The Perfect Intangible Storm October 22, 2007. 2 The Perfect Intangible Storm Market Forces ...

The Perfect Intangible StormThe Perfect Intangible Storm

October 22, 2007October 22, 2007

2


Market Forces

Economic Inversion

Auctions

IP Traded Exchange

DevelopingIP

Marketplace

DevelopingIP

Marketplace

3


History…

DevelopingIP

Marketplace

DevelopingIP

Marketplace

4

Intellectual Property Intellectual Property MarketplaceMarketplace

Mark

et

Qu

ali

ty

Historical Present Future

High

Low

Royalty Based

IndustryLicensing

Litigation

DefensiveCross

Licensing

Expansion

Licensing

Motivated by threat of enforcement

High frictional cost of transactions

Beginnings of IP as an income stream

Period of feudal lords

5


Mark

et

Qu

ali

ty


High

Low

Royalty Based

IndustryLicensing

Litigation

DefensiveCross

Licensing

Public Auctions

Web Portals

/ Listing

s

ExpansionLicensing

P-LEC’s

IP Based Financin

g

Patent Pools

Period of trial and error

“Do as I say not as I do”

Based on IP as valuable separate from the core

business

Rise of the intermediaries

6


Mark

et

Qu

ali

ty


High

Low

Royalty Based

IndustryLicensing

IP Indexes

Litigation

DefensiveCross

Licensing

Public Auctions

Patent Royalty Trusts

Web Portals

/ Listings

ExpansionLicensing

IP for the masses

Invested as an asset class

Age of the Golden Rule

P-LEC’s

IP Based Financing

IP Exchange / Board of

Trade

Patent Pools

Hedge Funds

7


Market Forces

Economic Inversion

Auctions

IP Traded Exchange

DevelopingIP

Marketplace

DevelopingIP

Marketplace

8

Economic InversionEconomic Inversion

16.8%

83.2%

32.4%

67.6%

68.4%

31.6%

79.7%

20.3%

0%

20%

40%

60%

80%

100%

1975 1985 1995 2005

Componentsof S&P500MarketValue

16.8%

83.2%

32.4%

67.6%

68.4%

31.6%

79.7%

20.3%

TangibleAssets IntangibleAssets

16.8%

83.2%

32.4%

67.6%

68.4%

31.6%

79.7%

20.3%

16.8%

83.2%

32.4%

67.6%

68.4%

31.6%

79.7%

20.3%

Source: Ned DavisResearc

9

Economic InversionEconomic Inversion

Quantitative evidence of transition to “knowledge economy”

Antiquates current accounting and SEC reporting requirements

Greater asset volatility without traditional risk management and risk transfer

Suggests need to greater intangible asset process and control requirements

Likely permanent change to US economy

Likely to be repeated internationally

Further complications comparing and valuing intangible assets across national borders

Intangible assets to deliver investor returns“U.S. intellectual property is worth $5 Trillion to $5.5 Trillion…

that’s more than the gross domestic product of any other country.”Business Week.com, March 28, 2007 citing economists Kevin Hassert and Robert Shapiro

10


Market Forces

Economic Inversion

Auctions

IP Traded Exchange

DevelopingIP

Marketplace

DevelopingIP

Marketplace

11

Ocean Tomo Live IP AuctionsOcean Tomo Live IP Auctions

Ocean Tomo Auctions has established itself as the leader in the live auctioning of Intellectual Property through four successful events, which resulted in over $50M of transactions for some of the world’s largest and most established companies.

The Ocean Tomo Live Intellectual Property Auctions have received considerable national as well as worldwide media attention, including features and appearances on CNBC, Bloomberg TV, The Wall Street Journal, Washington Post, Chicago Tribune, Forbes, FinancialTimes Barron’s, Red Herring, BusinessWeek, and CNET, among others.

