Good afternoon and welcome ladies and gentlemen to the Acacia Research fourth quarter and yearend 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/or its wholly and majority-owned operating subsidiaries. All intellectual property acquisitions, development, licensing, and enforcement activities are conducted solely by certain of Acacia Research Corporation’s wholly and majority-owned operating subsidiaries. With us today are Chip Harris, President of Acacia; Dooyong Lee, Executive Vice President; Clayton Haynes, our Chief Financial Officer; and Ed Treska, our General Counsel. 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 and we will then open the call for questions. Acacia continues to build its leadership position in patent licensing and generated another year of record growth in 2011. During 2011 Acacia grew its revenue and other operating income to a record $185 million, up 40% over the prior year and acquired control of a record 40 new patent portfolios for future revenue growth. During 2011 Acacia generated 125 new revenue agreements covering 56 different licensing programs and generated initial revenues from 21 new licensing programs. During the fourth quarter of 2011, we acquired control of a record 15 new patent portfolios in the quarter as our growth in patent assets continues to accelerate. Acacia now controls over 200 patent portfolios and we enter 2012 with the largest number of licensing opportunities in our history. Acacia increased its cash and investments by $219 million during 2011 and ended the year with $323 million. In January of 2012 we announced that we are acquired ADAPTIX, a…

Thank you Paul and thank you to everyone joining us for today’s fourth quarter and fiscal year and 2011 earning conference call. As indicated in today’s earnings press release on a consolidated basis, revenues in the fourth quarter of 2011 increased $7.7 million or 59% to $20.8 million as compared to $13.1 million in the comparable prior year quarter. Fourth quarter 2011 revenues included license fees from 37 new licensing agreement covering 26 of our technology licensing programs as compared to 41 new licensing agreements covering 25 of our technology licensing programs in 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. We continued our trend of strong trailing 12 month revenue in operating income growth with consolidated trailing 12 month revenues increasing 40% to a record $184.7 million as of the end of 2011 as compared to $131.8 million as of the end of 2010. Currently to-date on a consolidated basis our operating subsidiaries have generated revenues from 112 of our technology licensing programs up from 91 technology licensing programs as of the end of 2010. License fee revenue 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. Please note that the income tax provision for the 2011 periods discussed is preliminary and subject to completion and adjustment. As such, related net income or loss and earnings or loss per share for the 2011 period discussed are subject to adjustment resulting from completion of the income tax provision in connection with the completion of our year end close procedures and the filing of our 2011 annual report on Form 10K with the SEC. For the…

Thank you Clayton and operator you can open the call for questions.

Thank you, sir. (Operator Instructions) Your first question comes from the line of Tim Quillin of Stephens Inc. Please go ahead.

Could you talk just a little bit about the different options you had in terms of raising capital and why you settled on a private placement, may be how that relates to timing as opposed to you are waiting until an acquisition is a little more teed up and going through a traditional equity offering?

Well, the transaction is fairly advanced with a private company and that met a standard that precluded us from being able to do a registered offering.

Without disclosing.

But without disclosing the company we’re acquiring and they did not want disclosure of the company.

Okay.

So, the only route we really had was to do a private equity offering which will be registered subsequent to those events occurring.

And so you can’t tell us a lot about the target I guess at this point, but may be if you could talk about the timeframe for completing the acquisition and may be if the range of potential types of targets, you know, as an operating company, just patent assets, what exactly are investors getting here?

The timeframe would be likely you know the end of this quarter, early second quarter, in terms of a closing if it goes through. We have an LOI and we’re in the early stages of due diligence. So, but that would be the expected timeframe if we did continue with the deal and close that. It would be end of the quarter or beginning next quarter. But we can’t give any more color on that. Any color we would give might lend to the identity of the company which we agreed not to do.

And one last question and I’ll hop back in the queue. So you had, you notched a couple nice licensees of the ADAPTIX patents shortly after closing the acquisition, and you filed the suits against kind of a range of potential other infringers. What should be the timeframe that we should be thinking about in terms of seeing additional licensing revenue on those patents? Thanks.

Well, you know our patent. We’re always in discussions with people. We’re in the settlement business. So you know litigation is really a backdrop. So we would certainly look to continue to try to get the early licenses done on the portfolio. We think it’s kind of a compelling portfolio, given its depth and breadth and pedigree. But you know all of these are negotiated settlements so it’s difficult for us to predict the timing of the settlement. Well in negotiations we have companies obviously we haven’t litigated with that we can reach the licensing agreement without litigation. But we can’t predict the timeframes of those being completed.

Your next question comes from the line Paul Coster from JPMorgan.

I’ve got a few questions. So first one, is there a lockup on the shares that have been placed in through this private placement?

