Bennett Notman - Davenport & Company Llc. Pat Galvan - Private Investor Rengan Rajaratnam - Galleon Group Rob Ammann - RK Capital

Welcome to the Acacia Research second quarter earnings release conference call. (Operator Instructions) I will now turn the conference over to Paul Ryan.

Today's call may involve what the SEC considers to be forward-looking statements. Please refer to our 8-K which was filed with the SEC today for our forward-looking statement disclaimer. With us today are Chip Harris, President of Acacia; Dooyong Lee, Executive Vice President; and Clayton Haynes, our Chief Financial Officer. Today I will give you an overview of the progress we are making in building the business and Clayton Haynes will provide with an analysis of our financial results. We will then open the call for questions. As we just reported, Acacia’s second quarter revenues were $7.1 million compared to $5.9 million in the year ago period. Trailing12 month revenues were $37.7 million compared $46.8 million in the year ago period. In the second quarter, Acacia subsidiaries entered into 16 new licensing agreements covering 11 different licensing programs including initial revenues from three new licensing programs. Acacia also acquired control of six new patent portfolios for future licensing and we now have generated revenues from 36 different licensing programs and control 95 patent portfolios. Our cash, cash equivalents, and investments totaled $45.7 million at the end of the second quarter compared to $46.1 million in the prior quarter. As we stated in our earnings release, Acacia’s long-term revenue growth potential continues to increase based on several patented technologies which could commence generating revenues over the next year as well as growth in our existing licensing programs. As we have previously stated the timing of our revenue generation can vary and quarterly revenues are therefore likely to remain uneven. With $16.2 million in revenues in the first half of 2008, it is possible that we may not generate revenue growth this year over the $52.6 million recorded in 2007. We are confident in the revenue potential of our patent portfolios while…

Thank you to everyone joining us for today’s second quarter 2008 earnings conference call. As indicated in today’s earnings press release, second quarter 2008 license fee revenues total $7,116,000 as compared to $5, 865,000 in the second quarter of 2007. License fee revenues for the 6 months ended June 30, 2008, totaled $60,164,000 as compared to $31,050,000 for the 6 months ended June 30, 2007. Second quarter 2008 license fee revenues included license fees from 11 of our technology licensing programs including initial license fee revenues for our authorized spending accounts technology, picture archiving, and communications systems technology, and video editing technology. Second quarter 2008 license fee revenues also included fees from the licensing of our audio communications fraud detection technology, Credit Card Fraud Protection Technology, DMT technology, Pop Up internet advertising Technology, Portable storage devices with Links technology, remote management of imaging devices technology, Rule based monitoring Technology, and Telematics Technology. Second quarter 2007 revenues included license fees from 20 new licensing agreements covering eight of our technology licensing programs. To date we have generated revenues from 36 of our technology licensing programs. License fee revenues continue to fluctuate from period to period based on fluctuations in the dollar amount of individual agreements executed each period which is primarily driven by the nature and characteristics of a technology being licensed and the magnitude of infringement or use associated with a specific licensee. Secondly, the specific terms and conditions of license agreement executed in each period in a period of infringement contemplated by the respected license fee payments, and lastly, fluctuations in a total number of agreements executed each period. Trailing 12-month license fee revenues was $37.7 million as of June 30, 2008 as compared to $52.6 million as of December 31, 2007 and $46.8 million as of June 30,…

We will open up the line for questions?

(Operator Instructions) And our first question will come from Bennett Notman of Davenport & Co. Bennett Notman - Davenport & Co.: I guess the question probably a lot of people are wondering is in the last 12 months you guys have added a lot of IP and you have added a lot of talented executives but the revenue growth just doesn’t seem to be coming. Could you just talk a little bit about whether something has changed with the licensees that you are approaching and maybe in the court system or just in the overall environment that really seems to be sort of creating a bottleneck for you here?

We don’t see anything from a fundamental standpoint. I guess the only area, there probably is more IP litigation and than there was three or four years ago and to some small degree probably the litigation calendars are taking a little longer. I know certainly, we, over the past year have filed some litigations when appropriate at Eastern District of Texas and there the time to trials has grown from roughly 18 months to three years or more. But aside from that, we don’t see any reason and quite fundamentally a lot of the new programs that I have described in the prepared remarks are programs that are right after inception and so we think that we will certainly, as we have indicated in our release, we expect a good long-term growth and again our revenues are exclusively generated from negotiated licensing agreements and it is difficult to estimate when you are going to get into a conclusion out on a negotiated deal as you could see today Qualcomm segues with Nokia for a year and a half on an existing deal. So even large guys sometimes wait until the court house steps for the settlements but certainly, in their case, it paid off and they got $12 billion in market value from one license today. So, we are very optimistic about the value of these portfolios. We are conscious that it takes time to negotiate these deals with not only with us but other people in the industry including even Qualcomm and, we are confident that the moneys will come in but predicting the timing, when your revenues were based on negotiated licensing agreement, is unpredictable. So, the short answer is we do not see anything in the climate that is negatively impacting our business. We just think we are in a little hesitation period. We did have some pretty solid revenues that came in from the global acquisitions. Some things that had already been queued up and we are two or three years into the licensing process and so there is a little bridge period where some of our newer portfolios that we have acquired over the last two years have to get to that process in the licensing phase where they start yielding revenues and we think that it will start in the second half and certainly next year. Bennett Notman - Davenport & Co.: Just to ask the same question in a different way and this is the first time where you guys have sort of said that you might not have growth on a year-over-year basis but prior to this you have been anticipating that you would end with. I am just trying to gauge maybe what changed or what went different so far this year versus maybe what you would have anticipated towards the end of last year when you were looking for growth on a year-over-year basis?

