members from asserting their patents

LOT does not prohibit members from monetizing their patents

LOT does not criticize the PTO or patent quality

What LOT Network IS NOT

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Anyone can join. Any industry, any country, regardless of portfolio size

Agreement drafted to obviate the need of members to give notice, prepare covenants, or track patents that are transferred

No need to report patent transfers or transactions

Increases freedom to operate

As membership grows, so too grows the benefit to each member

No burden to being in the LOT Network

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Questions

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THANK YOU

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1. Patent Freedomhttps://www.patentfreedom.com/about-npes/litigations/

2. James Bessen & Michael Meurer, The Direct Costs from NPE Disputes, 99 Cornell L. Rev. 387 (2014).

3. RPX 2014 Litigation Report.http://www.rpxcorp.com/wp-content/uploads/sites/2/2015/03/RPX_Litigation-Report-2014_FNL_040615.pdf

4. US Patent and Trademark Officehttp://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm

5. ROL Grouphttp://www.richardsonoliver.com/news/2014/12/1/buyers-and-sellers-in-the-2014-brokered-patent-market

6. Linda Biel, AST 7. Dan McCurdy, RPX presentation at 2015 IP Counsel Cafe spring meeting, Palo Alto, CA. 8. Kevin Jakel, Unified Patents presentation at 2015 IP Counsel Cafe spring meeting, Palo Alto, CA.9. Mark Lemely & Douglas Melamed, Missing the forest for the Trolls, Cornell Law Rev. 2013.

References

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http://www.rpxcorp.com/wp-content/uploads/sites/2/2015/03/RPX_Litigation-Report-2014_FNL_040615.pdf

http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm

PRIVILEGED AND CONFIDENTIAL Invitation to join LOT Network Ken Seddon CEO, LOT Network Sept 30, 2015...

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