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RPX Corporation (NASDAQ:RPXC)

Goldman Sachs Technology and Internet Conference Call

February 13, 2013 5:00 pm ET

Executives

John A. Amster – Chief Executive Officer and Co-founder

Analysts

Brian Karimzad – Goldman Sachs Group Inc.

Brian Karimzad – Goldman Sachs Group Inc.

Hi, good afternoon everybody here and on the webcast. I’m Brian Karimzad from Goldman Sachs Research and pleasure to introduce our next company, the RPX Corporation and CEO, John Amster. John, welcome.

John A. Amster

Thanks for having me.

Brian Karimzad – Goldman Sachs Group Inc.

Anytime. I guess that first place to start. You reported yesterday, but I don’t want to getting the details of that, just yet and the price of bucks to renew the story here is so, can you give us some background on RPX and how defensive patent aggregation has evolved and how you’d fit into broader patent picture?

John A. Amster

Sure, so we have been around for four plus years. We got first financing by about 4.5 years ago. And we did saw on the observation that there were thousands of companies being sued by these non-practicing entities, NPEs commonly refer to as pattern trolls that the average length of a patent troll litigation was 18 months, 50% transaction costs. We are talking about a very, very large market with billions of dollars being spent annually and operating companies really having no solution.

The other observation was that very large portion of the patents that are being asserted against operating companies in these NPE cases are bought at some point within a reasonable period of time prior to the lawsuit for a very small fraction of what those costs end up being. So it’s a very large arbitrage to buy patents before they end up in the hands of NPEs. The problem is that no one company wants to go buy a lot of these patents because they are often not very good, they even when they are good, people don’t want to own them they just want to get their license to them.

So in effect there is no clearing house, there is no function in this market to get rid of all those patents before they end up in litigation. And we started RPX to create that clearing house. And so what we did at first was offer a service where companies passed an annual fee we build them annually we go out, we use the aggregate of those fee of those, subscription fees to then go buy as patents as we can, and still maintain a profit.

And so since inception augmented by additional contributions from our clients, we spent over $0.5 billion, we’ve resolved hundreds of litigation on behalf of our clients, and we believe avoided hundreds and more. And so we are delivering a very good ROI for now 140 clients and it’s really the only thing I get in the patent space.

Brian Karimzad – Goldman Sachs Group Inc.

Fair enough. Help us, I guess, to get a sense then of how you think about the addressable market for your particular service, and how that maybe has changed over the last couple of years, you put out some matrices before, but again for folks that are new to it hopefully frame that?

John A. Amster

Sure, at a very high level there are 1,000 of companies that are consistently sued by MPEs and there have recently been a bunch of costs studies around what the costs are of this market and I really do consider that to be in a broader sense what the addressable market is. Two professors recently reported that they thought the addressable market is actually $30 billion that the MPE problem cost company’s annually $30 billion

We think it’s more or like $7 billion, so with 50% transaction cost, so from our perspective call it three, it doesn’t really matter. What we also know from a matrix is that we think that re-priced a lot of litigation that’s out there today. We think that you can resolve virtually all the litigation out there today for low billion of dollars with a couple of exceptions. But you can eliminate probably 85%, 95% of the risk for a very reasonable amount of money, less than the annual TAM. In other words, companies could pay a company like RPX billions of dollars, and that could be considered a many billion of dollars cost savings. And so the big picture, that’s the way we look at the concept of the clearing house, but just to throw out a few steps. Since the beginning of 2010, there have been 1,800 companies, unique companies that have been sued by an MPE.

390 of those 1,800 companies have been sued five times or more since 2010. In Q4 alone there were 1071 NPE lawsuits against 920 unique company defendants, 855 of which are still prospective clients of RPX. 145 of those 855 were sued twice just in Q4. This is a massive problem; there is no insurance for it. Companies spend $0.50 of every dollar on legal fees, so I think the addressable market is huge.

Brian Karimzad – Goldman Sachs Group Inc.

Fair enough. What about the reform legislation that was in the place in 2000, I mean, the metrics you’re saying don’t indicate much change.

