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BUYING AND SELLING INTELLECTUAL PROPERTY Premier date: October 21, 2016 1 © 2016 DailyDAC, LLC d/b/a/ Financial Poise™ INTELLECTUAL PROPERTY-201 SERIES

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Page 1: Buying & Selling IP

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 1

BUYING AND SELLING INTELLECTUAL PROPERTY

Premier date: October 21, 2016INTELLECTUAL PROPERTY-201 SERIES

Page 2: Buying & Selling IP

Premier Date: October 21, 2016

IP-201 SERIES

CHOOSING AND PROTECTING YOUR BRAND

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 2

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WE WOULD LIKE TO TAKE THIS OPPORTUNITY TO THANK OUR SPONSORS

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 3

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 4

meet the facultyPANELISTS

Gary Sorden Klemchuk LLPSanjay Prasad Prasad IPNed Hearn Law Offices of Edward R. Hearn

MODERATOR William Cory Spence,

SpencePC

Page 5: Buying & Selling IP

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 5

Practical and entertaining education for business owners and executives, accredited

investors, and their legal and financial advisors. For more information, visit

www.financialpoise.comDISCLAIMER: THE MATERIAL IN THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY. IT SHOULD

NOT BE CONSIDERED LEGAL ADVICE. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.

Page 6: Buying & Selling IP

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 6

about this webinar

IP rights are an important class of intangible assets that can be assigned or licensed to generate revenue. Indeed, some companies do not make or sell products; their entire revenue is derived from the licensing of their patents. Suffice it to say, licensing revenue has become a significant source of value in the global intellectual property economy. This webinar will help you better understand the complex legal issues associated with IP transactions.

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 7

about this seriesIn today's economic environment, intellectual property (IP) rights have become increasingly important assets for both individual and corporate entities. More and more, both are recognizing the economic importance of IP rights--whether those rights consist of a single patent--or whether they consist of an entire portfolio also including trademarks, copyrights, and trade secrets.

This information-packed webinar series focuses on the intricacies of IP rights as they relate to the specific areas of brand protection, IP transactions, internet marketing, and other IP issues that are critical when representing innovators and inventors. Join some of the leading attorneys in the World, as they discuss—in plain English for the non-expert—some specific IP challenges that individuals, businesses, and those who represent them are likely to face.

As with all Financial Poise webinars, each episode in the series is designed to be viewed independently of the other episodes, and listeners will enhance their knowledge of this area whether they attend one, some, or all of the programs.

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 8

episodes in this series

EPISODE #1 Choosing & Protecting Your Brand

9/23/16

EPISODE #2 Buying & Selling IP 10/21/16

EPISODE #3 Setting Up a Website 11/18/16

EPISODE #4 Legal Issues for Innovators & Inventors 12/16/16

Dates above are premier dates; all webinars also available on demand

Page 9: Buying & Selling IP

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 9

Types of Intellectual Property• Trademarks identify the source of a good or service used in

commerce.

• Copyrights protect original works of authorship, including literature, music, artistic works, and computer software.

• Patents grant property rights on inventions, allowing the patent owner to exclude others from making, selling, or using the invention.

• Trade Secrets are formulas, processes, devices, or other business information that companies keep secret and out of the public domain.

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 10

Why Buy & Sell Intellectual Property?

In recent years, the market for buying and selling IP has experienced significant growth. Today, businesses treat IP like any other fixed asset. A business may acquire IP for the following reasons:

• Strengthen negotiation positions• Risk mitigation• Investment opportunities

A business may divest its IP for the following reasons:• Monetize latent IP• Monetize excess IP• Quickly raise capital

Page 11: Buying & Selling IP

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 11

How to Buy & Sell Intellectual Property

• IP Brokerage• IP brokerage firms work with clients interested in

acquiring IP as well as clients looking to divest IP.• On the sell-side, brokerage firms will often perform due

diligence of the assets to determine an initial sales price.• Auctions• Similar to any other auction, interested parties may bid

on IP assets, with the highest bidder acquiring the assets.

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 12

Acquiring Trademarks/Service MarksWhen acquiring trademarks and/or service marks, the following issues should be considered:• Ownership• Confirm that the seller does in fact own the mark.• Identify any licenses, assignments, security interests, or any other burden attached to the mark.

