Good afternoon and welcome ladies and gentlemen to the Acacia Research Third Quarter Earnings Release Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the presentation. I will now turn the conference over to Mr. Paul Ryan. Please go ahead sir.

Thank you for being with us today. 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. In today’s call the terms we, us and our refer to Acacia Research Corporation and it’s wholly or majority-owned operating subsidiaries. All intellectual property acquisitions, development, licensing and enforcement activities are conducted solely by certain Acacia Research Corporation’s wholly and majority-owned operating subsidiaries. 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 you with an analysis of our financial results. We will then open the call for questions. Acacia had a great third quarter. It was our best quarter so far as we continue to build our leadership position and patent licensing. Acacia had record quarter the revenues of $63.9 million, record GAAP net income of $24.7 million and record trailing 12-month revenues of $138.6 million. We continue to grow rapidly in all of our key performance metrics. For the first nine months of the year, we have generated $118.7 million in revenues, which is an 150% increase over the prior-year period. We have accomplished this growth while also increasing our gross margins by 39% from 46% to 64%. We have also increased our working capital since the beginning of the year by 153% to $91 million. We have also significantly increased the diversity of our revenue base this year as we generate revenues from a larger number of our patent portfolios. Year-to-date, we have generated revenues from 52 different patent portfolios compared to 25 last year, an increase of…

Thank you, Paul, and thank you and to everyone joining us for today’s third quarter 2010 earnings conference call. As indicated in today’s earnings press release on a consolidated basis Acacia reported record third-quarter 2010 revenues of $63.9 million as compared to $16.2 million in the third quarter of 2009. Third quarter 2010 revenues included license fees from 51 new licensing agreements covering 36 of our technology licensing programs as compared to 36 new licensing agreements covering 18 of our technology licensing programs during the comparable prior year quarter. For more details please refer to today’s earnings press release for a summary of technology licensing programs contributing to revenues during the quarter and a summary of technology programs generating initial license fee during the quarter. We continued our trend of revenue growth with consolidated trailing 12 months revenues totaling $138.6 million as of September 30, 2010 as compared to $90.8 million as of June 30, 2010, $67.3 million as of December 31, 2009 and $65.7 million as of the end of the prior year quarter. Currently on a consolidated basis, our operating subsidiaries have generated revenues from 87 of our technology licensing programs, up from 56 technology licensing programs as of the end of the comparable prior year quarter. License fee revenues continue to fluctuate from period to period based on the various factors discussed on previous earnings conference calls and in our periodic filings with the SEC. For the third quarter of 2010, Acacia Research reported record net income of $24.7 million or $0.75 per share and $0.70 per fully diluted share versus a net loss of $3.4 million or $0.11 per share for the comparable prior year quarter. As illustrated in today’s press release and related 8-K filed with the SEC. Excluding the impact of non-cash patent amortization…

Operator, can you open up the call for questions and answers?

(Operator Instructions). Our first question comes from the line of Mark Argento from Craig-Hallum Capital.

Congratulations on a really another breakout quarter. When we look at there’s kind of two parts of the business, the base licensing business and then more of these kind of structured license deals like you did another one this quarter, which drove some pretty good upside. I know you probably don’t want to breakout the two, but because it is so lumpy, could you give us some overall trends on the kind of the base licensing business separate from kind of the structured licensing, kind of the size of the deals, maybe and try to give us a little bit of color on that if you could?

If you look through the nine months year-to-date, the base licensing continues to move up significantly. Most of the revenue has been generated from our base licensing programs, and to some degree they will generate probably more and more of these structured deals, where we periodically negotiate the licenses of multiple portfolios. When you really think about it, when we do these deals, we’re basically licensing a number of our portfolios at one time to one company, which is part of our base licensing. So, it’s really one and the same, quite frankly. Generally you got larger numbers when a company decides that it wants to take licenses to a number of portfolios that we control at the same time in the same quarter.

Can you talk a little bit more about these kind of structured license deals? I mean, are they for a period of time, are they taking perpetual licenses for certain portfolio? That’s kind of how I’ve always understood there’s kind of two flavors here. Could you maybe give a little more color on that?

