1. E C O N O M I C S  V A L U A T I O N  S T R A T E G Y Effective Decision Making For Managing and Licensing IP Assets January 29, 2004 David Yurkerwich, New York Christopher Spadea, New York This document and the information included herein is not intended to contain or present legal or expert opinions of any persons or entities including the authors and InteCap, Inc. It is only intended to be illustrative of certain steps that could be appropriate to identify, analyze, market and negotiated potential IP transactions.

2. 1 Effective Decision Making for Managing and Licensing IP Assets Boardroom Directive: Maximize IP Value 1.What technology areas are represented in our patent portfolio? 2.What are the major markets and products in each technology area? 3.What key patents do we have in each technology area? 4.Who else has significant patents in each technology area? 5.Who else has significant products in each technology area? 6.What patents are core to our major lines of business? 7.What portion of the market will not be reached by our lines of business? 8.How do we gain maximum access to profits from the rest of the market?

3. 2 Phased Transaction Approach IP Analytics Identify opportunities based on technology research IP Analytics Identify opportunities based on technology research IP Valuation Value opportunities based on market research IP Valuation Value opportunities based on market research IP Transaction Develop detailed models to negotiate price IP Transaction Develop detailed models to negotiate price IP Marketing Develop packages to approach/met with multiple targets IP Marketing Develop packages to approach/met with multiple targets

4. 3 IP Analytics 1.Identify Core and Important Intellectual Property  Identify IP for existing and future business areas  Identify Highest and Best Use for Each Patent Family  Interview Engineers and Technical IP Analysts to Assess IP Importance  Identify Important Patents

5. 4 Phase One: IP Analytics 2.Analyze Competitive IP in All Markets Use tools and databases to identify companies that own other key IP Coupled tools with detailed research in each technology area Create a proprietary ranking methodology to identify- “IP Have’s” and “IP Have Not’s ”

6. 5 Key Data Sources Available for IP Analysis  IP sources most frequently used: Thomson Derwent –World Patents Index –Patents Citation Index Thomson Delphion Issuing Authorities’ Websites –USPTO –European Patent Office –JPO IFI CLAIMS –U.S. Patents / Citations –Current Patent Legal Status MicroPatent / Trademark.com Assignee websites  Additional sources often used: INPADOC –Family and Legal Status PATFULL –US Patents Full Text European Patents Fulltext JAPIO –Patent Abstracts of Japan Engineering/technology/scientific –INSPEC, EiCompendex, SCISEARCH, CAS Markets and Technology (Events) –Factiva –PROMT

7. 6 Subject Area Search Criteria  Develop subject area search using Derwent World Patents Index Example related to Wireless LAN technology Set No.Search StringComments s1s mc=(w01-a06b5a or w01-a06c4 or w05-d04a or w02-g02) Derwent Manual Codes relating to wireless LAN s2s (network? Or LAN or data(2n)communicat?) and (wireless? Or transceiver? Or radio or mobile or portable) Descriptive keywords related to technology attributes s3s s1 and s2Use combination of codes and keywords to narrow results s4s s3 and pc=usFind patent families with US counterparts s5s s4 and (hierarch? Or tree or slave or master)Determine hierarchical wireless LAN hits

8. 7 Wireless LAN Top 15 Assignees Total Priority Filings RankHitsDerwent Assignee Name 1137MOTOROLA INC 2134NOKIA CORP 3113TELEFONAKTIEBOLAGET ERICSSON L M 495INT BUSINESS MACHINES CORP 587NEC CORP 684LUCENT TECHNOLOGIES INC 771KONINK PHILIPS ELECTRONICS NV 858AT & T CORP 957TOSHIBA KK 1049SONY CORP 1142INTERMEC IP CORP/NORAND CORP 1231MURATA MFG CO LTD 1329FUJITSU LTD 1426HEWLETT-PACKARD CO 1526NORTEL NETWORKS LTD

9. 8 Wireless LAN Subject Area Filing Analysis

10. 9 Phase One: IP Analytics 3.Rank Potential Targets and Market Opportunities Based On-  Competitive IP Ranking  Product Position in Marketplace (Current and Planned)  Historical Success Similar Product Markets  Historical Licensing policy  Historical Litigation Policy  Prior technology transactions  Current Cash Generation and Balance  Major Competitive Forces Affecting Each Company

11. 10 Phase Two: IP Valuation 1.Research and Analyze the Markets  Current and future products  Technical and White papers  Historical Market Sizes and Shares  Forecasted Market Sizes and Shares  Comparable Transactions / Acquisitions

12. 11 Phase Two: IP Valuation 2.Royalty Rate Research  Licensor and target historical royalty rates  Industry royalty rates  Consider relationships to industry standards  Prior deal structures (i.e. paid up, running royalty etc.)  Specific rates help both parties focus on realistic IP values

13. 12 Phase Two: IP Valuation 3.Litigation Research  Identify markets with active litigation  Identify targets which may need IP for defensive purposes  Cross reference patents in litigations to IP analytic results  Identified targets with cross-license agreements

14. 13 Phase Two: IP Valuation 4.Development of Dynamic Financial Models  Create for each market and product  Consider market overlaps  Consider historic and expected performance of specific products Products with a large historic revenue base will be harder to license Future profits may more than offset historical losses  Models must be target specific and be easily adjusted by both parties

15. 14 Phase Three: IP Marketing 1.Customized Target (‘Teaser’) Packages  Craft and send introductory packages to each target.  Packages highlight significance of the IP to targets business  Targets contacted before and after mailing to assess interest and schedule meetings  Demonstrate to target that a “Deal team” is in place and a transaction is likely to occur

16. 15 Phase Three: IP Marketing 2.Customized Target (‘Kick-off’) Powerpoint Presentations  Overview of the IP Owner and the other parties in the market  Overview of Products and Business Reasons for Development of IP  Industry Examples of Use and Importance of IP in the Marketplace  A Non-Technical Understanding of Key Patents and Claims

17. 16 Phase Three: IP Marketing 3.Develop Customized Financial Models for Interested Targets  Customized information demonstrates that target’s unique issues have been considered in determining values.  Use information created by the Target whenever possible.  A model which closely reflects the Target’s business will put the negotiations on common ground.

18. 17 Phase Three: IP Marketing 4.Daily Review of IB Reports, Press Releases, and Industry News  Using the Targets own statements and information reduces their ability to posture.  Showing that the information is current is key to the Target’s deal personnel buy-in.

19. 18 Phase Four: IP Transaction 1.Formation of Deal Team  Negotiation Team should include financial, technical and legal representatives  First meeting should be an offer for an open exchange of information between the parties  Feedback from first meeting should be incorporated to build shared models for negotiation  Response time is important

20. 19 Phase Four: IP Transaction 2.Identify unique value metrics applicable to negotiation  Willingness to change the valuation model to reflect the Target’s suggested metrics builds respect between the parties.  Often one suggested change results in other counter changes by the IP holder. (i.e. reduction in ASP may result in increased units)  Putting the valuation model in the Target’s language allows the Target to use the same model for Senior Management or Board Approval.

21. 20 Closing Summary Thoughts  Holding all IP exclusively will rarely maximize profits  Early and broad claims in major markets must be analyzed  Sellers must study and measure your own vulnerabilities  Sale with license back in growing markets easier to get done  Sale proceeds may exceed less favorable licensing-in position  Size and average age of portfolio matters  Have nots with growing market share are good targets  Risk adjusted market share models facilitate communication