• Registration • Determine whether the marks have been registered federally and/or in one or more states.• If the mark(s) have been registered, confirm that the registration(s) have been properly maintained.

• Use of the Mark• Verify that the mark(s) are still in use.• Non-use for certain time period may constitute abandonment, and consequently, loss of the mark.

• License and Assignments• Perform detailed due diligence on all licenses and assignments.• Licenses may significantly affect the nature, scope, and/or duration of the buyer’s activities.• Ensure that the seller has not engaged in “naked licensing,” which may lead to the mark(s) being declared

abandoned and unenforceable.

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 13

Acquiring CopyrightsWhen acquiring copyrights, the following issues should be considered:• Ownership• Confirm that the seller does in fact own the rights in the copyright.• Determine the original author of the work.• Verify that the work is not in the public domain • Determine if the work is a “derivative work” or a “work made for hire.”

• Registration • Determine whether the work has been registered with the U.S. Copyright Office.• Copyright registration is not scrutinized for validity like trademarks and patents, thus, it is important to

evaluate the validity and strength of the copyright.• License and Assignments• Carefully exam any prior transfer history to ensure that the transfer history has been properly documented.• Ascertain the scope of rights transferred. Licensed rights may be limited to a specific use.

• Modification History• Obtain a complete modification history of the work with a listing of all publically available versions.

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 14

Acquiring PatentsWhen acquiring patents, the following issues should be considered:• Ownership• Confirm that the seller does in fact own the patent.• Verify that all required maintenance fees have been paid.• Identify the countries the patent rights exist.

• Pending Applications • Determine whether the patent has any continuations or continuations-in-part that are pending before the Patent

Office.• “Open chains” are often more valuable because the buyer may prosecute new applications based on the

acquired patent. • Validity and Enforceability• Determine whether any actions have been filed on behalf of or against the seller for infringement.• Perform an independent validity and prior art search.

• Licenses and Assignments• Verify that any prior assignments have been properly recorded.• Determine the scope of use for any existing licenses.

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 15

Patent Valuation When assessing the monetary value of a patent, one must consider the following factors:• Technology Area• The earlier in the commercialization stage the technology, the lower the value of the patent.

• Priority Date• An early priority date means less prior art can be brought against the patent.

• Strength and Breadth of the Claims• A majority of the due diligence should be spent analyzing the patent itself. • The claims of a patent determine the scope of coverage, and thus, stronger claims provide wider coverage.• Important to analyze the claims in light of the specification.

• Market Need and Size of the Relevant Technology Market• Valuable patents relate to a large technology market and solve an wide spread problem within that market.

• Other Factors• Years remaining on the term of the patent.• Size of the portfolio.• Whether or not the patent family is an “open chain.”

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 16

Who is Buying & Who is Selling Patents?

Not surprisingly, operating companies accounted for a significant majority of patent sales in 2015, while on the buy-side, non-practicing entities led the way.

71%

16%

8%

1% 1% 1%

Seller Type

Operating Company NPE Inventor University/researchDefensive Aggregator Other

42%

34%

21%

3%

Buyer Type

NPE Operating CompanyDefensive Aggregator Other

Source: Intellectual Asset Management Magazine, January/February 2016

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 17

2015 Patent Brokerage MarketBetween June 1, 2014 and May 31, 2015, patent packages offered for sale accounted for $1.1 billion, with sales estimated around $233 million. Below are some key metrics:• Assets

• 566 packages were offered for sale.• 8,846 total assets were offered for sale, a 26% increase from 2014.• Of the 8,846 assets offered for sale, 6,127 assets were US-issued.

• Technology Distribution• Software and cloud computing related patents packages represented over 30% of all patent package sales.

• Package Sizes• Over 50% of the packages included 5 or less patents.• Less than 9% packages included 100 or more patents.

• Asking Pricing• The average asking price per US-issued patent was approximately $277,000.• This was a 20% drop from the 2014 asking price.

• Sold Assets• 13% of the offered packages were sold.

