1. Is the System Broken? Identifying Good and Bad Behaviors In Licensing
– LAIPLA Spring Seminar

2. Jay P. Kesan, Ph.D., J.D. Professor, University of Illinois at Urbana-Champaign; Patent Attorney; Entrepreneur
Phil Hartstein President at Finjan
Michael Kallus Director, Client Development and Acquisitions, RPX Corporation
David Rosmann Executive Vice President, Acacia Research Group LLC

3. Jay P. Kesan, Ph.D., J.D. Professor, University of Illinois at Urbana-Champaign; Patent Attorney; Entrepreneur
Professor Jay P. Kesan's academic interests are in the areas of technology, law, and business. Specifically, his work focuses on patent law, intellectual property, entrepreneurship, cyberlaw, digital government (e-gov), agricultural biotechnology law, and biofuels regulation. At the University of Illinois, Professor Kesan is appointed in the College of Law, the Institute of Genomic Biology, the Department of Electrical & Computer Engineering, the Information Trust Institute, the Coordinated Science Laboratory, the College of Business, and the Department of Agricultural & Consumer Economics. He directs the Program in Intellectual Property & Technology Law at the College of Law. At the Institute of Genomic Biology (IGB), he is group leader of the Business, Economics & Law of Genomic Biology (BioBEL) theme, and he directs research on biofuel law & regulation at the Energy Biosciences Institute (EBI). Professor Kesan continues to be professionally active in the areas of patent litigation and technology entrepreneurship. He was appointed by federal judges to serve as a special master in patent litigations, and has served as a technical and legal expert and/or counsel in patent matters. He also serves on the boards of directors/advisors of start-up technology companies.

4. Phil Hartstein President at Finjan
Phil Hartstein is President of Finjan Holdings Inc.. He oversees the direction and management of current assets and future investments and works directly with the executive management team and Board. Phil has worked in a number of technology and intellectual property related roles the past 15 years. He started with a boutique IP law firm, worked as IP counsel for a VC funded startup, spent time in IP consulting and IP brokerage firms, and prior to joining Finjan, spent four years bringing both private and public market capital, expertise, and credibility in licensing and enforcing patent rights on behalf of owners. Phil holds a BS in industrial technology from California Polytechnic, San Luis Obispo. He is a regular speaker and participant in industry and trade organizations, and is a named inventor and patent holder with more than two dozen pending and issued patents across a number of disciplines.

5. Michael Kallus Director, Client Development and Acquisitions, RPX Corporation
Michael Kallus began his career as a judicial clerk for the Honorable Chief Judge C. Roger Vinson in the US District Court for the Northern District of Florida. He went on to private practice with Fish & Richardson’s Boston office and later as a founding member of Confluence Law Partners, focusing on the defense, development and strategic employment of his clients’ intellectual property assets. Prior to RPX, Mr. Kallus litigated complex patent issues in federal courts throughout the US and the ITC, negotiated lucrative technology licenses, reviewed IP portions of billion-dollar mergers and acquisitions, and advised businesses in capitalizing on their intellectual property. Mr. Kallus is a graduate of the University of Virginia School of Law and the University of California, Berkeley. He is a member of the state bars of California and Massachusetts

6. David Rosmann Executive Vice President, Acacia Research Group LLC
Mr. Rosmann joined the company in October 2011 as Senior Vice President. He was appointed to Executive Vice President in May Mr. Rosmann began his legal career as an attorney with Irell & Manella LLP in the High Technology/intellectual Property Group, where he represented Broadcom on I.P. and litigation matters as an outside attorney from Most recently he was Vice President, Intellectual Property Litigation at Broadcom Corporation from Mr. Rosmann holds a B.S., Engineering Science and Mechanics/Biomedical Engineering from Iowa State University, a Master of Science Electrical Engineering from the University of Southern California and a J.D. degree from Loyola Law School, Los Angeles.

