The Evolving IP Market An Inventors Walk Down Wall Street

1. The Evolving IP MarketAn Inventors Walk Down Wall Street James E. Malackowski April 2013

2. DISCLAIMER: THIS PRESENTATION WAS PREPARED BY REQUEST FOR EDUCATIONAL DISCUSSION PURPOSES ONLY AND DOES NOT NECESSARILY REPRESENT THE VIEWS OF OCEAN TOMO, LLC, ITS AFFILIATES, CLIENTS, EMPLOYEES OR EXECUTIVES. USE IS BY PERMISSION OF THE AUTHOR ONLY. SELECTIVE DATA OR IMAGES TAKEN OUT OF CONTEXT MAY BE MISLEADING TO A SUBSEQUENT AUDIENCE OR TRIER OF FACT.

3. What’s Happening Now?

4. The Big Picture

5. Opportunity Behind The Headlines -- Nortel Nortel Auction Generates 3x Expected Price, Bonds Get Par + Accrued Subs Turn Out to be an Even Better Bet • Ocean Tomo valued the senior bonds when they were trading in the 70’s • Based on Ocean Tomo’s valuation, hedge fund clients generated significant returns on both the seniors and the subs

6. ALU IP Collateralized Debt (Liquid) ALU IP Portfolio (# patents and Average IPQ Score)

7. Going Private - Mosaid

8. Private Equity / Venture Capital Investing Private Companies With Strong IP Are More Likely to Get Additional Funding And Less Likely To Go Bankrupt Thomson VentureXpert database for the 1976-2005 period. See Cao, Jerry X. and Hsu, Po Hsuan (2010), Patent Signaling, Entrepreneurial Performance, and Venture Capital Financing, forthcoming, 31.

9. Shareholder Activism – Motorola Mobility

10. Shareholder Activism - AOL • Starboard is an activist who became one of the largest shareholders of AOL • On Feb 24, 2012, Starboard publicly wrote the Board: • AOL owned a robust portfolio of extremely valuable patents that had gone unrecognized and underutilized • Starboard believed that AOL’s patent portfolio could produce in excess of $1 billion of licensing income if appropriately harvested and monetized • AOL’s inaction … was alarming … the Company’s most valuable patents would expire worthless • On March 13, 2012, CEO Tim Armstrong stated at an investor conference that: “... AOL’s patent portfolio, it’s beachfront property…it’s basically extremely valuable.” • On Apr 9, 2012, AOL announced the sale of its patent portfolio to Microsoft for $1.056 billion in cash.

11. Shareholder Activism - AOL We cannot find one instance prior to our February 2012 letter in which Mr. Armstrong had ever publicly made reference to, or commented on, AOL’s valuable patent portfolio. – Starboard Value L.P., May 25, 2012.

12. IP Event Trading – Litigation

13. Fundamental Long/Short Trades Tesla (TSLA) / Ford (F) / General Motors (GM) – IP data helped identify proprietary battery technology as the key to first mover advantage and safety advantage. The trade was long TSLA/ short F/GM and a basket of auto suppliers to hedge out Beta. Generated 100% relative returns; initiated 5/11.

14. U.S. Equities – OTP v. SPX • The graph at left shows the five year performance of a portfolio of 300 stocks picked using quantitative IP valuation tools v. the S&P 500 • The portfolio is composed of stocks representing all market caps and styles and, therefore, does not exhibit those biases • As the IP index has consistently outperformed the S&P 500 • Capturing that outperformance or “alpha” across a family of investment strategies results in superior risk-adjusted and absolute returns relative to the market.

15. U.S. / China 200™ Patent Index • The graph at left shows the five year performance of a portfolio comprised of the top 100 companies that own the most valuable US patents relative to their book value and 100 companies that have the most valuable Chinese patents. • The portfolio is composed of stocks representing all market caps and styles and, therefore, does not exhibit those biases • Over the five-years of back testing, the U.S. / China 200™ Patent Index has outperformed its’ benchmark the MSCI World Index by 2922 basis points.

16. How Did We Get Here?

17. Royalty Licensing Defensive Cross Licensing Competitive Litigation IP Historical Evolution High Market Development Period of Feudal Lords Congress Low 1st Generation

18. Contingent Counsel Royalty Licensing Public Auctions Defensive Cross Licensing Bowie Bonds Patent Pools Web Portals Competitive Litigation IP Historical Evolution High Market Development Period of Feudal Lords Rise of the Intermediary Congress Low 1st Generation 2nd Generation

19. Privateers Activists Contingent Counsel Royalty Licensing Public Auctions IP Event Trading Defensive Cross Licensing Bowie Bonds Patent Pools Web Portals Competitive Litigation Going Private IP Historical Evolution High Equity Indexes Market Development Period of Feudal Lords Rise of the Intermediary Age of the Golden Rule Congress Low 1st Generation 2nd Generation 3rd Generation (Part 1)

20. What Can We Expect Next?

21. Changing Numbers (Accounting, Reporting and Damages) Regional Centers Traded Exchange (IPXI) Risk Management IP Evolution Continued High “Taxation Economy” Market Development Sovereign Funding Low 3rd Generation (Part 2)

22. Changing Numbers (Accounting, Reporting and Damages) Regional Centers Traded Exchange (IPXI) Risk Management IP Evolution Continued High “Taxation Economy” Market Development Sovereign Funding Low 3rd Generation (Part 2)