John A. Amster

I think the reform was terrific for the patent market, in particular, if you offer a service to reduce patent risk, because it’s very clear now a year plus after AIA that to extent it had any impact, it was a negative impact. In other words, the problems gotten worse and they passed the legislation.

Brian Karimzad – Goldman Sachs Group Inc.

Why do you think that’s the case?

John A. Amster

Because I don’t think it really had anything to do. I think the two things are on court.

Brian Karimzad – Goldman Sachs Group Inc.

All right, fair enough, yeah.

John A. Amster

I actually think that the AIA will make the patent problem worse but we haven’t seen that impact yet. It will make the patent problem worse because I think there will be more, more patents getting issued by the PTO that probably shouldn’t get issued, because some elements of the AIA will overburden the PTO. I think the impact we’re seeing now, really isn’t directly correlated to the AIA. Just so happens that there are lot more NPEs and the NPEs are getting more active.

Brian Karimzad – Goldman Sachs Group Inc.

All right, what about some pending legislation, so there is something that’s been quoting out there and other has, it had much traction but the idea is, of course, potentially a plaintiff like an NPE to pay the defendant’s cost if they lose, and we have other countries where as they kind of lose their pay is model. What do you see as the roadmap there and how do you think NPEs would adapt if that were to transpire?

John A. Amster

It’s actually a great question, and about a year ago, I got into an argument with Chief Judge Rader in federal circuit because he was asked the question and said – he said the one thing that we could do to change the system is have loser pays and when the factual problem and at that moment I actually became very convinced that in fact it would be exactly the opposite because pretty much every time they’ve tried to judicially change the law in a way to help companies deal with the MPE problem it’s always gotten worse. Best example of that legally, judicially was changing the stat the standard for being to able to bring a declaratory judgment action they figured by lowering that standard.

Then companies would be able to file declaratory – for declaratory judgment to avoid a litigation, figuring that’s going to stop lawsuits. What it’s stopped was the notice of law – notice of these letters and sort of the basically people would just get sued instead of getting a letter and having a chance to negotiate before litigation. I think having loser pays is exactly the same thing go back to where I started which was the observation we made when we started RPX was that there are thousands of companies being sued.

The average length of litigation is 18 months and there is, 50% transaction costs. My belief is if you change the law in that way, you are going to give that defense lawyer an excuse to keep people in – for an average of 24 months before they told them to settle. The reality is cases settled because they should, cases settle because these are valid patent rights granted, property rights, granted by the United States Government, and there is a cost of making them go away and there is a risk to trying to make them go away.

And I think that’s what fundamentally judges and people who look at each case individually, but don’t look at any of the data, don’t get it, and what you look at when you see the data is that most of the cases are legitimate cases. They are cases where there is an argument to be made on both sides that a patent is valid and what that means is there should be a non-court way to solve that problem. Because you should not have a 50% transaction cost, transaction ever. And you certainly shouldn't have roughly 98% of the cases, that you have in the market be settled by 50% transaction costs. I think loser pays, is just going to give lawyers one more argument to keep people in litigation.

The other thing is MPEs are incredibly well financed and from their standpoint, they work on contingency fees, so they don't have a lot of cost there, if they have to increase their costs by few million dollars of bringing a case where they are modeling out 10s of millions of dollars in recovery from lots of companies. Then they're going to be able to workout into their business model. It’s an asymmetrical problem, they are able to go sue 20 companies and what they would do, they would adapt, they would fund themselves in a way that could cover the loss of a first case, but almost inevitably they would file a suit against one company, instead of maybe multiple, so that they got lower fee, lower potential risk of losing, but they would look at the stats and know that 98% of the time, they’re not going to get to the point where they could have a recovery of legal fees because 98% of the time.

Brian Karimzad – Goldman Sachs Group Inc.

(Inaudible) trial.

John A. Amster

That defendants going to settle the case.

Brian Karimzad – Goldman Sachs Group Inc.

Yeah, I got it. What about the general market for clearing transactions on year – I mean about a year ago there was some consolation that your activity had slowdown truly it’s picked up last year, you met your budget, and you had a lot of activity in the fourth quarter. What are you finding on that front, is it more or less attractive, I guess easy to find a kind of patents that you are looking for versus the year or two ago.