Yeah, it’s probably 90 days; it’s a private equity placement and we have wait for certain events to occur or not occur on a priority registration. So we would assume, yeah, it would be there concurrent with the announcement of the intended acquisition if it occurs or if we abandon that then we can go ahead with the registration at that point in time, so sometime within that 90 day timeframe. But they are currently restricted.

The ADAPTIX acquisition and subsequent monetization, can you just give us some sense of what timeframe we should expect for full return on the investment there; is there any other kind of parameters on your philosophy around that deal? And what if anything that should signal regarding this perspective deal as well?

All that depends on the nature of the assets required Paul, in certain cases as in the case of ADAPTIX where there has never been any licensing at all, that affords us a lot of opportunities. There wasn’t any current litigation going on, so we had open opportunity to have some discussions with companies about wanting licenses. As a philosophy, as we stated in the prepared remarks our corporate culture is very much about getting return of capital and then you can worry about the return on capital. So we’re very much driven to do early introductory deals. We think more and more companies are realizing that and moving in that direction which would be good for them and good for us, but we can never predict the timeframe of when we would recover x percent of the revenue, but certainly it’s our intent to do a very reasonable early deals to get our capital back and be able to reuse our capital in subsequent transactions.

As you can imagine Paul the identification of us as to when we think we might be able to do it puts us and our shareholders at a tremendous disadvantage in the negotiation with expectations of when and where.

But the plus is cleared. I think we've continued to exhibit that in portfolios we’ve brought in and the timeframes of us be getting to generate licenses has been shortening consistently and particularly our new portfolios that we've brought in.

Got in. In your prepared remarks Paul you said you have the largest number of licensing opportunities in your history, is that merely a reflection of the number of portfolios you've acquired now or is it referring to the actual number of negotiations that you have underway at this moment in time.

Well they recover absolutely both. I mean we've got not only more companies to settle with in current litigation but we have more portfolios and we are negotiating non litigated transactions with us as well.

Yeah as Paul said in his remarks we've seen 2009, we virtually had zero settlements that were without litigation and we saw about 20% of the revenues in 2010 and about approximately 25% of the revenues in 2011. We continue to think that that opportunity will grow and with it margin expansion.

The average revenue generating portfolio per quarter kind of bumps around all over the place, but should we expect it to grow through the time or is that an unrealistic expectation?

Yeah we often times have portfolios where there is less companies at much and larger revenues points. We’ve other portfolios that have very broad coverage of 30, 40, 50 companies at much lower revenue points per company. Both types of portfolios are very profitable for our shareholders and yeah we like both kinds of portfolios. So again I don’t think there is any metric that defines our business, it’s very helpful based around that because it varies quarter to quarter.

Well, I think the trend is probably as important if not more important is the trend away from everything as a litigation. If you look back I think our litigation expenses averaged around 19% or 20% over the last couple of years. And if we are able to do more of that without litigation then the margins will increase. As we state each quarter, margins vary quarter to quarter based on the ownership and the backend participation, it goes without saying that we own more of the backend our margins will expand.

And you amortize over several years, so obviously the margins from these deals upfront should be much superior to what we have seen previously?

Well, yeah if we own the portfolio a 100%, certainly if there is no litigation we have 95% plus margins. With litigation, the margins would still probably in the 70% to 80% range. So absolutely, most of the portfolios that we have acquired, the ones we are looking at have 7 to 10 year life.

I think in the fourth quarter we did 50 new licensing opportunities and I think 4 or 5 of those we had, we have 100% backends. But still the vast majority of our business and where we really made our mark and the vast majority of the people who come to us are in the partnering model.

Your next question comes from the line of Mark Argento of Craig-Hallum Capital. Please go ahead.

Jus a couple of questions, one more of kind of a housekeeping accounting question, in regards to your ADAPTIX portfolio or other types of transactions where you are buying the IP outright, should we assume that you guys will have to amortize the purchase price over kind of the useful life of those patents or can you give us a little bit of help in terms of the models and what kind of amortization expense we should be running through for that transaction or others like it?

Sure, sure, certainly pursuant to the requirements under US GAAP, we are required to allocate the purchase price amongst the assets acquired and certainly in the ADAPTIX scenario, the primary asset is the patent portfolios and so we would be required to amortize that purchase price over what we deem to be the estimated economic useful life of the patents. Currently we are estimating anywhere from a seven to ten-year amortization period on the purchase price.

Alright. Have you guys finetuned exactly kind of what the dollar, the dollar month you are going to run through the P&L will be or is that something you can help us with at some point?

I guess we are still sort of finalizing our thoughts on that, but as soon as we come up with sort of our final estimates on that, we certainly can, I can provide you some information.

Yeah. Certainly in the first quarter report, what’s the time period within the transaction occurred, we would have that information at that time.