Source: Intellectual Asset Management Magazine, January/February 2016

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 18

Patent Sales Post Alice• The 2014 Supreme Court decision in Alice Corp. v. CLS Bank had a dramatic

effect on the validity of software and business-method patents. • The Alice decision has not had as dramatic an effect on the sales rate of

software related patents as some experts originally thought, but it did have a dramatic effect on the sales rate of financial patents.• Software Patents – In 2014, the average sales rate for software related patents was 20%

higher than the total market sales rate. In 2015, even with the Alice decision, the sales rate was still 10% higher than the total market sales rate.

• Financial Technology Patents – In 2014, the average sales rate for financial technology patents was 40% higher than the total market sales rate, but in 2015, the rate dropped to 45% below the total market sales rate.

Source: Intellectual Asset Management Magazine, January/February 2016

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More About The Faculty D

WILLIAM [email protected]

William Spence assists individual and business clients to obtain their best possible outcome in contentious legal matters. He has extensive experience in litigation, arbitration, and mediation involving all areas of intellectual property law. A registered patent attorney, Mr. Spence serves clients by providing advocacy and advice in the areas of: patent infringement; trade secret misappropriation; unfair competition (including conspiracy, tortious interference, and related antitrust claims); breach of contract; post-grant patent proceedings (e.g., inter partes review) ; trademark infringement; and copyright infringement.

He has litigated claims in both state and federal courts throughout the United States. Additionally, Mr. Spence has extensive experience with patent monetization strategies and complex, international patent infringement litigation involving multiple parties and jurisdictions, most notably including Japan.  He is a published author and frequent speaker on patent monetization and other intellectual property issues, and has been repeatedly recognized as an “Illinois Rising Star” and “Illinois Star,” in the area of intellectual property.

Mr. Spence is a graduate of the University of Notre Dame, where he obtained separate Bachelor of Science Degrees in Chemical Engineering and Biophysics (“Physics in Medicine”). As a student he received the distinction of Notre Dame Scholar and also earned the Monogram Award. Upon graduation from Notre Dame, Mr. Spence received his commission as a Second Lieutenant in the United States Air Force, Medical Service Corps. After completing his military service, he worked for several years in the chemical industry before pursuing his legal education at the University of Houston Law Center.

Prior to forming SpencePC, Mr. Spence spent twelve years practicing law with Kirkland & Ellis LLP in Chicago, IL and Tokyo, Japan. 

19© 2016 DailyDAC, LLC d/b/a/ Financial Poise™

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More About The Faculty D

GARY [email protected]

Gary Sorden is a managing principal at Klemchuk LLP in Dallas.

He primarily focuses on commercial and intellectual property litigation in the areas of software, electrical, mechanical, semiconductor, and chemical technologies. He has represented clients in federal and state matters before trial and appellate courts as well as alternative dispute resolution forums. His experience also includes representing clients in a wide variety of matters including real estate, commercial, oil and gas, business, environmental, securities actions, class actions, product liability, trademark, copyright, and patent disputes. Gary’s diverse litigation experience allows him to provide comprehensive representation in a wide-variety of litigation matters while also maintaining the business objectives of his clients.

Gary also counsels clients in obtaining and developing intellectual property including product and company branding strategies as well as the development of patents, trademarks, and copyrights. Intangible assets, such as intellectual property, are a key driver in the valuation of companies and as a result, he works closely with his clients to develop an intellectual property strategy that is appropriate and scalable for the needs of his clients.

Gary earned his law degree from Texas Tech School of Law and holds a M.S. in Engineering Management from Southern Methodist University as well as a B.S. in Computer Science from the University of Texas – Pan American.

20© 2016 DailyDAC, LLC d/b/a/ Financial Poise™

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More About The Faculty:

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 21

SANJAY [email protected]

Sanjay Prasad is a Principal at Prasad IP, PC in Silicon Valley. He has practiced at the forefront of technology and intellectual property for over 20 years. He is experienced in all business and legal aspects of intellectual property, from advising on IP strategy to execution. He has served as:

• outside counsel, advising emerging and established companies on all aspects of IP matters;• chief patent counsel to Oracle Corporation, leading the transformation of its patent strategy including

licensing, litigation, policy, standard setting and software licensing matters; and• licensing and business executive, handling deal development, negotiation and close, patent sales and

acquisitions and leading patent licensing/sales teams.