John A. Amster

It’s definitely very hard for us to predict when we're going to how much we're going to spend in any particular quarter, but over the course of a year, we typically have been able to plan and spend accordingly. Not just in terms of the dollar amount, but spend in terms of use that same budget in order to satisfy our renewal needs and also our new client (Inaudible). And that was the case, that was certainly the case last year, but again it can be very variable because in some cases we might find a deal. It is very opportunistic, so we might find the transaction that costs us a lot more money in a particular quarter, and that could have an impact on how we spend the budget throughout the rest of the quarter, or the rest of the year.

And then, also we do have that in any given moment some visibility in the pipeline so we might pass on certain opportunities, but one thing for sure is there is no shortage of opportunities, and the pricing has remained very stable. So, we find that we’re able to use our evaluation model, building in the margins that we would like to see, and again satisfy both from renewals perspective our goals and new client add perspective, and still stick within our budget and still stick with our evaluation model, so everything has been pretty normal.

Brian Karimzad – Goldman Sachs Group Inc.

Okay. What about those renewals? I mean you went through pretty much the heaviest period you ever had, and it was 20 or so renewals you had last year. What do you want in that process, what were kind of people’s sticking points as you got through towards the end and made those renewals to happen and how’s that changing?

John A. Amster

So, we – it was a very good year from that perspective. We learned a lot operationally, just the process of going through it, building a renewal plan for each client, figuring out how to bring the different elements of the business, and the personnel to bear on that renewal, figuring out the timing, really understanding what the difference is in terms of the client approval process for renewal versus the original sale.

This is the first time we have gone through that. We learned a ton. We came through it very well. I think we learned that where we were very pessimistic that we should – it’s good to be paranoid, but that we were personally surprised in almost every instance that we are pessimistic, and we lost very, very, few clients, less than a handful. And we were surprised on the couple of ones that we lost, not really understanding some of the internal dynamics that were going on, and how that can impact the renewal. And so, I think if all goes well, every year we have is going to be bigger renewal year than the last.

Brian Karimzad – Goldman Sachs Group Inc.

All right.

John A. Amster

So I think going into this year, we feel a lot better than we did last year, and we felt very good going in the last year. With that said, we are going to lose some clients, and we are going to lose them for the similar reasons that we lost a client or two last year which is, they are in a area where they don’t face lot of MPE risk. They may have singed up for a very specific reason were there was a litigation that they were involved in that did pose a lot of risk, but that type of risks comes across or comes along every couple of years.

And so I think what we are going to see is, there is going to certain class of clients that come in and out based on very specific events driven things were the math make sense. And then the results of the other cost kind, which is we may believe that we are delivering a good ROI and we are just not able to convince some of that, and we’re going to see that too.

The one area where I don’t – I also thing that we’re in a much better position today than we’re two years ago, and even at the beginning of last year which is, if you think about it, a company that likes what we’re doing and is open with us about their data and what their costs are, should never drop out because of price. And we need to be able to use the tools that we’ve developed, and insurance is an example to be able to predict these severity and frequency of future patent risk, and apply that to somebody and say, yeah, you are right, you shouldn’t be paying us $3 million a year. If the 50% likelihood is only and spend a million in year, and you’ve got less the 15% chance to spending more than $3 million.

$3 million is not the right price for our share this on an annual basis, and we should be able to re-price that. So one thing going forward that I think the team is very aware of itself, we shouldn’t believe loosing anybody over price.

Brian Karimzad – Goldman Sachs Group Inc.

Fair enough, have you thought, I think what historically, but half of your clients have come on board in active litigation.

John A. Amster

Exactly.

Brian Karimzad – Goldman Sachs Group Inc.

That’s pretty much being consistent over time.

John A. Amster

Yeah.

Brian Karimzad – Goldman Sachs Group Inc.

Have you thought about different approach to some to those, who have less frequency, but end up in that situation maybe to encourage, or is that just maximum value was that getting them on for three years, and that’s….

John A. Amster

What’s interesting again, we’ve gone through a bunch of renewals with people who signed up.

