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American Bar AssociationSection of Intellectual Property Law

2002 Summer IPL Conference

ipValue Partnering Opportunities

Pierre de Saint PhalleipValue Management, Inc.

June 26-30, 2002Philadelphia, Pennsylvania

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Independent vehicle focused on financing and building technology-enabled businesses in partnership with leading global corporations

• eONE Global in partnership with First Data Corp• Site59, a partnership among travel companies, was sold to Travelocity

IP monetization vehicle - Deep implementation expertise – Partnering focus

• Premiere global investment bank• Advisory and financial expertise• >$10bn under management in private equity

• World's largest PE firm focusing on IT investments

• Over $10b under management

• Leading strategy consulting house• Business development and

operational expertise

The founding partners of iFormation and ipValue

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Common IP related issues for companies today

• Financial results– Need to “drop” more money to the bottom line

– More efficient extraction of value from their organizational assets

– Linking R&D to ROI

• Strategic– Most companies want to be ‘like IBM’

– Protecting the source of technological and competitive advantage

– Effectively use intelligence to form alliances and improve licensing negotiations

– Shareholders are beginning to ask how companies are capitalizing on IP

• Knowledge– Little awareness of the value of the IP portfolio

– Limited information systems in place to promote and coordinate effective IP management

– Sustainability of realization efforts may be thin

• Organizational– Internal lack of coordination between IP owners – “warring tribes” complex

– Lack of internal experience on realizing value

– Internal resources are limited

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Defensive uses

Cost control / ‘quick wins’

Profit centre

Integrated

Visionary

• Create legal defences, devise protection strategies

• Owned by General Counsel

• Consider what is core to the business and what should therefore be maintained

• Conduct royalty audits

• Understand opportunities within portfolio to license, assign, JV, spin out

• Manage portfolio for growth

• Align strategy of portfolio with that of the corporate

• Invent new ways of fully utilizing IP

Most of the Global 2000

IBM

Lucent

Canon

Texas Instruments

P&G

Dow

Motorola

Thomson

Honeywell

Examples Hallmarks

Effectiveness of attitudes to IP

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ipValue outsources the IP value extraction functions from large corporations.

Innovation IP Management Value Extraction

Key Issues

Major Activities

• Quality• Productivity• Commercial applicability

• Cost efficiency• Usefulness to

innovation and value extraction

• Maximizing value

• Allocating research cost base

• Research programs focus• Prototyping• Undertake research to

produce new technology• Decision to patent

• Filing• Patent management

system• Maintenance/renewal

• Proof pack preparation• Value extraction

assessment• Implementation

- Stick/carrot licensing- Cost savings- Audit- Donation- Business build- Mining

• Cluster analysis• Prioritization: technology,

commercial, patenting

ipValue offers a comprehensive set of IP monetization services

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Expert personnel with hands-on experience in IP commercialization

ipValue management team is best-in-class

Executive ipValue Leadership Previous Experience

Peter Wheeler

Vincent Pluvinage

Chairman; MD, iFG

Chief Executive Officer

Goldman Sachs

Preview Systems, ReSound

Corporation, ATT Bell Labs

Joe Zier President KPMG Partner-in-Charge, IP

Pierre de Saint Phalle Director & CLO; MD, iFG Davis Polk & Wardwell

Bruce Sanderson Senior Vice President Lucent Technologies Licensing

Dennis Melton Vice President Avaya Patent & Licensing Manager

Paul Seaman Vice President Agere Systems IP Licensing

Joe Cote

Jim Sommercorn

Frank Casey

Tom Major

Eno Schmidt

John Grierson

Vice President

Vice President

Vice President

Vice President

Senior Vice President

Manager, Euro. R&D

A.D. Little, GTE Licensing

Lawrence Livermore Laboratories

IBM Licensing

Honeywell IP Licensing

KPMG Partner, IP

BTexact

Tim Nolan

David Leigh

Director, iFG

Director, iFG

Hearst Corporation

McKinsey

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ipValue’s IP ecosystem

Law Firms Prosecution Management Opinions Contracts Litigation

IP Boutiques Spillover Small opportunites

Labs Reverse engineering IP development IP provider Market assessment Technical assessment Prototyping

Accounting Firms Prosecution Filing Management Opinions

Marketing IP Marketing Market assessment

Information Providers Software Access

Venture Capital Business build/IP buyer General Atlantic Goldman Sachs

Consulting Strategic issues Process Boston Consulting Group

ipV Technical

knowledge Value extraction

expertise Market

knowledge

Unifying IP practices is the greatest opportunity to fast track value creation

Unifying IP practices is the greatest opportunity to fast track value creation

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1. Assess acquirer’s reasons for obtaining assets2. Approach selected acquirers3. Evaluate value pricing 4. Develop business case and value proposition5. Provide information to interested parties6. Present to decision makers at acquiring entity7. Negotiation8. Closure9. Collection

1. Evaluate nature of alleged infringement or misappropriation2. Determine if infringer is a customer, supplier or non-related party3. Establish amount of use4. Evaluate extent of dependency 5. Determine capacity to pay6. Prepare assertion support brief7. Approach selected alleged infringors8. Evaluate license pricing – past and future9. Present to decision makers at alleged infringors10. Negotiation11. Possible litigation12. Closure13. Collection