Past Participants include:

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Ocean Tomo AuctionsOcean Tomo Auctions

Traditional live auction held three times each year

6 to 12 month process

Each auction tied to an investment summit or conference

Includes all categories of IP sold in related groups or Lots

Traditional auction economics and commissions

Public forum with expansive participation by third party market makers

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Auction ResultsAuction Results

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Live Public Auction ProcessLive Public Auction Process

Submission of IP for sale

IP Qualification by Ocean Tomo

Acceptance of IP into Auction

Submit

Review

Private Due Diligence Meetings

Information Submitted to Online Data Room

• Patent numbers• Current assignees• Description of patents• Rights being sold• List of licenses or encumbrances• Due diligence materials• Availability of prototypes• Additional technology or know-how

offered• Availability of consulting services

Bidder Registration

IP rights

DollarsLIVE IP AUCTIONS

IP rights Dolla

rs

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Auction Process (licensing)Auction Process (licensing)

10/30/200737 CFR 404.7(a)(1)(i)

Fed. Reg. Notice of Prospective License

15 day Obj. Period

Agency and OTFS select patent(s) to be

licensed

OTFS wires Agency portion of funds

2/24/2008Sub-license granted / license is transferred

to winning bidder

Ocean Tomo Live Auction Date

Winning bidder wires OT funds

OTFS applies for license of selected technology(ies)

with right to sub-license or transfer license


(unsuccessful transaction)

If significant interest but reserve not met,

OTFS will continue to market technology(ies) under private sale process

Ocean Tomo Federal Services Live IP Auction Timeline

10/4/2007

OTFS Pre-qualifies biddersFor Agency lots in Auction

OTFS license granted;Documents go into Online data room;

OTFS begins to market the availability

of the licensed technology

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Auction Process (licensing)Auction Process (licensing)

License Granted(Transaction Closes)

37 CFR 404.7(a)(1)(i)Fed. Reg. Notice of

Prospective License

NASA Receives35 USC 209

Commercialization Plan from Auction Winner

Agency ConsignsIP Lots to

Ocean Tomo

OTFS wires Agency portion of funds


(unsuccessful transaction)If significant interest but reserve not met,

OTFS will continue to market technology(ies) under private sale process

Ocean Tomo Federal Services Live IP Auction Timeline

10/4/2007

37 CFR 404.7(a)(1)Fed. Reg.

90-Day Public Notice of Availability

90-Day Notice Period


Documents go into Online data room;OTFS begins to market the technology;

Pre-qualify bidders based on commercialization requirements

15 day Obj. Period Comm. Plan Approved

Payment From LicenseeDue to Ocean Tomo

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The two part process: use of the auction to test pricing followed by off floor sales

“Quality” closely related to technology-in-use

Management of seller expectations and reserves

Need for process to adjust reserves in the greenroom

Balancing of risks versus simplification of bidder diligence

Emergence of true arbitrage risk investors

Confirmation of general strategy of auction environment and extended development cycle

Lessons LearnedLessons Learned

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October 24 and 25, 2007 in Chicago Catalog available online at www.OceanTomoActions.com Featuring patents in digital home media, financial services,

e-commerce, near field communications, WIMAX, web services and audio signal processing technology

April 2008 in San Francisco All IP asset categories

June 2008 in Amsterdam All patent lots to include EU assets Simulcast to Asia

Upcoming AuctionsUpcoming Auctions

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Market Forces

Economic Inversion

Auctions

IP Traded Exchange

DevelopingIP

Marketplace

DevelopingIP

Marketplace

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Tradable Technology Baskets™Tradable Technology Baskets™

PatentTechnologyBaskets

PatentTechnologyBasketsrepresent the maintenancevalue of patents in a specifictechnology sector. OceanTomo'sPatentRatings® systemcalculates themaintenancevalue of all patent inforce on aweekly basis.

Basket Patents

Technology Close5/25/07

Change Total New Exp./Abndn

Avg.IPQ

PatentNumber

Assignee Weeks #1

Professional and scienti¼c instruments 24,631 -3.7% 300,301 56 13 123.3 6,534,124 ABCCorp. 3Electroniccomponents, accessories &comm. eqp. 23,708 -5.0% 150,00 3 12 109.2 6,645,212 123Corp. 54Of¼cecomputing & accounting machines 13,289 -3.4% 230,021 45 47 102.2 6,341,132 ABCCorp. 5Drugs and medicines 5,749 -4.5% 392,292 79 4 143.2 7,001,921 123Corp. 45Agricultural chemicals 5,631 -4.5% 47,029 7 78 123.2 6,102,021 ABCCorp. 32Industrial organic chemistry 5,395 -4.7% 23,022 6 56 111.1 5,901,029 123Corp. 1Miscellaneous electrical machinery, eqp. & supplies 4,105 -3.2% 92,029 57 43 89.8 6,102,920 ABCCorp. 4Rubber and miscellaneous plastics products 3,921 -4.6% 283,928 49 7 124.2 6,209,092 123Corp. 55Electrical transmission & distribution equipment 3,053 -5.1% 298,837 79 5 132.2 6,987,098 ABCCorp. 4Fabricated metal products 3,050 -3.8% 23,292 6 45 122.7 5,908,987 123Corp. 9