Brian Karimzad – Goldman Sachs Group Inc.

And they are renewed.

John A. Amster

And they are renewed. Right so, it’s been, I think bottom-line is it’s actually been working very well and though the one client that I would put into that category, a former client from last year. They really had almost no litigation since then. And so there is not a lot that you can do for them. Most of the other ones have a pretty consisting cadence of litigation and that’s obviously an important driver.

I think over time, one of the things that we need to do with the data is proved to people that we’d be far more efficient for our clients if we never did a single litigation, but rather we spent all of our dollars in the open market. The promise it is harder to quantify for people today and what the correlation is between the open market and litigation. The more data that we have, the more of the data that we have on assertions, litigations, settlements all of the stuff, the more that we can correlate to them the fact that when you buy something in the open market sold by broker X, there is an 85% chance that it’s going to end up with MPE Y and end up into in a litigation getting these two dozen companies.

And we have a lot of that data, figuring out the right way to explain that to people who are very used to looking at everything on a case-by-case basis, using outside counsel, really digging into the details of the patent suppose to, it doesn’t matter what the patent says, it matters who is transacting it, that’s a complete transformation of the market. We are not there yet, but we are certainly moving in that direction which I think is going to help with renewals and also one of the things that it’s going to drive being able to hit the 10 that’s out there.

Brian Karimzad – Goldman Sachs Group Inc.

(Inaudible) on that, so, last year I think the sale cycle probably extended a bit further than in some of us had estimated at that point in time, what was post mortem on that, what processes have changed and kind of how you are looking at that going forward.

John A. Amster

So, it's actually interesting, I think the great thing about Q4 was that it really and able to turn back to the team and say you can’t get too happy, you got to keep an even keel and you got to understand that the markets out there, were delivering a great service, the only one out there, we have a massive barrier to entry and our clients we got over a 100 of them really like what we are doing.

We are going to get clients, we might not get them next quarter, it might take two quarters, but we are going to get them and having the best quarter we've had in two years from that perspective was really helpful for that. Was also really helpful to point back and say look and all the hard work that we did to be very self critical, self analytical about what our process is look at due to lot of regression work looking at past sales that have been successful past, un-success was a wrong word we've been talking to a lot of companies from the very beginning.

So, what's the difference between these companies that haven't closed and ones that have. I’m really trying to figure out, what are the stages of a sales process for us, and how do we get better at predicting housings move to the sales process. It’s not as (Inaudible), it’s not as easy as it might sound, people need do remember that, we are – every client that signs up for our service is signing up for the service for the first time ever. No one’s ever bought it before.

In fact most of the people we are selling through have never bought anything other than legal services by the hour. So there is no process within the company for buying us, so it’s not obvious what the metrics are to track as you go through the pipeline. So that’s the type of stuff that we've done over last year as really look back at the sales process and say this is what we should be tracking to measure the quality and interaction, not this, right it’s the face-to-face meeting with the general counsel, not the whatever and so that’s what we've been doing, and I think that’s stuff has paid off, there is no (Inaudible) all right this is an – it’s an ongoing effort that we’re going to need to continue to look at, because the other thing is the TAM changes, the nature of the companies in it change, and so that we are going to need to be constantly looking at what that sales processes is and trying to adapt it, but Q4 is certainly a good indicator that, some of the hard work that we did throughout the year had some payoff.

Brian Karimzad – Goldman Sachs Group Inc.

Okay. I guess we segment that, there’s core tech base which you have done well, and then you did well early in. Then there is a couple other, I will call domes that are alongside it which would be financial services, and then you have automobile that you pointed out before. How deep do you think you are on that core tech side of it at this point, or is that still pretty open (inaudible).

John A. Amster

With the numbers I am talking about are really that broadly defined information technology.

Brian Karimzad – Goldman Sachs Group Inc.

Okay.

