1. Invitation to join LOT Network
Ken Seddon
CEO, LOT Network
Sept 30, 2015

2. Ken Seddon - CEO, LOT Network
Ken Seddon comes to LOT with over 20 years experience managing all areas of intellectual property. Ken has worked at some of the largest patent holders the world including Apple, Micron, Motorola, Intel and most recently as the Vice President of IP at ARM. A resident of Phoenix, Arizona, Ken graduated from the Georgia Institute of Technology, with a bachelor's degree in Computer Engineering. He also earned a master’s degree in Solid State Device Physics and a Juris Doctorate from Arizona State University.

3. The Patent Assertion Entity (PAE) problem

4. PAE problem getting worse
PAE litigation is on the rise!
2015 likely to be a record
based on 1st half actuals PAEs are responsible for 84% of high-tech
patent litigation in the US!
Patent Suit Filings Continue On Record Pace, Report Says
By Matthew Bultman
Law360, New York (July 14, 2015, 6:30 PM ET) -- More than 3,100 new patent cases have been filed in federal court so far this year, a record-breaking number that could put patent filings in 2015 at an all-time high, according to a report released Tuesday.

5. PAEs - hurting innovation1
PAE litigation is on the rise!
2015 likely to be a record
based on 1st half actuals PAEs are responsible for 84% of high-tech
patent litigation in the US! 8 7
CLS V Alice decided in June of 2014

6. The PAE problem is getting worse4
(thousands)
US Patent Office: number of patents and new applications by year
The number of patents issued by the US Patent Office is growing!
(Over 300,000 new patents in 2014 alone)

7. The PAE problem is getting worse
Over 50% of patents sold last year relate to software PAEs acquired over 15,000 patent assets in 2014 alone 5 6

8. Where are the PAEs getting their patents?
81% of patents acquired from PAEs come from companies 7
Source of Patents
Companies provide PAEs with most of the patents

9. PAEs target small/medium sized software companies3
62% of target companies have < $100m in revenue 3
Defendant Revenue Profile
You are not too small to get sued.

10. PAEs target small/medium sized companies
62% of the patents used by PAEs in litigation are software patents
The average annual revenue of an PAE target company is $10.8 million/year
On average a software company pays $3.32 million for each lawsuit from an PAE
PAEs cost companies over $29 billion/year in direct accrued costs
Small or medium sized companies pay 37% ($10.73 billion) of those costs 8 2 2 2 2

11. Overview of LOT

12. LOT Summary
A network of companies that are working to address the problems of PAEs.
Members give each other a license to patents so ALL LOT members are “immunized” from patents that leave the network and fall into the hands of PAEs.

13. LOT believes in traditional uses of Patents
LOT Members are still allowed to:
Assert their patents directly against other LOT members
Assert their patents directly against non-LOT members
Sell their patents to operating companies (LOT agreement does not apply)
Sell their patents under spin-out/M+A activity
There is no burden to membership:
LOT members are not required to report if they sold a patent
LOT members do not have to give notice before they sell a patent
You may withdraw anytime. Future patents not impaired

14. How does LOT work?

15. Illustration of the LOT Agreement's Operation
Over 325,000 WW assets
Over 99,000 US assets 2 1
LOT
Today: Companies 1 and 2 join the LOT Agreement. 1 2
Tomorrow: Company 2 sells a patent to Company 3. Company 3 is not in LOT. 2 1
LOT 3 $
License to LOT membership automatically becomes effective.
Legend
- Transferred patent(s)
Future: LOT membership immune from sold patent, regardless of the owner. 2 1
LOT 3 X 4 X

16. LOT supports traditional uses of IP
LOT Network members are free to assert their patents offensively or defensively against non-LOT members. No restrictions on how IP is licensed to operating companies in a cross-license or commercial agreement. (note, exclusive license to an PAE invokes the license) 3 1 2
LOT

17. LOT supports traditional uses of IP3
LOT Network members are free to assert their patents offensively or defensively against other members.
No restrictions on how IP is licensed to operating companies in a cross-license or commercial agreement. 1 2
LOT

