Acquisition Model

AST’s process of acquiring patents begins with a worldwide network of over 170 brokers, operating companies, law firms, academic institutions, individual inventors and other patent holders with patents for sale. We receive portfolios ranging from a single patent to thousands of patents and applications.

AST performs a preliminary analysis on each patent portfolio to ensure we understand the current assignee, and relationship of any involved selling agent. We then search for family members and foreign counterparts, and ensure that the patent is within the technology areas of interest to AST’s member companies. AST then performs an initial analysis, classifying each patent by (i) the types of products an adversarial patent holder may try and target with the patent (e.g., cellular handsets, routers, digital cameras, web-browsing technologies); (ii) the technology represented by the patent (e.g., antennas, imaging, liquid crystal, power supplies, graphical interfaces), and when the patents are of potential interest to one or more member companies, (iii) the quality of the patent using indicative characteristics (e.g., how early in time is the invention relative to other similar inventions, how easy is the invention to detect, how easy to avoid, how likely is it used in a standard, how broad are the claims).

With this knowledge, AST is able to help its members better focus on patents of potential interest to them. Because AST is governed by its members, all patents, AST analyses and marketing materials supplied by the seller are securely distributed to members via a web-based application called f-AST IP. The decision of whether to pursue a patent through AST is the decision of each member. For an annual fee of $200K (which decreases as additional companies join AST to help defray the costs of gathering, analyzing and conducting bid activity on patents), operating companies are delivered a wealth of information on thousands of patents annually (we estimate more than 10,000 patents will be presented to AST members in 2010). Fortunately, our process allows companies to focus, generally, on less than 5 percent of these patents that meet their specific technical, product and quality interests. For patents of interest, unless AST has learned of a patent sale in confidence (which occurs rarely), unless or until an AST member has informed AST of its intent to bid through AST, that member can pursue the patent alone, through other organizations in which they might participate, through AST, or not at all.

When AST members choose to bid, they inform the AST CEO and deposit sufficient funds to cover their bid, in an escrow account held by Wells Fargo. AST helps foster collaboration among members by identifying common interests and communicating potential interest among members without divulging which members in AST may have interest or pricing information among members. This helps similarly-situated companies to more rapidly identify patents of interest while still fully protecting their anonymity while ensuring every member is solely responsible for deciding whether to bid and the amount of any bid. AST is committed to paying the full market price for patents we purchase. We are not interested in a bargain, and believe patent owners should realize the full market value for their patent in a competitive, transparent marketplace. We also believe that a fully transparent sales process, whereby all interested parties are informed of a patent sale and have the opportunity to participate in it, is in the best interest of the patent seller and all potential buyers, including AST. Because we are buying for defensive purposes (freedom of action) versus purchasing for the purpose of enforcement (the primary objective of non-practicing entities), our due diligence is primarily focused on the integrity of the chain of title, assuring that the seller has the right to sell the patents, and on the completeness of the portfolio (ensuring all family members are included in the sale). We require clear title to the assets we purchase and an understanding of previous licenses or other encumbrances, but otherwise asks very little in representations and warranties of sellers compared to other buyers. For this reason, AST closes quickly, usually within a few days following an accepted offer.

For each acquisition, AST forms both a Series pursuant to the Delaware Statutory Trust statute, and a Limited Liability Corporation (LLC) under each Series. This enables us to accurately account for the finances and activities of each portfolio purchased, since AST can purchase a patent portfolio if one member has interest, or if many members are participating in the acquisition. A list of all portfolios AST has acquired and their associated LLCs can be found here.