www.ipwatchdog.com

www.ipwatchdog.com

Invest in Growth How LOT Network Addresses the PAE Problem Ken Seddon CEO, LOT Network August 30, 2018 LOT Network CEO Ken Seddon Introduction of Ken Seddon 25 Years of Engineering and IP experience

BS. EE Georgia Tech, Masters Device Physics from ASU, JD from ASU Motorola: engineer and patent prosecution Intel: Asst. Director of Patents - patent prosecution and licensing Numonyx: Chief IP Counsel Micron: Asst. General Counsel Apple: Strategic patent licensing, patent purchasing, NPE defense ARM: VP of IP Why you should join LOT Network $29 Billion 3

PAEs - hurting innovation PAEs drain ~$80B from the US economy per year, or $1.5B a week10 Defendants added to NPE Campaigns Quarterly AIA Patent lawsuits have jumped 500% between 2005-20141 New pleading requirements Operating

Companies 15.9% PAE 84.1% Dan McCurdy 2017 SAS NPE Forum and RPX Average PAEs are responsible for 84% of high-tech patent litigation in the US!7 Where are the PAEs getting their patents?

Inventor/ University 81% of patents acquired from PAEs come from companies7 19% Operating Company 81% Companies provide PAEs with most of the patents 2014: LOT Network is formed as the solution Board of Directors

LOT Begins LOT Agreement is scaling Board of Directors Today: LOT Includes the most sophisticated Global IP holders across all industries Arista Denso Square Boeing ADM

American Express Facebook Covestro Oracle NetApp Salesforce eBay Tesla Volkswagen Cisco Alibaba Honda Nissan Electronic Arts GM

Amazon Lenovo Hyundai Who is joining and why? 9 Some of LOTs 270+ members Software: Hardware: Some of LOTs 270+ members Automotive:

Financial Services Some of LOTs 270+ members Entertainment/media Retail: Key Others: What about small companies? Startups and small companies are softest targets for trolls

- 50% of all companies sued by trolls make less than $10 million/year - Over 50% of all patent lawsuits concern software patents GAO report on IP: http://www.gao.gov/products/GAO-13-465 1/3rd of LOT Members are start-ups What is LOT Network? Non-Profit Community

Protecting Innovation LOT - community providing PAE immunization How LOT Protects Members A license to the other members of LOT Network that applies ONLY on and after transfer of the particular patent to a patent assertion entity (License on Transfer - LOT) 17 No effect on traditional uses of patents

Free to Cross License Free to Do Nothing Free to Assert Free to Sell LOT - community providing PAE immunization No effect on traditional uses of patents LOT Members involved in recent IP disputes:

Cisco Arista Waymo Uber Google Oracle No Burden to being a member Dont have to list patents Dont have to give notice Dont have to

report What is an assertion entity? A patent holder, in combination with its affiliates, that generates more than 50% of its gross revenue from patent assertion. 21 How LOT works 22 Illustration of the LOT Agreement's Operation Today: Companies 1 and 2

join the LOT Network. Tomorrow: Company 2 sells a patent to a Patent Assertion Entity. Future: LOT membership immune from patent, regardless of the owner. Over 1,198,000 WW assets Over 250,000 US assets License to LOT membership automatically becomes effective. Legend: = Transferred patent(s)

Illustration of the LOT Agreement's Operation Today: Companies 1 and 2 join the LOT Network. Tomorrow: Company 1 sells a patent to an Operating Company OP CO E OP CO D Over 1,198,000 WW assets Over 250,000 US assets OP CO

C Legend: = Transferred patent(s) OP CO F OP CO H OP CO G License to LOT membership automatically becomes effective when transferred to PAE.

Illustration of the LOT Agreement's Operation Today: Companies 1 and 2 join the LOT Network. Tomorrow: Company 2 becomes an assertion entity Over 1,198,000 WW assets Over 250,000 US assets License to LOT membership automatically becomes effective. LOT Network is non-profit: Annual Fee LOT Members Annual Revenue

Annual Membership Fee Less than $5 million Free Between $5 and $10 million Free Between $10 and $25 million Free Between $25 and $50 million

$5,000 Between $50 and $100 million $10,000 Between $100 million and $1 billion $15,000 Greater than $1 billion $20,000 (cap) LOT provides value to its members

27 Analysis of assets litigated by PAEs 28 What types of patents did PAEs use to sue in the US (1,796 litigations) # of patent assets 200 186 G06F-Digital Data Processing

H04L-Transmission of Digital Information H04W-Wireless Communication Networks H04N-Pictorial Communication G06Q-Data Processing H01L-Semiconductor Devices H04M-Telephonic Communication G08B-Signalling systems G06K-Data Recognition G06T-Image data processing 150 130 103 100

85 55 54 45 50 18 16 13 G08B

G06K G06T 0 G06F H04L H04W H04N G06Q

H01L H04M LOT has thousands of patents in the same areas as those PAEs are asserting in the US # of patent assets 125,000 100,000 LOT has over 461,000 assets in the exact areas that PAEs are asserting in the US.