7. Going Beyond Types of PAEs
Jay P. Kesan, Ph.D., J.D. Professor and Workman Research Scholar, University of Illinois at Urbana-Champaign

8. Motivations
“Suits brought by PAEs have tripled in just the last two years, rising from 29 percent of all infringement suits to 62 percent of all infringement suits.”
Colleen V. Chien, Patent Assertion Entities, Presentation to the DOJ/FTC hearing on PAEs
“Patent infringement litigation by patent monetization entities has risen dramatically over a remarkably short period of time. One of the most striking results is that in 2012, litigation by patent monetization entities represented a majority of the patent litigation filed in the United States.
Robin Feldman, The AIA 500 Expanded: The Effects of Patent Monetization Entities

9. Motivation for this Panel
Much of the response against PAEs has attempted to better define the nature of the PAEs involved in patent litigation to understand their incentives and strategies
Universities
Individual inventors
Failed startups
Technology development companies
Patent holding companies
Mass patent aggregators
IP subsidiaries of operating company

10. Focusing on Types of Behaviors Employed by PAEs
How can we facilitate a “liquid” market for patents?
Are patents ever likely to be a “commodity”?
How can we generate reliable and reproducible valuations for patents?
Can we have a service like Zillow for patents?
How can we define and develop best practices for patent licensing to advance the creation of a market of patents?

11. LAIPLA Spring Seminar June 6 – 8, 2014 Phil Hartstein, President Finjan Holdings, Inc.
NASDAQ: FNJN

12. Early Innovator in Software Security Over $65M Invested in R&D
Finjan as Technology, Product Producing, Operating Business
Early Innovator in Software Security
Spurred by a challenge to develop a “killer” Java application
Founded by Shlomo Touboul, notable security expert
Early recognition that inventions needed patent protection
Over $65M Invested in R&D
10 Facilities worldwide
150 employees
12 inventors across the patent portfolio
Broad Portfolio of Patents
40+ Issued and pending patents around the world
Patents covering Finjan developed products
Fundamental, not “feature,” patents
Top Technology Investors
VC’s
Corporate
Network Products Guide – Finjan’s unified Secure Web Gateway announced the winner in the 2009 Product Innovations Web Security category
Finjan's Vital Security Web Appliance 8.4 named WINNER for the Network Datastream Protection Category in eWEEK's Excellence Awards Program

13. Finjan’s Evolution as a Technology Company
Finjan Founded on novel, behavior-based security technology
Finjan completes first license of its patented technology
Negotiated transaction, no litigation required
Finjan divests its product business, research center, retains its IP
Acquiring company continues to sell Finjan products
2011 (filed 2006) - Finjan wins first patent trial and subsequent appeal at Federal Circuit
Patents found valid and infringed, enhanced damages award from $X million to $4X million
Finjan’s investors decide on public company path, install new management team
Implements transparency in business dealings while providing liquidity to investors
Intellectual property expertise installed internally to drive strategy, tactics, and growth
Finjan re-engages security industry through licensing and continued investment
Finjan invests in JVP Cyberfund focused on bringing new security technologies to market

14. Finjan’s Core Values & Best Practices Campaign
Invest in, protect and support the broad dissemination of technological advancements, which in turn create rewards for investments in innovation and job creation.
Preserve our integrity by consistently being honest, truthful, and transparent in our actions.
Show leadership and commitment as credible advocates of IP rights standing up as trustworthy experts in our industry.
Build strong relationships through strong communications.
Best Practices
Ensure focused licensing and enforcement programs pursuing the provider of the patented technology and not its customers, consumers or end users.
Conduct reasonable diligence to determine a patent’s enforceability and use with respect to prospective licensees, and make that information available to them.
Respect procedural rights and judicial efficiency in the courts and in the prosecution and protection of IP behind the innovation.
Be transparent with the intent in each discussion, and articulate the cause and effect scenarios which would prompt a shift in communication and an escalation of each discussion.
Provide useful facts to prospective licensees and defendants to foster productive business discussions early and often to aid in informed decision-making.
Offer fair value licenses or settlements based on legitimate factors and considerations.
Commit to keeping lines of communications open between the patent owner and prospective licensee to preserve a path for the parties to find an amicable solution or resolution for their respective businesses.
“Patent licensing may be the only major industry without a code of conduct or standards of ethical behavior.” ~Marshall Phelps

15. Finjan and its Best Practices in Licensing
Through these – or other – best practices, we are working to restore credibility to the licensing industry. First, in leading by example and from there advocating for a return to an efficient marketplace.
Finjan’s Innovation and Technology Continue to Drive Economic Change
More than 200 years with a patent system as the foundation for a modern economy
Commitment to enabling further technology development through licensing and investment
Our Licensing and Enforcement Programs are Defined by Integrity and Transparency
The company established Core Values by which it will commit in operating its licensing business
Best Practices in Licensing Encourage Meaningful and Efficient Transactions
Seven Best Practices address common stages in licensing, focused on the merits
Not addressing specific proposed reforms or reactive to legislative actions
No requirement of prospective licensee to acknowledge adhere but
Realities of Licensing
Bad behaviors exist on both sides – patent owners and prospective licensees
Reforms are focused on categorizing patent owners, should be redirected to behaviors
Return the focus to the merits of each case and managing resources judiciously
To be credible you have to build an infrastructure to deliver on these commitments