John A. Amster

Right, we accept that there is any medical devices, or medical stuff it would be IT related. There is very little of that activity out there. So, I think we are – I think that the core areas where we already are in, I said it over and over. We didn’t need to break into financial services in order to grow the business really nicely over the next few years. It’s nice to do that well. But, there is still are other areas that are within that IT, but just within IT alone that’s the deca-billion dollar problem that’s out there today, and that’s the area where the most of the buying, or most of the sale opportunities are, that’s where the vast majority of the NPE activity is, so we can just focus on that and then we’re fine.

Brian Karimzad – Goldman Sachs Group Inc.

Okay. The financial services side you got your first kind of big 10 financial services client last quarter. What are the implications of that, and then help us understand the reasons they are seeing the frequency that they are in that space?

John A. Amster

So the reason we are seeing the frequency, and we have seen this in lots of other industries as they move from their traditional platforms to different platforms, they are going to see more risks. So, as the bank moves outside of the bank, they saw more risk when they went to the ATM, they saw more risk when they went to processing checks using images and now they are seeing a lot more risk as they move to mobile, as they move more element to their business to mobile they will see more risk. So, today it’s more online banking through your phone when it’s starts to be things like online payments. When it’s point of sale things there is going to be radically different risk profile, similar with MSOs. As they move away from the set-top box where they had really good historical indemnification from vendors like Motorola and Cisco, they move away from that on to iPads and seconds and third screens, they are going to face a dramatically different risk profile.

When we look historically at our moving into a new market with an anchor tenant, what we seen is, that early on handsets, for example, we got the first one, and we got everyone within like a quarter. I mean, it was boom, boom, boom, and it was very event driven. We are able to get everybody similar in basic consumer electronics, big Japanese CE manufacturers. So, early on we saw the anchor tenant move very quickly into a pretty good penetration into a vertical.

What we saw more recently with the Altitude deal last year, we penetrated into the MSO market. It was really great for the dialog with the MSO market. We have not had – we haven’t converted, but we are going to, at least, I firmly believe we are going to convert there. But, it took a year of dialog, because what the anchor tenant did was really spark the dialog with that industry in a much more meaningful way than it had before.

Brian Karimzad – Goldman Sachs Group Inc.

Yeah.

John A. Amster

And so, I would expect something similar with financial services, and we’ve already seen the results of it. The dialog has gotten better since we announced (inaudible) since it’s spread through the industry that we have in anchor tenant it’s going to increase the dialog and hopefully in a year or two, if it takes a year to get the next financial services client I wouldn’t be surprised, if it happen sooner I wouldn’t be surprised either, but that’s kind of what I’m expecting is that given the nature of the risk that these guys face, it’s only been a few years since they have been facing multiples. A bunch of them still haven’t had a big hit like some others had and it’s going to take sometime before they really realize what’s the scope of the process.

Brian Karimzad – Goldman Sachs Group Inc.

Okay. And what would you say to I guess to help us understand and then when someone is ready to join, I mean what’s the typical frequency that suits for someone who does convert over and the size of the ticket to kind of makes them wake up?

John A. Amster

I haven’t looked recently at exactly what that date is, it’s typically 5-ish suits in a year is still – we have a lot of people in our pipeline that are still at that level.

Brian Karimzad – Goldman Sachs Group Inc.

Yes.

John A. Amster

If it’s one or two suits a year, and again it also depends on what the rate card is, but typically you are talking about somebody who is seeing a couple of million dollars in legal fees at least. With the potential of having a verdict that could be 10, 20 times that, even in reasonably small case. That’s what you need to see to make them happy as well, but we have in our view a very, very good pipeline of companies where the (inaudible).

Brian Karimzad – Goldman Sachs Group Inc.

Okay. And what about the network effect I mean part of the inception of this thing, the idea was you build the client network, it’s easier to defend against suits, when you get more cross-pollination and benefit across the assets the pack that you are buying, because you have a broader group of folks. Explain to us how that’s evolve versus what you initially thought before you had 140 clients?

John A. Amster

I still believe there is a network effect in the business and you see it within different vertical markets, but I also have – always thought that I don’t know when it’s going to happen. We never expected to have a snowball in the first five years, we never expected that a snowball within the first five years.