It depends on the company and the structure. Predominantly, the essential element is, it rationalizes and makes more economic for both sides. The licensing process, it gets more money to our IP partners, because you tend to settle these with less litigation cost and less expenses of licensing. So, it’s really beneficial to both parties. Depending on the company and depending on their needs, but you are right, generally, there is a term and what they want to achieve is a periodic round of licensing negotiations, much like large companies do with each other although our timeframes are generally much shorter than is typically done in the industry, because we want our new IP partners coming in, participating in additional revenues from those renewals of those agreements. So, they take a variety of forms, but basically in essence that it’s a way for us and large companies, where we have many portfolios that relate to them to enter into periodic negotiations and take licenses without litigations.

I noticed on the balance sheet, you have a pretty good size receivable. When do you expect, or what kind of the terms historically on recouping your cap or getting your cash from some of these deals going forward?

Actually, we have collected the receivables of $38.9 million, we have collected $37.6 million in the first 15 days, so we’ve collected 98% of all that money, it is in the bank.

Decent current cash number is the $83 million that you had at the end of the quarter plus roughly another $37 million?

Yes, so we pay our IP partners.

Less than 43% margin on an average.

Yeah, then you take the normal margins that we are achieving and the splits that go to our IP partners, but yeah, right now we have $85 million in cash, plus the $37 million, and during this month we will be doing these payments out to our partners.

It seems to be, really over the last nine months in particular just a really significant shift in the way large tech companies are viewing their IP and maybe if you just touch on a little bit, who it’s benefiting? You guys are getting more deals done; do you see this persisting for a period of time? How do you think about the opportunity going forward and kind of where’s you are positioned today and what you need to continue to do to find success?

In terms of the trend, the large companies worldwide decided to monetize their patent. We think we are at the very beginning of that process. Historically, it has been a couple of handfuls of companies that have generated very large dollars from their patent portfolios, and increasingly we are seeing more and more companies, certainly in the dialogs we’re in with companies plus the ones that we are hearing about in the marketplace. So, we think we are at the very beginning of a major trend of companies realizing that the patents that are on their balance sheet are the results of their investment and R&D with shareholder money and that ought to be generating financial returns from those patents. So, more and more companies are adopting what I might call the IBM philosophy. They were kind of the leaders in realizing that there’s a lot more returns that can be generated for their shareholders from their R&D investment by broadly licensing out their patents to industry instead of just holding those patents defensively. As more companies have done that and it’s impacted their bottom line, there’s more pressures on managements and boards to do the same thing. So, we think we are at the very beginning with this new trend.

When you think about the, I don’t have the stat right in front of me, but the number of new patent portfolios you guys brought in the quarter and so far this year, and I don’t know it’s up 50% to 75% in terms of just total number of portfolios, but just the number of portfolios is one statistic or a challenge statistic and this is hard to provide I assume, but do you think about the size of these new portfolios you are bringing in like of course the one that you signed with Renesas. If you think about the new IP that you brought in this year, not just in a number of portfolio stats, but the opportunities out there. The way we look at it, it’s probably a magnitude of what you had historically in the pipeline. So, have you doubled your market opportunity or tripled your market opportunity do you think with the new IP you brought in so far this year?

No, we want to put a specific number, because we have a lot of legacy IP that we think is very valuable. Certainly there is no question that when you start partnering with companies that have 40,000 partners here, moving in orders of magnitude in terms of sheer numbers of patent, and we just think it’s an increasing trend. I wouldn’t want to put a hard number, but certainly it’s gone up dramatically. Yes, the value.

Last question, more of a housekeeping question. In terms of the NOL, where are we and how much you have left on your tax yield?

From NOL standpoint, as of the end of the fiscal 2009, we had approximately $86.4 million in federal NOLs and about $68.7 million total in state NOLs.

They were all (inaudible)?

With respect to what the tax return is looking like for fiscal 2010, we’ve not done those calculations yet, but the 86 and the 68 are what is available as of the end of 2009.

We’ve generalized 38 million in profit so…

So, the two numbers we don’t know what the exact taxes will be but starting the year we had an 86 million NOL and we have made 38 million this year. So, you can do the math as where we’re slightly big.