23. Risks • Single-sided corporate attitude to monetization • Exhaustive “wait and see” attitude • Unchecked shareholder activism and litigation • Failure of risk markets to develop • Failure to attract liquidity providers • Public failures due to false expectations • Unintended secondary consequences of legislative or judicial reform; one-way judicial ratchet • Continued dilution of “power to exclude” (e.g. ebay; ITC; essential patents) • Concentrated foreign sovereign ownership and management of IP rights; lacking U.S. policy • Misconceived financial reporting requirements

24. Risks • Single-sided corporate attitude to monetization • Exhaustive “wait and see” attitude • Unchecked shareholder activism and litigation • Failure of risk markets to develop • Failure to attract liquidity providers • Public failures due to false expectations • Unintended secondary consequences of legislative or judicial reform; one-way judicial ratchet • Continued dilution of “power to exclude” (e.g. ebay; ITC; essential patents) • Concentrated foreign sovereign ownership and management of IP rights; lacking U.S. policy • Misconceived financial reporting requirements

25. Kodak • Jan. 18, 2012 – Kodak valued its patent portfolio at $2.2 to $2.6 billion in motion filed by Kodak • Notwithstanding EK’s declared intent to sell 1,100 patents on July 22nd, stock has continued downward

26. Risk Management - Patent Royalty Trust™ Select Products / Technology Areas Fairness Opinion Insurance Establish Trust “Interpleader” Notice (optional) License Execution and Payment

27. Changing Numbers (Accounting, Reporting and Damages) Regional Centers Traded Exchange (IPXI) Risk Management IP Evolution Continued High “Taxation Economy” Market Development Sovereign Funding Low 3rd Generation (Part 2)

28. Sovereign Funding • Impact • P-LEC defense • Manufacturing cost advantage • Recycled and managed primary research funding • Protect domestic industry • Export judicial burden • Next generation “cartel” • Activity • Europe Fund (France Brevets) designed to create new economy infrastructure which favors inventions (EU 50 million) • Taiwanese Fund to acquire IP to assist local companies • Japan Fund targeted investments in life-science IP • Korea Fund to promote local IP rights (USD 403 million reported) • LESI Global Technology Impact Forum received Delegations from Turkey, China, Singapore, the Philippines, UAE and Hong Kong

29. Changing Numbers (Accounting, Reporting and Damages) Regional Centers Traded Exchange (IPXI) Risk Management IP Evolution Continued High “Taxation Economy” Market Development Sovereign Funding Low 3rd Generation (Part 2)

30. Regionalization Regional Service Center Regional Service Center Regional Service Center Regional Service Center U.S. IP Central Market Regional Service Center PAN-ASIA EUROPE

31. IP Market Plans

32. Changing Numbers (Accounting, Reporting and Damages) Regional Centers Traded Exchange (IPXI) Risk Management IP Evolution Continued High “Taxation Economy” Market Development Sovereign Funding Low 3rd Generation (Part 2)

33. Changing Numbers • FASB 141/142 • IP to fill the “GAAP” now in U.S. and Germany at a minimum • IP reporting in Hong Kong (HKSE Feb 2012 Guidance) • Changing damages accounting / Daubert patchwork quilt • Expanding efforts towards global ratings now in U.S., Europe and across Asia

34. Ratings

35. Taxation Economy • Growing expectation / consent to pay IP “tax” • Low per unit effect across all products • Catalyst to greater IP based reporting • Consistent with planned IP exchange models • Decomposition of cross licenses • True Governmental taxation starting with cross border affiliate entities

36. Changing Numbers (Accounting, Reporting and Damages) Regional Centers Traded Exchange (IPXI) Risk Management IP Evolution Continued High “Taxation Economy” Market Development Sovereign Funding Low 3rd Generation (Part 2)

37. IP Exchange – U.S. Efforts Accelerating The Intellectual Property Exchange International (IPXI) is the world’s first financial exchange that facilitates non-exclusive licensing and trading of intellectual property (IP) rights with market-based pricing and standardized terms. The result is an exchange that operates under two core principles: transparency and efficiency. IPXI invites all IP market participants to consider membership.

38. IPXI – Unit License Right™ Contracts USP X,XXX,137 A / B / C GENERAL DESCRIPTION: USP X,XXX,137 A / B / C Valve Seat Insert PATENT(S):  USP X,XXX,137 and continuations, continuations-in-part and foreign counterparts. FIELD OF USE:  All RESTRICTIONS: All secondary sales through IPXI ISSUER RIGHT TO USE:  Yes including all subsidiaries UNIT BASIS:  Each ULR covers one automotive or light truck engine TOTAL OFFERED QTY:  50 million license units offered in 10 unit lots OPENING: Dutch Auction (50% minimum quantity and price) OFFERING TERM:  3 years TERM OF LICENSE:  Until consumed IPXI PRICE BANDING: + / - 20% INITIAL OFFERING (TRANCHES) U137A: 10 million ULRs $0.50 per unit U137B: 10 million ULRs $0.75 per unit U137C:  30 million ULRs $1 per unit FOLLOW-ON OFFERINGS Unlimited 50 million ULRs Deemed Market Price

39. IPXI – Patent Value Indexes

40. Humanitarian Marketplace Development

41. The Evolving IP Market: • A 30 year overnight success (more or less).

42. Revolution

43. Ocean Tomo Overview

44. Ocean Tomo History

45. Ocean Tomo History

46. James E. Malackowski 200 West Madison, 37th Floor Chicago, IL 60606 (312) 327-4410 Ph jmalackowski@oceantomo.com