We expected that, that it will be a while until we can really quantify our business model in a way that it becomes the obvious spread likes wildfire to every CFO’s office because they realize that if they invest in RPX subscription in 10 years, the problem can go away and they could be spared you know the potential of getting sued by somebody that’s could asking for a $100 million, we are not there yet and the goal is to continue to just build the business the way we are building it continue to get a great exhaust of data from our clients, continue be able to use that to quantify the fact that our 100 plus million dollars of buying in a year is reducing risk by X percent right.

And then if we can continue to build on what we are doing and show people that – if we had a $1billion to spend on acquisitions you could reduce risks in the market by 95%. I think it is the point where we can really quantify that in a way that it’s difficult to argue it is when we start getting the real network effect in the business. That’s one of the reasons why insurance is important to us because gone back to what we are talking about sales, improvement and focusing on the sales process.

The every company has a process for buying insurance. They all buy it, they don’t know how to buy it they are use to buying it, and so that dialog is much more natural dialog we can walk in and say, hey we have a patent insurance product we want to talk to you about it and there is a vernacular in which people are used to discussing the topic.

You talk about frequency and severity and people don’t look at you funny right they go oh; yeah okay got it you talk about retentions; you talk about all these things I mean that dialog is what makes it a more quantifiable sales approach and I think that’s what is going to lead to hopefully some network effects in the business when you know every audit company says the audit committee says you need to have this, you can look at similar analogies like D&O Insurance, and just best practices start to spread throughout companies, and that to me is the area where the network effect will just come into play.

Brian Karimzad – Goldman Sachs Group Inc.

Okay, well and then, I mean, why don’t you frame for us the beginnings of your insurance business. What’s the structure right now and …?

John A. Amster

So the structure of it right now, as we've talked about it on the call yesterday, we're looking at covering MPE legal expenses and certain cases settlements or certain parts of the settlement cost. We're charging a premium. We have reinsurance or so we're receiving 50% of the premium to reinsure, as you are also taking off 50% of the risk. We have built in a verity of protections in terms of what the ultimate liability is from total annual limits to policy limits to case limits, to stage of case limits, there is lots of data that we can use to figure out with the appropriate structures of the policy. And then also other typical things like retentions and code base and things like that.

So, we are in the market with it, we sold half a dozen policies, which to put in perspective is an unbelievable number of policies in terms of patent. Any venture in the patent insurance space were I think far in a way the most successful one ever already which is obviously not saying lot, but people have been trying to crack this nut for couple of decades. And I think all the indications were getting from people within the insurance industry is that what we are doing is really great. And the reason it’s great, is because it’s completely different than what anybody else has ever tried to do.

Every other effort has been focused around trying to use the traditional methodology of approaching the patent problem, the legal system to assess what the risk is, hire lawyers to go look at the landscape of patents to try to determine what risk is. And that didn’t work for a variety of reasons, moral hazard being probably the number one reason, right? If you ask a litigator to quantify what the risk out there is, they’re going to give you an answer that might be biased by the fact that they might end up defending against these cases, which was absolutely the case in all the big policies that got written.

We have a purely data driven analytical approach that no one else has. And on top of that we’ve got an underwriting process based on our experience being one of the largest buyers in the patent market for the last four years, and understanding, and I think as any individual entity, we have resolved more litigation than anybody else has ever, right?

We resolved hundreds and hundreds of MPE cases, so we really do know what we are doing and have a concentrated database of information that just completely changes the market, so we sold half dozen of them. So, we’re up to a great start, and we think that the addressable market there is really big, but this insurance is really crawl, walk, run, and we’re going to be crawling for a while.

And so, that’s why we threw out yesterday, a 20 to 40 by the end of the year policy number, which is a huge range, and what we wanted to tell you is we do have an internal target, that’s kind of what it is. It’s still really low. Don’t except anything meaningful for this, from this for this year but we want you to be able to measure what our progress is. We won’t be able to really measure it from a financial perspective this year, what we want qualitatively, for you to understand what we’re trying to accomplish.

Brian Karimzad – Goldman Sachs Group Inc.

Okay. What – can you can give us a sense for the size of client you’re bringing on with the service, kind of caps you have there, and what you’re willing to…?