18. LOT Network is non-profit: Costs

19. LOT Members have divested patents
Current LOT members have divested over 1,200 US assets in last two years. (3,300 ww assets)
H04N - Transmitting images
H04L - Transmitting Digital Information
G06F - Digital Data Processing
H04B - Transmitting signals
H04W - Wireless communications
Top divested categories
211 patents

20. 14 Largest patent categories currently in LOT membership
Over 99,000 US assets
Over 325,000 ww assets
H04N - Transmitting images
H04L - Transmitting Digital Information
G06F - Digital Data Processing
G03G - Storing images
G06Q - Data processing system
Top current categories
17,339 assets

21. Overlap of patents by top CPC codes
Social Media Co
(3459 US assets)
LOT Network
(99,000 US assets)
A61B
G06K
H04W
G03F
H04B
G01R
H04M
Over 90% of Facebook’s portfolio
overlaps with LOT’s Top 14
G06F
H01L
H04N
G02B
G03G
G06Q
H04L
G06T
B41J
A61B - Medical Diagnosis
B41J - Printing
G02B - Optical
G03F - Semiconductor
G03G - Electrography
G06F - Digital Data Processing
G06K - Presentation of Data
G06Q - Data Processing Systems
G06T - Image Data Processing
H01L - Semiconductor
H04B - Transmitting signals
H04L - Transmitting Digital Information
H04N - Transmitting images
H04W - Wireless communications

22. Overlap of patents by top CPC codes
Top 5 Bank
(2154 US assets)
LOT Network
(99,000 US assets)
G02B
H04B
H04L
G06Q
G03G
G03F
G07D
G07F
Over 82% of Bank of America’s portfolio
overlaps with LOT’s Top 14
H04N
A61B
G06T
G06K
B41J
G06F
H04W
H01L
A61B - Medical Diagnosis
B41J - Printing
G02B - Optical
G03F - Semiconductor
G03G - Electrography
G06F - Digital Data Processing
G06K - Presentation of Data
G06Q - Data Processing Systems
G06T - Image Data Processing
H01L - Semiconductor
H04B - Transmitting signals
H04L - Transmitting Digital Information
H04N - Transmitting images
H04W - Wireless communications

23. Recommendation: LOT for Suppliers
Provided by:
Jeffrey Blumenfeld
Chair, Antitrust & Trade Regulation
Partner, Tech Group
Lowenstein Sandler LLP
2200 Pennsylvania Avenue, NW
Washington, DC 20037

24. Significant Value in adding suppliers to Membership
Significant value in adding some Suppliers Both Suppliers and Customers get protection from patents outside their bilateral ecosystems
Value
Company A
Company C
Company B
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
LOT NETWORK

25. LOT does not require members to cross-license each other
What LOT Network IS NOT
LOT does not require members to cross-license each other
LOT does not buy, sell, own, or invalidate patents
LOT does not prohibit members from selling their patents
LOT does not prohibit members from asserting their patents
LOT does not prohibit members from monetizing their patents
LOT does not criticize the PTO or patent quality

26. No burden to being in the LOT Network
Anyone can join. Any industry, any country, regardless of portfolio size
Agreement drafted to obviate the need of members to give notice, prepare covenants, or track patents that are transferred
No need to report patent transfers or transactions
Increases freedom to operate
As membership grows, so too grows the benefit to each member

27. Questions

28. THANK YOU

29. US Patent and Trademark Office ROL Group Linda Biel, AST
References
Patent Freedom
James Bessen & Michael Meurer, The Direct Costs from NPE Disputes, 99 Cornell L. Rev (2014).
RPX 2014 Litigation Report.
US Patent and Trademark Office
ROL Group
Linda Biel, AST
Dan McCurdy, RPX presentation at 2015 IP Counsel Cafe spring meeting, Palo Alto, CA.
Kevin Jakel, Unified Patents presentation at 2015 IP Counsel Cafe spring meeting, Palo Alto, CA.
Mark Lemely & Douglas Melamed, Missing the forest for the Trolls, Cornell Law Rev