Realization process overview

1. Establish focus2. Identify assets being monetized3. Evaluate strategy and define goals 4. Evaluate assets for highest and best value5. Categorize assets into realization potential groupings6. Assess commercial viability

• Legal• Technical• Market• Economic

7. Assess potential acquirers/licensees8. Assess possible infringors

Phase 1 - Assessment Phase 2 - Monetization

Assertion

Tech Transfer

Phase I:The Assessment Process

Phase 2:The Monetization Process

Legal Assessment

Technical Assessment

Market Assessment

Economic Assessment

Downstream Assertion

Downstream Markets

Upstream Licensing

Business Building

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Example: ipValue‘s strategic partnership with British Telecom:

ipValue and British Telecom entered into a partnership agreement in Dec. 2001 to commercialise BT’s IP (both assertion and tech transfer)

• Six-year exclusive contract to license BTexact's existing and future patents to corporations headquartered in the United States and Canada

• Non-exclusive rights in Japan• Entire 14,000 patent portfolio • Long-term partnership, with an objective to generate $100m revenues per year

towards the end of the contract

Key terms of the partnership agreement• Access to BT’s patent portfolio information, BT technical and legal experts• Joint decisions through the Patent Review Board (composed of ipValue and BT)• Third party expenses funded by ipValue and reimbursed from revenue• ipValue manages receipt of gross licence or royalty stream as an agent• Sharing of revenues from portfolio exploitation• BT to maintain currency of patent filings

Our value extraction model: Tech transfer and assertion

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When does partnering make sense?

Our partners share certain characteristics

• Large companies with world class research organisations

• A desire to generate significant revenues through licensing

• An understanding of the advantages of shared risk and reward

• A large portfolio of patents and other intellectual property which is under exploited

• The willingness to enter into long (five years or more) exclusive partnerships over significant portions of their portfolio

How does that work in practice?

• ipValue manages the entire process: assessment of the portfolio, identification, evaluation and generation of value realization opportunities

– We are designed to manage the whole or significant parts of a company’s portfolio, rather than a limited number of identified patents

• Our partners maintain complete ownership and access to their intellectual assets

– Key decisions on the portfolio, including decision to license, have to be approved by the client

– Such an agreement allows our partners to weigh a potential revenue opportunity against any strategic or competitive concern

• We share the risks and rewards

– Revenue share model for management of realization process

– Investment-neutral process for our clients

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Outsourcing opportunities

Geography-Europe-Japan-North America

Technology/Field of useRange from one technology group to entire portfolio

Extraction method

- Assertion- Tech. transfer

- Bus. development

Opportunity

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Structure alternatives

Structure Pros Cons

Pure agencySimpleCleanFew tax or legal issues

No share in capital upside of value extractionDifficulty in making the agreement a “partnership”Sometimes difficulties vis-à-vis 3rd partiesHard to structure other extraction possibilities

Licence with Rights to sub-license

Clear prima facie rights vis-à-vis counterpartsMay be tax advantageousEasier agreementCloser to partnership

Complex agreementHard to structure other extraction possibilitiesRights of entity may be unpalatable

Full JV

True partnershipOwnership involvementPossible capital upsideCan cover all possible exploitation routes easily

Very complex to negotiateDemands 100% of portfolio to be successfulRequires senior management involvement

Securitization of existing IP revenue streams

Provides potentially less expensive capital to sponsor

Creates significant value from assets that are typically overlooked by investment community

Very complex to negotiateRequires senior management involvement

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Appendix:•eOne Global

•Site59

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eOne Global overview

• ~$185MM revenue run rate

• 3 operating companies in high-growth payment markets - Enterprise, B2G, and Wireless

• $235M in committed investment capital

Business Highlights

Business toGovernment

EnterpriseMultiple Ventures

Wireless

$160m in cash

$360m of assets

+ $75m in cash

• iFG purchased 25% of eOne Global

• eOne is FDC’s exclusive vehicle for pursuing emerging payment markets

• FDC has right to repurchase eOne in years 4-6 at FMV

Transaction Highlights

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Site59 overview

• Founded in Spring 2000 to be a real-time provider of last minute travel packages over the internet by Boston Consulting Group and iFormation Group. Other investors included Starwood, Accor, Six Continents and other travel companies

• Site59 achieved tremendous success in the marketplace since launching its ASP strategy of providing packaging services to online travel distributors in March 2001

- Within 12 months became white label provider to Travelocity, Orbitz, Cheaptickets, Yahoo!Travel, Priceline, eBay, AA.com, Delta.com, Northwest, Lowest Fare, Bestfares, among others

- Revenue grew from $160K in March of 2001 to $4.4M in March 2002- Company reached breakeven in March, ahead of budget and less than 2 years after

launch

- In March of 2002, Travelocity purchased Site59 for $43 Million- SIte59 to become Travelocity’s vacation packaging and merchant hotel business

Forbes Best of the Web in Travel

CNN Best of Travel

Wall Street Journal: Best in

last-minute travel