16. Licensing Discussions Pipeline
Two Distinct Paths to Achieve Fair Value in Licensing
We are one year into our renewed licensing campaign and have several enforcement actions. We are seeing a positive response from the industry, less contentious negotiations, and over time we expect decreased timeline.
Licensing Discussions
Pipeline
Initiating a discussion with Licensees on a factual basis
Conducting real technical and financial analysis establishes credibility
Engaging in a rational discussion has moved us to pricing and terms faster
Continued support and interaction on validity and infringement arguments
Enables multiple concurrent licensees without escalation to enforcement
Enforcement Actions
Case Timelines
Credibility with the Court and Defendants with heightened pleadings
Interacting directly with Defendants (not counsel) builds trust
Maximizing opportunities to engage in mediation/settlement talks is important
Utilizing judicial resources and staying focused on the merits reduces costs
Fairness in pricing and recognizing discounted terms earlier will reduce risk

17. Credibility and Transparency in Licensing

18. ACACIA RESEARCH GROUP, LLC NASDAQ: ACTG
David Rosmann Executive Vice President
NASDAQ: ACTG
A Subsidiary of Acacia Research Corporation
UNLEASHING patent POTENTIAL.

19. ACACIA is at the TRANSACTIONAL CENTER of INNOVATION.
ACACIA RESEARCH GROUP, LLC

20. Good Practices Rewarding the Idea Makers and the World Changers
Patent Owners
Acacia is a leading player in the secondary patent market
Most patents are owned by entities that do not make products covered by their patents
Acacia partners with patent owners to bridge the gap between invention and production, helping patent owners get paid by licensing their patents to the companies that use them
Outsourced IP licensing transactions help promote a secondary market for these patents
ACACIA (Clearinghouse)
Products
& Services

21. Good Practices - Financial Models
Partnership
Hybrid Partnership
Acquisition Model
Typical partners for Acacia:
Major corporations
Research labs and universities
Individual inventors
Protects patent owner from countersuits
High margins with upside leverage
How it works:
Up-front capital infusion as an advance on future licensing
Acacia receives 100% of return until capital infusion is returned
Objectives:
Recover capital infusion in months
Upon return of capital infusion, net profit revenue split with patent partner begins
3x return of capital in 5 years
Purpose:
Increases Acacia’s total addressable market
Strong Balance Sheet yields competitive advantage
Acacia buys 100% of the patents for 100% of the profits
Typical partners:
Distressed Corporations
Failed Corporations Controlled by VCs
Higher margins with increased upside potential
Patent
Diligence
40%
Patent Owner
Acacia
20%
Law Firm
Acacia
70-100%
Legal
0-30%
Split net
profit 50/50
with patent
owner
License
patents to
corporate users
Pay legal costs

22. Good Practices – Portfolio Strength Smart Phone Coverage
Silicon Image 2
10 Patents
High Speed Display Interfaces
NSN
74 Patents
2G/3G Power Control, Handover, Coding
Rambus
69 Patents
LED back lighting
Adaptix
205 Patents
4G/4.5G OFDM, Cooperative Diversity
Access
125 Patents
Sync, Apps, User Interface
Silicon Image
138 Patents
High Speed Chip Interconnect
VoiceAge
274 Patents
High Fidelity Voice Codecs

23. The Future of Invention: IP Legislation Patent Reform is Fundamentally Good for Acacia’s Business
The Goodlatte Innovation Act Overview Proposed Reforms #1 – Reduce abusive litigation, costs and time—Acacia agrees #2 – Mandatory disclosure of patent holdings for NPEs—Acacia agrees #3 - Core discovery expenses are born by each party but each party must pay the other for excessive discovery requests—Acacia agrees #4 – Protect end user—Acacia agrees #5 – Loser pays—Acacia agrees if mutually applicable

24. There In No Frivolous Patent Lawsuit Crisis (5/27/14 IP Law360 Article by Acacia EVP, Jaime Siegel)
District
Patent Cases Filed
Rule 11 Motions Filed
Cases in which Rule 11 Motions were Filed
Rule 11 Motions Granted
Delaware
2,334 17
0.728% 1
Eastern District of Texas
2,779
0.035%
Northern District of Illinois
453 4
0.883%
Northern District of California
804
0.124%
Central District of California
935 11
1.176%

