1. “Primer on Patent Pools” (and Other IP Strategy Alternatives) Licensing Executive Society Chemical, Energy, Environmental, Materials (CEEM) CEEM Community Conversation Peter Kim, Principal, Irvine Pointe Advisory, LLC peter@irvinepointe.com (www.irvinepointe.com) 1 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 4/23/2013 “People say you have to have a lot of passion for what you’re doing. And it’s totally true. And the reason is because it’s so hard that if you don’t, any rational person would give up. It’s really hard. And you have to do it over a sustained period of time.” Steve Jobs, All Thing Digital 2007 “A man can do nothing better than to eat and drink and find satisfaction in his work …” Ecclesiastes 2:24 Source: allthingsd.com

2. Boutique Intellectual Property Advisory Publicly-Traded Semiconductor IP Licensing Publicly-Traded Patent Aggregation/Licensing Venture-Backed Patent Licensing Services (clients served: Xerox, British Telecom) Private Invention Laboratory (invented Priceline.com patent portfolio) Worldwide #2 PCT Filer (Co-Marketing Relationship, ask for details) 2 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 4/23/2013

3. Patent owners have many different strategies to drive adoption of a new technology, including forming a patent pool. What is the objective of a patent pool, and its key benefits? How does it differ from a traditional patent licensing program? What is involved in creating a patent pool? How do regulators look at the key issues? Other IP Strategy Alternatives, including: – creating a new patent licensing program, – selling patents outright, and – working with a patent monetization partner. 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 3

4. WHAT IS A PATENT POOL? 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 4

5. 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 5 Patent Pool Licensee 1Licensee 2Licensee 3 Licensor 1Licensor 2Licensor 3Licensor 4Licensor 5 Licensee 4Licensee 5 Creators of Technology (Patents) Users of Technology (Products)

6. 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 6 Patent Pool Licensee 1Licensee 2Licensee 3 Licensor 1Licensor 2Licensor 3 Patent Pool Licensee 1Licensee 2Licensee 3 Licensor 1Licensor 2Licensor 3 Traditional License

7. 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 7 ABA x B LicensorLicenseeLicenses 111 222 339 4416 5525 10 100 20 400 ABA + B LicensorLicenseeLicenses 112 224 336 448 5510 20 40 Patent PoolTraditional License

8. 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 8 The more fragmented the external technology markets, the more aggressively firms will patent (beyond what is otherwise predicted).* The effects of fragmented external rights on the patenting behavior of firms will be especially pronounced among capital-intensive firms (all else equal).* * Source: Rosemarie Ham Ziedonis, October 2003. Don’t Fence Me In: Fragmented Markets for Technology and the Patent Acquisition Strategies of Firms. Michigan Business School, Working Paper Series. (http://deepblue.lib.umich.edu/handle/2027.42/36305).http://deepblue.lib.umich.edu/handle/2027.42/36305

9. 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 9 Fragmented Concentrated Capital-LiteCapital-Intensive Con: easy to design-around Pro: less regulatory scrutiny Pro: greatest admin. benefit Pro: hard to design-around Very few patents? Con: regulatory risk Con: little admin. benefit

10. 4/23/2013 Copyright © 2013. Pet Irvine Pointe Advisory, LLC. All Rights Reserved. 10 Case Study Patent Pool MPEG-2 (June 26, 1997) TechnologyVideo and Systems coding Administrator 9 Founders (27 Essential Patents)*; later expanded to 27 licensors (patent holders)** Columbia University Fujitsu Limited General Instrument Corp. Lucent Technologies Inc. Matsushita Electric Industrial Co., Ltd. Mitsubishi Electric Corp. Philips Electronics N.V. Scientific Atlanta, Inc. Sony Corp. * DoJ Business Review Letter - http://www.justice.gov/atr/public/busreview/215742.htm ** MPEG-2 Patent list - http://www.mpegla.com/main/programs/m2/Documents/m2-att1.pdf

11. New Research: Patent Pool Effect 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 11 Source: Keyvan Vakili, Ph.D. Candidate (draft November 30, 2012, yet unpublished, cited with permission). Competitive Effects of Collaborative Arrangements: Impact of the MPEG-2 Pool on Outsiders’ Innovative Performance. Rotman School of Management, University of Toronto. Formation of a patent pool may influence the patenting behavior of firms (focus on outsiders or non-pool-participants), to shift their innovation strategy from technology exploration to pool implementation

12. MPEG-2: Many Licensors & Licensees 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 12 27 9 Licensors: Patents: Licensees: 2261,000+ 27 1,518 199719982011 Year: * Excluding original patent owners, who receive a license to all patents in pool Source: Keyvan Vakili (draft November 30, 2012, yet unpublished, cited with permission). Competitive Effects of Collaborative Arrangements: Impact of the MPEG-2 Pool on Outsiders’ Innovative Performance. Rotman School of Management, University of Toronto. 0*

13. What is in a Patent Pool? Essential Complementary FRAND Obligation 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 13

14. 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 14 Business Review Letter from U.S. Dept. of Justice Patent Pool Administrator Independent Evaluator to Determine Essentiality Founding Members (Patent Owners / Licensors) Licensing Program: Distribute Royalties, Enforce Infringement Issue Call for Patents Related to Technology Patent Pool Playbook

15. Company Issue Injunction: SEP/FRAND Patents Joint Patent Buying Consortium Injunction: SEP/FRAND Patents Regulator FTCE.U.DoJFTC FRAND: Recent Regulator Scrutiny 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 15

16. WHAT IS BEST WAY TO DRIVE ADOPTION OF NEW TECHNOLOGY? 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 16

17. Model: ARM Holdings 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 17 Revenue growth since IPO spans 13 years Consistently-High YoY Growth Source: ARMH Annual Reports (1998-2010)

18. ARM “Playbook” 1.Two-Way Partnerships 2.Careful Balance in Roadmaps 3.M&A: Buy Complementary Vendor 4.VC: Invest in Pioneering Customer 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 18

19. Two-Way Partnerships 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 19 Partners19901993Present OEM (customer’s customer) Fab-less (customer) Chip-less The concepts of “Two-Way Partnership”, “Customer’s Customer”, “Push-Pull”, and “Chip-less/Fab-less” are described in a 2009 case study “ARM Holdings PLC: Ecosystem Advantage” from University of Cambridge, Judge Business School “Pull” “Push”

20. Careful Balance in Roadmaps 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 20 Customer’s- Customer’s Roadmaps ABC Customer’s Roadmaps DEF Graphic by Irvine Pointe Advisory, LLC. The concept of “Careful Balance in Roadmaps” is described in a 2009 case study “ARM Holdings PLC: Ecosystem Advantage” from University of Cambridge, Judge Business School

21. Nurture New Ecosystem 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 21 Source: ARMH Annual Report (2010) Invest in a startup- customer as outside prototype, pioneer new end markets, and feedback loop on improving product Buy a “complementer” (sells product or service to same customer base) to add value to customers

22. TRADITIONAL LICENSING PROGRAM 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 22

23. SELLING PATENTS 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 23

24. WORKING WITH A PARTNER 4/23/2013 Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 24

25. For further information: Peter Kim Principal, Irvine Pointe Advisory, LLC peter@irvinepointe.com www.irvinepointe.com Q&A Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved. 254/23/2013