Attendees will learn what the buzz words “patent monetization” actually mean and what entities in fact monetize patents (operating companies/NPEs). Attendees will further hear different reasons for the buying and selling of patents. The webinar will then present a few of the changes that have occurred in the market over the last couple of years (including, the Alice decision, PTAB/IPR proceedings, fee shifting) and the effects these changes have had on the market. In particular, we will discuss how such changes have affected the way patent purchase transactions are sourced, negotiated and drafted. Lastly, we will offer up some tips for how to successfully buy/sell patents in today’s market.

1. Negotiating and Closing Patent Purchase Transactions
in the post-Alice/PTAB Review Era
November 2015
Lillian Safran Shaked, Adv. Partner
E-mail: lillian@shaked-law.com
Website: www.shaked-law.com
98 YigalAlon St. | Tel Aviv 6789141 | Israel | Tel: +972-3-372-1114 | Fax: +972-3-372-1115

2. What is Patent Monetization?
 The generation of revenue or the attempt to generate revenue
by selling or licensing patents
 Can be conducted by operating companies or non-operating
companies

3. Reasons to Buy Patents?
 Augment an existing portfolio – without added R&D costs
 Generate licensing revenue
 Build a defensive portfolio
 Attract investors

4. Reasons to Sell Patents?
 Patents are a liability as well as an asset
 Patents in someone else’s hands may generate more revenues
than in your hands
 Bring in needed cash
 Core/non-core patents

5. What is the “Alice” decision?
Alice Corp. v. CLS Bank International
 2014 decision of the Supreme Court - considered as a decision on the patentability
of software patents and business method patents
 Computer-implemented, electronic escrow service used for facilitating financial
transactions based on anticipated future actions
 Implementation of an “abstract idea” on a computer - not enough to transform
that idea into patentable subject matter
 Post Alice - patents with abstract or obvious claims or claims subject to prior art
not eligible for patent protection despite the operation through or use of
electronic means (such as a computer)

6. What is the PTAB Review/IPRs Era?
 The Leahy–Smith America Invents Act (the “AIA”) made significant changes to
the U.S. patent system:
o Instituted post-grant opposition proceedings (“reexaminations”)
 A reexamination is a process whereby a third party can have a patent
reexamined by a patent examiner to verify that the subject matter it claims is
patentable
 Provides patent challengers an expanded base on which to attack patents
 Cost for a company to file and prosecute an IPR to a decision by PTAB is
between $200,000 and $500,000

7. Statistics:
 Since Alice in 141 Federal Court decisions – 104 patents were found invalid and 4,672 of
6,519 claims were found to be invalid.
(http://www.bilskiblog.com/blog/2015/08/alicestorm-summertime-blues-continue.html)
 In nearly three years following the first IPR having been filed, 71% of all patent claims
reviewed were invalidated by the PTAB and 100% of all CBM claims were invalidated
(http://www.uspto.gov/sites/default/files/documents/inter_partes_review_petitions_ter
minated_to_date%2001%2015%202015.pdf)
 From 2012-2014, patent sales (in dollars) dropped by 84%, the number of patents sold
dropped by 59% and the average price dropped by 61%
(http://patentlyo.com/patent/2015/06/america-invents-trillion.html#_ftn1)

8. What is Fee Shifting?
 On February 5, 2015, Rep. Robert Goodlatte introduced a proposed amendment to the AIA
– Award attorneys’ fees and litigation-related expenses absent
finding that “conduct was reasonably justified or that special
circumstances make an award unjust.”
 Courts already have the authority to penalize parties bringing non-meritorious claims of
patent infringement and to compensate those unjustly targeted
 In Octane Fitness v. ICON Health & Fitness, the Supreme Court held that district court judges
possess broad discretion to award attorneys’ fees in patent infringement litigations

9. Effects?
 First stage - confusion and uncertainty – patent transaction
market shuts down
 Second stage – patent prices fall drastically, little movement of
patents
 Third stage – financial players emerge to pick up the pieces, offer
both funding for deals, funding for litigation and insurance (fee
shifting), patent syndicates emerge

10. What’s Changed?
Assets
Players
Pricing
Deal Terms

11. Assets
 type of assets (system, hardware, software)
 more homework and better preparation needed to be done by sellers (claim
charts, internal due diligence)
 bigger portfolios (more patents, continued prosecution, foreign assets)

12. Players
 larger players (both buyers and sellers)
 more capital available
 deal structures – PIPCOs, reverse mergers into shells, SPVs
 bigger portfolio deals

13. Pricing
 lower up front
 bigger back-end
 staggered longer time for payments
 net rather than gross share

14. Deal Terms
 due diligence
 document production (declarations)
 reps and warranties (back-to-back, risk sharing)
 standing issues (exclusive rights, no reversion assignment)
 cooperation post-closing (access to inventors)
 indemnification
 limitation of liability (from payments to investment)

15. Timing
 longer time to source, diligence, negotiate, close
 funding in the interim – options
 cost of capital

16. How to Succeed?
Use consultants, brokers, prosecution counsel, licensing counsel,
financing partners:
 Understand the market
 Understand who are your potential buyers/sellers
 Diligence the assets in advance (both the actual assets and
similar assets)
 Set reasonable expectations
 Consider interim financing
 Have patience

17. Thank you