25. ACACIA RESEARCH GROUP, LLC NASDAQ: ACTG
A Subsidiary of Acacia Research Corporation
UNLEASHING patent POTENTIAL.

26. Patent Valuation
Michael Kallus, Director, Client Development and Acquisitions
June 8, 2014

27. Patent Reform

28. Patent Reform Goals Patent Quality
Improve quality of patent examination
Litigation Procedure
Increase efficiency of patent litigation
Transparency and Notice
Decrease information asymmetry

29. Patent Reform Patent Quality
Actor
Description
Software patent eligibility
Judicial
Clarifying patentability of computer-implemented inventions
Appellate fact-finding review
Limiting appellate review of district court fact-findings to clear error
Post-grant claim construction
Legislative
PTO required to adopt District Court claim construction in post-grant review
Examiner training
Executive
Increased examiner technical training
Prior art sourcing
Expanding/encouraging submission of prior art by the general public
Double-patenting
Codify prohibition of obviousness type double-patenting in first-to-file regime
Post-grant review estoppel
Limiting validity estoppel following unsuccessful post-grant review
Patent Quality Initiatives
Industry
Data collection, IPR challenges, and prior art identification

30. Patent Reform Litigation Procedure
Actor
Description
Fee shifting
Legislative
Various efforts focusing on shifting the costs of litigation to losing party
Sanctions: Rule 11
Judicial
Requiring courts to make findings regarding compliance with Rule 11
Settlement offers
Penalizing plaintiffs whose damage awards do not exceed settlement offers
Bonding
Requiring plaintiffs to post a bond for defendant legal costs
Discovery stays
Stay discovery until after claim construction
Discovery limits
Cost shifting for discovery requests outside core
Stay discovery pending motions to dismiss/venue transfer/damages hearings
End-user stays/intervention
Stays for customers until supplier suits are resolved; right of intervention
Joinder of interested
parties
Requiring joinder of exclusive licensees and patent owners [on defendant’s motion]
Inducement
Limit claims of indirect infringement where no direct infringement found
Laches
Decrease time for a patent owner to file a claim
Venue transfer
Mandatory transfer when proposed new venue is “clearly more convenient”

31. Patent Reform Transparency and Notice
Actor
Description
Real party-in-interest
Legislative
Requiring patent owners to disclose real party-in-interest during prosecution, when sending demand letters and/or in litigation
Heightened pleading standard
Increasing the specificity required of claimant
Glossary
Executive
Require glossary of non-plain meaning terms by patentee
Abusive assertion claims
State Attorneys General
State Attorney Generals creating cause of action for fraudulent/abusive assertion letters under consumer protection laws
Assertion database
Executive/Industry
Allowing/requiring recipients or senders of assertion letters to register them in database
Notice of sale
Industry
Patent owners make binding commitment to notify others before selling to NPE

32. RPX Acquisitions Practices

33. RPX Overview Founded 2008 to manage operating company NPE-related risk
Key Features
Entirely defensive- does not litigate
Purchase patents and acquire broad sub-license rights to manage client risk
Syndicated transactions
Insurance services
Patent quality initiative – IPRs
Patent transparency initiatives
Corporate Snapshot
Publicly-traded company (NASDAQ:RPXC)
178 clients
4,300+ patent rights
$800M+ in defensive acquisitions; 523 dismissals

34. Objective Due Diligence
Technical Analysis
Claims
Specifications
File history
Prior Art
Identified during triage
Internal search
Outside firm
Identified during prosecution or IPR
Provided by RPX client
Commercial Analysis
Track accused products
Understand market shares and associated revenue streams

35. Subjective Due Diligence
Case Posture
Forum
Strength of case
Counsel
Motions and rulings
Existing Licenses
Other
Indemnities
Cross-licenses
Damage models

36. Leverage Litigation pressure Client Network
178 companies with various aligned interests
Plaintiff Risk
Cash position
Expected returns
Public market pressures
Litigation costs
Litigation pressure
IPR
Claim construction and dispositive motions

37. Deal Valuation Scope of license Value to clients
66 Litigation in-licenses to date

38. Stradling Yocca Carlson & Rauth, P.C.
NEWPORT BEACH
RENO
SACRAMENTO
SAN DIEGO
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