John A. Amster

And again, it’s too early to really tell, but the number that we’re thinking is trending towards. There’s a couple of $100,000 is going to be a $150,000 to $250,000 ASP is what we’re targeting, and that’s really a combined insurance premium plus RPX membership. And but, we’ll see I mean it’s something that we are going to just have – tried out pretty clear transparent communication about as we are learning through this, then we’ll just be talking about what it is, but that seems to be about right based on what we are seeing in the pipeline and based on the few that we’ve converted.

Brian Karimzad – Goldman Sachs Group Inc.

Okay. Before I move on to the other questions are there any out there to talk about, couple of minutes left. So on the data that you’ve aggregated and you have a nice format with your clients. Where are you on considering otherwise to more broadly leverage that or you monetize on its own.

John A. Amster

I think the first step is to get the presentation and the analysis on top of the data that is presented to our clients to level that’s better before we think about doing anything external. And that really is just a prioritization issue. It’s much more important that when you continue the – I guess attack on the docracy of using the legal system to solve patent problems with data, with our clients, that’s the highest priority. Right so giving them data to quantify their risk and to use comparable transactions instead of going and trying to fight a legal battle. All right, and make sure I explain what this means. If you’ve been sued by a company and you can look at a 1000 data points and know that the standard deviation is $200,000 and what their settlement is and that is between $300,000 and $500,000.

You also know that they’ve never settled the litigation inside of 18 months and you know that you’ve never been involved in a litigation that lasted 18 months, that you paid less than $500,000 you should be able to answer that question without looking at the patent, or you should be able to decide what to do, we believe that. Our experience shows that that usually is very informative and we got to get the tools to our clients to start, being able to do that on – in real time basis, if you have all of the patent data and that’s all public. And you have all the litigation data in an organized fashion that’s all public, but not organized. We’ve organized in a way that’s more presentable than any other company has.

And then you can associate products and services and analysis of patents and cost data to that. We should be able to do a lot of very interesting things. So this year, each year, each quarter, we should be adding functionality to for our clients to be able to use and understand what patent risk they face, real time using analytical tools and correlating it to past data and past instances, so each quarter that should get better and better. This year also what we really wanted to do is just what information we have that’s publicly avail of that we could make publicly want to get some of that information public. So that to the extent that, we are starting to be effective getting the message out there about patent data that people are thinking about RPX is being at the center of it.

For example, if an equity analyst wanted to look at what’s happened in a litigation that they don’t need to sign up for patients which is crunchy and weird, but that there is a good place to go where they can do it and it’s clean and you have name normalization, so that if you search for Bank of America Merrill Lynch comes up, as an example.

That’s types that that we want to accomplish this year to put ourselves to the centered to be. Once we put ourselves at that center and the tools get beyond the basic stuff that our clients need. I think we will have opportunities to monetize in a variety of ways, whether it’s outside of our existing client base. For example, we get asked all the time by investors if their stuff that that we would be able to sell them. And there is other opportunities, but I think that’s beyond 2013 from we got to focus on our client base first.

Brian Karimzad – Goldman Sachs Group Inc.

Fair enough. And just before we close out here, color perspective you have on the structure of MPEs over the last couple of years in terms of changing and where the fundings come from, any sense you have on their returns as you look at things?

John A. Amster

There is still only a handful of MPEs that have had really, really good returns, that you’ve actually heard about most of the one that have had really good returns or that once to keep it a pretty low profile. And there is definitely more money coming into the space, there is a lot more speculation, and I think again we haven’t seen any wild victories yet. There is a lot of speculation on some of the big verdicts and announcements out there, and it’ll be interesting to see what happens. But definitely more, we hear a lot about people thinking about making move into the MPEs space and just haven’t seen that much more coming in.

Brian Karimzad – Goldman Sachs Group Inc.

Okay, fair enough. We are out of time. So John, thank you very much for joining us and your Investor Day is in New York…

John A. Amster

May 1st.

Brian Karimzad – Goldman Sachs Group Inc.

Here we go. All right plug for the webcast. And thank you for joining.

John A. Amster

Thanks, Brian.

Question-and-Answer Session

[No Q&A session for this event]

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