Highest Rated Patent

www.ipxchicago.com

21

Tradable Technology Baskets™Tradable Technology Baskets™

Importantly, for the first time in financial history, IPX Chicago will enable direct investment in technology and patent specific financial instruments. Tradable Technology Baskets (“TTB”) represent a series of traded contracts enabling investing and hedging with respect to the economic value of an industry-wide patented technology class (e.g. hybrid electric vehicle technology), derived by proprietary analytics.

This product will be used by participants to speculate on the future value of the technology class or by technology owners to hedge against the risk of competing technologies and lower their cost of capital.

Enables most efficient investment in the long term prospect of specific technologies.

22

Unit License Rights™Unit License Rights™

Unit License Rights (“ULR”) enable holders and exclusive licensees of IP to extend traditional private licensing of technology to an exchange traded product.

Will lead to increased price discovery, efficiency, transparency in the growing licensing environment.

Exchange trading will dramatically increase the number of potential participants in the marketplace.

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Unit License Rights™Unit License Rights™

CORE DESCRIPTION OF FORD ULR BETA TRADEULR: F6260531 Valve Seat InsertPATENT: 6,260,531 and continuations, continuations-in-part and foreign

counterparts. LICENSED FIELD OF USE: AllRESTRICTIONS: All secondary sales through IPXISSUER RIGHT TO USE: YesUNIT BASIS: One ULR covers one automotive or light truck engineTOTAL OFFERED QUANTITY: 5 million license units offered in 50 unit lotsOFFERING TERM: 3 yearsTERM OF LICENSE: Until consumed

TRAUNCHES1st: 1 million ULR’s at an initial offering price of $0.50 per unit (eg unit 1)2nd: 1 million ULR’s at an initial offering price of $0.75 per unit (eg unit

1,000,001)3rd: 3 million ULR’s at an initial offering price of $1 per unit (eg unit

2,000,001)

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Ocean Tomo Federal Services Ocean Tomo Federal Services OverviewOverview

25

Ocean Tomo Federal Services - A Company Ocean Tomo Federal Services - A Company Built on IdeasBuilt on Ideas

idea: Host live IP auctions to create a more liquid market.

reality: The first-of-a-kind live auction of patents followed by the first live auction of patents, trademarks, copyrights & domain names. Now a bi-annual event in the U.S. and an annual event in Europe.

idea: Create an online classified market for IP.

reality: The Dean’s List™ Online Intellectual Property Exchange, the first classified forum focused on IP, brings together buyers and sellers in a platform unlike anything currently offered in the market.

idea: Create a stock index that tracks the knowledge economy.

reality: The Ocean Tomo 300™ Patent Index, priced and published by the American Stock Exchange®, is the first equity index based on the value of corporate IP.

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Contact InformationContact Information

CHICAGO200 West Madison

37th FloorChicago, IL 60606(312) 327-4400 Ph(312) 327-4401 Fx

DC METRO7475 Wisconsin

Ave.Suite 525

Bethesda, MD 20814

(240) 482-8200 Ph(301) 652-2885 Fx

ORANGE COUNTY19200 Von Karman

Ave. Suite 600

Irvine, CA 92612(949) 222-1264 Ph

www.patentratings.com

PALM BEACH235 S. County Road

Suite 1Palm Beach, FL

33480(561) 309-0011 Ph(561) 805-8765 Fx

SAN FRANCISCO101 Montgomery

StreetSuite 2100

San Francisco, CA 94104

(415) 946-2600 Ph(415) 946-2601 Fx

Michael Walker7475 Wisconsin Avenue,

Suite 525Bethesda, MD 20814(240) 482-8202 Ph(301) 652-2885 Fx

[email protected]

The Perfect Intangible Storm October 22, 2007. 2 The Perfect Intangible Storm Market Forces ...

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