(Operator Instructions). Our next question comes from the line of Jonathan Skeels of Davenport & Company. Please state your question. Jonathan Skeels - Davenport & Company: Can you talk a little bit about your confidence may be signing additional structured licensed deals and specifically can you talk about the interest level among companies in signing these deals within.

Yeah, we had a goal at the beginning of this year doing two. Our goal for next year is three and for the following year four. People have asked us why that pays and it’s because we have some specific requirements in terms of the structure of our business particularly relating to the length of the term of these licensees. Some people in the industry are used the longer term, but it doesn’t said our business model. We’ve learned from our discipline on the business development side where we’ve always done 50-50 deals with partners and we’ve basically never broken that rate structures proving to be quite valuable now as we partner on larger portfolios. So, we think it’s going to be important for us to maintain that same discipline in the number of term deals we do because we are probably are going to deal do a dozen of this and hopefully the plan would be that they would renown you get three or four of them renewing per year give a lot more stability to the revenue base beginning each year. That’s the goal and we think that’s a reasonable timeframe. We have interest from a lot of major companies, but it’s always price and terms. So, that’s our goal, three for next year, four for the following year. Jonathan Skeels - Davenport & Company: Talking about renewals can you talk about may be confidence you have that companies wide enter into these deals and then it probably would find and stay in them longer term?

We can predict that if were made sense for them this time around with our accelerating growth in new portfolio. If that trend continues, it would probably make sense that they would want to do at the same way at the end of the original term period, but we have no evidence or experience with that yet. Jonathan Skeels - Davenport & Company: You started to monetize Renesas and the Access portfolios it seems like that the revenue ramp at Renesas has been quick and there is very little litigation involved there signing the first your first two deals in the quarter. Is this ramping as expected or you ahead of the schedule can you talk a little bit about that?

We are ahead of schedule. We’ve had the ability on these partnerships similar Access is a publicly traded company on the Tokyo Stock Exchange that had the original Palm source patents along the patents that they’ve developed themselves and Bell and certainly we feel moved into the first large license of that portfolio to a major company. We did that without litigation to Microsoft. So, certainly at this stage both of our partners are very happy with the timing that we’ve done and we’ve exceeded their expectations. Jonathan Skeels - Davenport & Company: How is the positive pressure you’ve been getting on these fields helping with other potential partners in both Asia and the US? These give references for you and in terms of the plans in new business.

Certainly the visibility are being in the press doing these kind of transactions with large companies can only help our visibility there. We are in discussions our business development paper and discussions with a number of other large companies, but certainly having favorable cost doesn’t hurt. Jonathan Skeels - Davenport & Company: Back on the cash balance you have said you wanted to get to $100 million can you just update us on the strategy there? In particular if you’re looking to possibly put capitals to work or put some of that cash to work what kind of returns that we’ve seen in the past when you put up money?

Why don’t I let Chip address that? He gets asked that question a lot.

Yeah, clearly the cash balances have grown pretty dramatically over the last couple of years as we have achieved probability. If you look at the three opportunities big companies have to do out there I mean, they can build an in-house licensing company for portfolios if they thinking about monetizing there assets. They can spin it off. You see the big semiconductor companies spend their portfolio off into a separate entity or they can access companies like ourselves to be their in-house licensing departments. The ability to have a strong balance sheet is clearly a competitive advantage that we have over companies that might consider themselves competitors of ours and to be able to put your might of work and as seen our margins growth we’ve been able to buy down back into participation to achieve the margin growth that we talked about in the last of years. We used to be in the high 30s low 40s, we moved to kind of the mid 40s to the mid 50s. On a year-to-date basis we’re over 60% now. Capital can be used for a lot of things like that. Psychologically, its very compelling if we’re going to have to compete and show what we can do for big companies compared to what’s supposed to a competitor might be able to do. Jonathan Skeels - Davenport & Company: On the IP fund when we expect that to ramp? Can you talk a little bit about what kind of opportunities you’re seeing out there?

We got a couple of opportunities do we have on the contract right now, that’s just the profile of the IP fund. We think that you know there’s early signs that were seen earlier monetization in some of our opportunities. Obviously, if we close on a couple of the opportunities and we do some of the licensing, one can only imagine the yearly returns of the fund. It does make it easier for us to attract additional capital if we need to if we find opportunities that kind of dwarf our balance sheet maybe. Jonathan Skeels - Davenport & Company: Can you break out your largest licensee in the quarter? Is that something we usually see? It usually in the queue, but…

Yes, we’ll providing that in this 10-Q as part of the third quarter results.