Mr. Prasad has testified before Congress on hearings that led to the passage of Section 19 of the America Invents Act. He has served on the board of trustees for the Software Patent Institute, the executive committee of the Association of Corporate Patent Counsel, the board of the Intellectual Property Owners Association, as chair of the IP Counsel’s Roundtable of the Information Technology Association of America, on the Boston University College of Engineering West Coast Alumni Council and on the advisory board of the California Invention Centre.

Mr. Prasad is admitted to practice in California, Massachusetts, the USPTO and various federal courts. He earned his law degree from Syracuse University and a master’s in computer engineering and a bachelor’s in electrical engineering from Boston University.

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© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 22

More About The Faculty EDWARD R. HEARN

With his principal office in San Jose, California, Edward (Ned) R. Hearn represents clients worldwide in intellectual property and business matters related to creative artists and media-based companies.

Ned's practice focuses on entertainment, internet, and computer software businesses and their convergence, intersecting content, media, and technology in the digital internet environment, including: recording, production, and publishing; multi-media and internet web-based productions; video games for mobile and console based platforms; mobile apps; digital distribution and repurposing of content; licensing, distribution, and marketing; copyright and trademark matters; merchandising; sponsorships; film, television, video productions; options, scoring, and soundtracks; content syndications; literary publishing, including fiction and technical and professional non-fiction; clearances for use of intellectual property in all forms of media; talent services negotiating and contracting; strategic alliances; content catalog sales and purchases; business start-ups and development; private financing; and private mergers and acquisitions of content and media-based companies.

His clients include record labels, music publishers, book publishers, software and video game publishers, traditional and internet-based media, production, technology, and content distribution companies; webcasting companies; recording artists, writers, producers, managers, authors, software, video game, and app designers and developers, and multimedia product and website designers and developers.

Ned has co-authored Musician's Guide to Copyright, (Scribners); The Musician's Business and Legal Guide (Prentice Hall); has published numerous articles on his practice area; and has presented at dozens of conferences, including for the American Bar Association (ABA), Practising Law Institute (PLI), American Society of Composers, Authors, and Publishers (ASCAP) Expo, California Lawyers for the Arts, NARAS/Recording Academy, and various media and trade association conferences.

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Visit www.eisneramper.comEisnerAmper. Let's Get Down to Business®

EisnerAmper LLP is a leading full-service advisory and accounting firm, and is among the largest in the United States. We provide audit, accounting, and tax services, as well as corporate finance, internal audit and risk management, litigation services, consulting, private business services, employee

benefit plan audits, forensic accounting, and other professional advisory services to a broad range of clients across many industries. We work with high net worth individuals, family offices, closely held businesses, start-ups, middle market and Fortune 500 companies. EisnerAmper is PCAOB-registered and provides services to more than 200 public companies and to thousands of entities spanning the hedge, private equity, brokerage and insurance

space in the financial services marketplace. As companies grow we help them reach their goals every step of the way. With offices in New York (NY), New Jersey (NJ), Pennsylvania (PA), California (CA), and the Cayman Islands, and as an independent member of Allinial

Global, EisnerAmper serves clients worldwide.

23© 2016 DailyDAC, LLC d/b/a/ Financial Poise™

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www.financialpoisewebinars.com

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About Financial Poise™ DailyDAC, LLC, d/b/a Financial Poise™ provides continuing education to business owners and executives, investors, and their respective trusted

advisors. Its websites, webinars, and books provide Plain English, sometimes entertaining, explanations about legal, financial, and other

subjects of interest to these audiences.

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The ChamberWise™ Education Consortium is a resource for Chambers of Commerce to provide its members with valuable

member benefits by offering relevant business education webinars; and generate revenue for the Chamber as well.

www.chamberwise.org

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Important Notes

• THE MATERIAL IN THIS PRESENTATION IS FOR GENERAL EDUCATIONAL PURPOSES ONLY.

• IT SHOULD NOT BE CONSIDERED LEGAL, INVESTMENT, FINANCIAL, OR ANY OTHER TYPE OF ADVICE ON WHICH YOU SHOULD RELY.

• YOU SHOULD CONSULT WITH AN APPROPRIATE PROFESSIONAL ADVISOR TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.