Well, there are some newer programs that we had anticipated. We would have first deals done yet, which we don’t yet – which hopefully will happen in the second half. I guess if anything, it is just, there is more of an inclination to push revenues a little further out. Court calendars tend to slow down, not speed up, negotiations always take time. So, if anything it is just again trying to estimate within a window period of 12 months. It is always difficult to do and we have had such positive momentum that we have always had no problem with anticipating growth. Obviously, where we stand at mid-year with $60 million which we think it is prudent people to advise people that we may not get that growth this year. It is obviously, that means we have to regenerate over $38 million on the second half. While that is certainly possible based on licensing discussions and programs we have. We just want to caution people that it may not occur this year. But again, it has no impact in our long term viability of growth. It is just simply a timing issue related to the nature of these revenues. Bennett Notman - Davenport & Co.: Okay, and then also, just maybe one housekeeping item, unless my numbers are wrong. I thought you guys had 93 portfolios at the end of last quarter. Now you are saying you have 95 active ones which it makes you think maybe several either were finished or were otherwise rendered inactive and I am just wondering sort of which ones they were and so what process leads to that coming.

Yes. You are correct. The number we state is the net amount of portfolios that we believe are active and can generate revenues and I can outline, dig out the ones that we subtracted from the amount. There were a couple smaller portfolios that we think we have essentially concluded the licensing on. So we took them off the list and then also we combine some and actually put them in as one combined portfolio. So, what we do is just give the net number of total portfolios but separately will give the amount of new ones that we have acquired during the quarter.

And we will take our next question from [Pat Galvan] a private investor. [Pat Galvan]: Yes. Were we part of that Qualcomm $12 billion deal?

No, I wish we were. It is just that indication certainly of the value that is resident in IP and also the difficulty sometimes of getting the user of the technology to agree to pay you. That is all. I was using it by a way of example.

And we will take our next question from Rengan Rajaratnam from Galleon Group.

I just wanted to ask if there is any portfolios that you are excited about in terms of modernization in the next three or six months in the CMB horizon.

Well, in answer to your question, any or all of the 18 that I just went over earlier on the call certainly are medical portfolios we think they are about ready, they are at the stage. You have to prepare, you have to get the other side of a like mind. You have to do a lot of upfront work to get to the point where you get in to viable monetary negotiations over licensing agreements. So, we have been doing a lot of that work on these portfolios over the last year or so and then you get to the point where it is logical we can start doing deals and we just did the first one which was Siemens on the PACS technology and we have a lot of discussions going on with our other medical portfolios. We certainly expect that out of those, as well as I am quite sure, the continuation of a number of the programs that have just started generating money and deals like the Projector technology and the Rule Based Monitoring technology, and Telematics. The odds are increasing. Once you get three or four or five deals done it is a momentum business. Other users of the technology that are more inclined, wants several other companies decide to take a license to fall in line and take a license. It is always a little more difficult to get the initial deals done. But we are pretty confident of those portfolios I went over earlier in the call that based on where we are in discussions now. It is highly probable that we are going to get the initial licensing deals done in a number of those and hopefully will lead to significant momentum in the licensing programs for those technologies.

We will go next to Rob Ammann from RK Capital.

Can you disclose the headcount at the end of the quarter?

At the end of the quarter we had 37 full-time employees and 6 part-time employees.

In the past when you get enough metrics if you disclose the total or just the full-time?

In the past it has been total.

Okay. So, basically unchanged first of last quarter at 53 total?

Yes. It is essentially we are up. Yes. We are pretty much where we need to be at the beginning of the year. As you know we hired in a couple of very experienced licensing executives and a couple of senior engineers. We are pretty well set from the manpower standpoint.

Okay. Maybe a little bit of splitting hairs here but fix expense guidance went up a little bit in terms of adjusting that range and it is the second time we seen it adjusted this year. Can you talk a little bit about that given that you are set on the head count? I understand not being able to talk when reds come in but it seems like the expenses tend to creep a little faster than you normally expect as well?

Let us see, I believe the guidance for that was given in the first quarter. I believe was between 13 and 13.5…

I think it was twelve and half to thirteen and a half if I think my transcript is correct.

Okay. Yes. It is just based on what we are seeing, as the business, progresses each quarter. I had tried to take a look at it and updating under the guidance just based upon with the expenses as they are being carried this quarter and look it out as far as the next couple of quarters are concerned. We take a look at all aspects of the business and the expenses that we think that we are going to incur and just try to give a good benchmark as to everything is going forward.

Any thoughts in terms of the revenue run rate and which are your cash break even?

Yes, if you look at it from of macro standpoint. Our breakeven is roughly $50 million a year and 12.5 per quarter with 40% margins.

And that does conclude the question-and-answer-session.

Thank you for being with us. If any of you have specific questions, please give Clayton and I a call we will be happy to help you out. Thank so much and we look forward to talking with you next quarter.