(1,198,000+ Overall) 98282 75,000 50,000 G06F-Digital Data Processing H04L-Transmission of Digital Information H04W-Wireless Communication Networks H04N-Pictorial Communication G06Q-Data Processing H01L-Semiconductor Devices H04M-Telephonic Communication

G08B-Signalling systems G06K-Data Recognition G06T-Image data processing 46539 40331 21895 25,000 12108 11619 0

186 G06F 130 H04L 103 H04W 85 H04N

55 G06Q 54 H01L 6294 45 H04M 18

894 G08B 9298 7973 16 G06K 13 G06T Analysis of assets bought

31 Patent sales: Forecast of future litigation 2,500 2347 2315 # of patent assets 2,250 2,000 Top 15 patent categories

for 15,572 assets sold 1,750 1,500 1288 1,250 1,000 875 799 750 724

497 500 429 425 250 270 254 238

197 179 176 164 H03K G09G G02B A61B

G01R G06K H03F 0 G06F H01L H04L G11C H04N

H04W G06Q G02F H04B Data from: Patent sales: Forecast of future litigation # of patent assets 125,000

100,000 LOT has over 687,000 assets in the exact areas as the patents bought in 2015 (1,198,000+ Overall) 98282 75,000 50,000 40331

46539 21895 25,000 12108 2347 2315 0 G06F H01L

1288 H04L 11619 1300799 875 724 497 G11C H04W

G06Q H04N 14086 4927 3562 429 G02F 425 H04B

270913 H03K 4700 254 G09G 238 G02B 6098 3212 7973

197 A61B 179 G01R 176 G06K Data from: 164367

H03F Yeah, but does LOT REALLY work? 34 LOT Members have divested assets, but Over 26,000 have left LOT Network 35 of those assets have landed in the hands of 8 different PAEs One of those PAEs is Intellectual Ventures

No LOT Member has ever been sued by an asset that has left the Network Data from: Are you an Optimist? 36 Are you an Optimist? LOTimist? 37

LOT Members are Optimists The LOT Member Index = all publicly traded members of LOT includes those that have struggled recently (e.g. retailers) LOT members have out performed the S&P 500 by 90% in last year Monetizers The Monetizers index = Most active monetizers in recent years Qualcomm, Philips, Yahoo, IBM, Ericsson, Nokia, Technicolor, Sony, Tivo, Dolby Monetizers lag S&P 500 by 87% in the last year

Are you a LOTimist? 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 Company A

Company B Company C Suppliers Suppliers Suppliers Value Why LOT is good for BUYERS Can trust

suppliers Help save $29 billion Stabilize supply chain Why LOT is good for SUPPLIERS Reduce indemnification costs Gain access to IP Become

preferred supplier Program voluntary Backup 46 References 1. Patent Freedom https://www.patentfreedom.com/about-npes/litigations/ 2. James Bessen & Michael Meurer, The Direct Costs from NPE Disputes, 99 Cornell L. Rev. 387 (2014).

3. RPX 2014 Litigation Report. http://www.rpxcorp.com/wp-content/uploads/sites/2/2015/03/RPX_Litigation-Report-2014_FNL_040615.pdf 4. US Patent and Trademark Office http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm 5. ROL Group http://www.richardsonoliver.com/news/2014/12/1/buyers-and-sellers-in-the-2014-brokered-patent-market 6. Linda Biel, AST 7. Dan McCurdy, RPX presentation at 2017 IP Counsel Cafe spring meeting, Palo Alto, CA. 8. Kevin Jakel, Unified Patents presentation at 2015 IP Counsel Cafe spring meeting, Palo Alto, CA. 9. Mark Lemely & Douglas Melamed, Missing the forest for the Trolls, Cornell Law Rev. 2013. 10. Robert Gebelhoff. (2015, November 23). Patent trolls': Reading the comments. The Washington Post. Retrieved from https://www.washingtonpost.com/news/in-theory/wp/2015/11/23/patent-trolls-reading-the-comments/ ( 2015) 47

28,276 assets Introducing IPwe While tempted to just trade, at some point in 2016, it occurred to me that blockchain could have a massively beneficial impact on the patent industry and patent asset class. I began assembling the team of programmers, data scientists, communications specialists and patent wonks we would need to implement and create a new business model that intelligently captures the power of blockchain in the patent space. We have been fortunate to obtain strong financial backing It is a curious path how a collection of misfit trolls, geeks and wonks ended up herebut we are going to crush it and make a fortune , improve the patent asset class and benefit the patent ecosystem and society at the same time. Erich Spangenberg Co-Founder [email protected] Reasons to join LOT Network

50 Benefits for startups Its free for companies with up to $25 million in annual revenue You become immunized to 1.1 million patents Opportunity to be an equal with industry leaders And now free patents! Free Patents for startups Canon, Lenovo, Red Hat, Google, SAP, Dropbox, GM, Ford, and other have committed to donate thousands of patents to LOT To qualify: cant be a PAE must have between $500k and $25M in annual revenue, OR $500k and $25M in funding over the last 18 months

You can select your technology area LOT will recommend 5 highest rated assets available You can pick 3 You can earn an additional 2 more by getting a peer to join LOT Companies that follow you into LOT are not licensed to the assets

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