Our next question comes from the line of Bruce Stewart, a private investor. Please take your question.

I don’t have a question. I want to say congratulations.

That sounds easy to answer, thanks.

We’ve the answer on that one. Thank you.

I want to thank you, thank the whole team for doing such a wonderful job.

(Operator Instructions) Our next question comes from the one Walter Ramsley of Walrus. Partners. Please take your question.

The patent acquisition cost, they were down in the quarters and it’s going to be the ongoing trend that now that you have the IP fund or what’s the outlook there?

No, I don’t think you can draw any conclusion from a particular quarter in that particular quarter, in the fund for you, portfolios we brought in, we do have capital and if our IP partners want upfront payments and we can buy more points, we’ll do that but in this particular quarter there just weren’t many of those opportunities.

You see a solid trend.

In the fourth quarter I mean you have indicated you don’t really expect a structure deal to take place so, you don’t get one, given up for the base business going at this point, generate a profit?

We hope so.

Our next question comes from the line of [Paul Berger of Hammock Investors]. Please state your question.

Two items, one on the license that you do with Oracle and Microsoft, can you give us a little color on but how many patent portfolios they took?

No, the confidentiality agreements that we have generally prohibit us from discussing adding specific of licenses or numbers of patters,

Is DMT dead now or is there is still appeals left for it?

It’s been in the appeal process, we also have new patent that received. Actually we started a new paten issued this week. There are new patents that have issued in the portfolio, we recently had a fed circuit appeal and the fed circuit confirmed the lower court’s decision that the five initial patents had indefinite claims. We haven’t made a final decision about any further appeals at this time, but that’s the most recent event and that’s occurred. Contemporaneous with that, we’ve been getting some patent issued which generally now will go out to spring of 2014. So, we will make a decision on the licensing and enforcement of those new patents.

For those people that you already have on under license and you had some that will continue or they continue into pay or is that on hold?

Actually the practicality of it is just the original patents expired in January. So, this would be the last quarter that people will be making payments under the original patents anyway. By the payments and result whether we decide to appeal the most recent decision and now basically the payments under the agreements would have been completed. We have these new patents which would cover from the day of issuance until roughly the spring of 2014.

Do you see the same kind of potential for the new patent as you go to one time for the old ones?

Shorter life, the licensing obviously they only revenues we could generate our further life of the patent which would be for that three and half year period, not a longer period which the original ones would have had a longer life. The market obviously has grown since then and so from this day to 2014 obviously there is a much larger market opportunity on a annual basis.

Our next question comes from the line of Peter [Norton of Norton] Capital Management. Please state your questions.

Question I have relates to the cash that you discussed on the balance sheet, which is growing. As I understand the capital intensity in the business is rather low. I’m wondering what the thoughts might be internally about the dividend or some sort of stock off buyback etc?

Well, we see our sales tell us a growth company. Through the second quarter we had kind of the annual growth about 68%. Our treasury policy or functional be more aligned with growth companies than mature dividend paying companies.

They’re actually growth companies that paid dividends.

We might be one of them.

That’s what I’m asking.

We don’t have any policy on that. This is clearly in this process here that. The corporate opportunities that we’re seeing and our kind of overwhelming the business development opportunities here and we’ll just have to take a look at when and if we deploy cash on larger opportunities we have in the past. It’s a little early with that a lot of foresight into the future is what our revenues going to look like. Too early still talking about a dividend or a stock buyback right now. Unidentified Analyst Is there a number on the balance sheet cash number that we trigger decision to move in that direction or not?

It’s a function of what’s on the balance sheet in the opportunities that we see in the kind of the near term say in the next year so, we have to had take a look at both of those and determine what’s appropriate from a retention of cash.

This will conclude the question-and-answer session. I will now turn the call back to Mr. Ryan.

I want to thank you all for being with us on the quarterly call. If you have additional questions, you can call give myself or Rob Stewart. I look forward to talking on our next call in February, thanks.

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