Alright. And then shifting gears, Chip, you talked a little bit about the trend towards non-litigation settlements and at least the two you did with ADAPTIX and the bulk of the ones you’ve done over the last year, I think have being guys, done with guys that you have had more formal kind of look forward relationships with, some people comprehensive deals, there is a litany of different names, I guess, sort of, being given those transactions. But are you able to have formal discussions with potential licensees if you are not in that type of relationship with them. I knew one of the issues had historically been is you approach somebody about license and portfolio and you already have a kind of a standstill agreement that you lose venue control, of venue and a lot of those things. Are you seeing a willingness or a change in the market place or is there some mechanism in place where you actually able to have these discussions now with guys without having to worry about them coming out at you before you can have a decent discussion?

Yeah, I think we have both formal agreements and informal agreements. And refining the (inaudible) agreements are just as structured and followed as formal agreements. So, we have more of those. People are more willing to rationalize the process of monetizing IP. I’d say that the more sophisticated the player, the more realistic and the more understanding they are of the process and the more willing they are to talk about it, discuss something rationally before the friction cost on both sides gets involved.

And then my last question is in terms of the organization, I mean the rate of growth and the explosion in the IP market, how comfortable are you in terms of the scalability of the model number of people. Do you have to add people at this point or how are you looking at your G&A here going forward?

Yeah, the headcount has stayed about the same. We’ve grown the business from about $20 million runrate to $180 million rate with approximately the same headcount and we don’t see a need for significant on balance sheet headcount increases. In the first quarter we will probably pair back four or five people and add four or five people. The leverage in the model also in the fact that we have a significant amount of very valuable resources working off balance sheet for us, not only our partner law firms were probably you know 12 to 15 law firms with 60 to 70 full-time equivalent lawyers are working on business for Acacia shareholders and are paid obviously on a performance basis. Similarly on the due diligence area, our managing engineers each manage probably 15 to 25 leading outside consultants and technical experts which we repeatedly use and my guess is probably there is 30 or plus full time equivalents of leading technical experts again not on payroll. And those expenses get reimbursed to the company out of gross revenues. So it is not a net cost to shareholders. So here probably at any given time there is a 150 to 200 people actually working for shareholders on these matters but between 50 and 55 were actually on payroll. And we don’t expect that to significantly increase.

Your next question comes from the line of Daniel Gelbtuch of Cantor Fitzgerald. Please go ahead.

Hey just wanted to revisit the comprehensive deals. Obviously you guys have backed away from that for the time being as you I guess assess the value of your portfolios or potentially acquired portfolios, but my question is, is the pipeline still as robust as it was a year ago and what do you see in that market right now?

Well we have people interested, we have turned down offers of doing structured patent deals where it didn't make sense either financially for us. We are more interested in only doing those transactions and it would be probably be less than we originally thought we would do with companies where we think there's additional business we can transact to the benefit of our shareholders but again with the exceptional growth in our patent portfolios and the quality of the patent portfolios obviously our pricing has gone up and the companies who did those early deals probably got an hindsight of very good bargains.

Yeah and with the growth of our revenues and with the growth of our margins we were able to drive significantly greater returns for shareholders without the opportunity cost of removing potentially large companies from potential licenses down the road, so this is a much more accretive, much more valuable and a way for us to grow the business both from a top line and from a bottom line.

But as you can see also, some of the companies we did those transactions with have come back and bought additional rights from us in addition to whatever term rights they had in the original agreement. So we are trying to select partners that are companies that are very sophisticated in this area, want to eliminate the friction cost and can engage in a variety of transactions that benefit them and that benefit our shareholders simultaneously. So we will continue to do. We've got interest in doing additional structure term deals if the price is right and the terms are right. We will do them and expect we will do some this year.

Okay and just I guess switching gears to more of a high level in the industry obviously InterDigital had an announcement this quarter where they backed away from their sale and RPX maybe switched gears a little in terms of what they were going to be doing going forward. What do you see in terms of from a high level, the direction of the market and how things are shaping in the current situation in the market?

Well, we think if the whole idea of the option or the model was an exception rather than the rule. If you look at the options that were done three or four years ago and it turned out in the autopsy where one party was responsible for 90% of the purchases. If you look at the auction that was Nortel in the early spring that is clearly the only successful one that happened. There was a number of public options that you mentioned IDCC, there was one around Kodak. There has been a number of other ones. There is only few degrees of separation, we would be surprised if there is a transaction that we don’t know about and just if we never brought anything in an auction and a handful of times we’d even transacted on the broker side of it. Its just not our business. Our business is kind of doing the deep dive, finding the opportunities. Most of the stuff we see that goes to auction has limitations because its been licensed in so many different ways or its just kind of we’d pass that. That’s not an area that we are actually canvassing that and we would not expect to see a lot more auctions. Just especially from the strategic standpoint they seem to all have what they need.

Also if you think about from strategic standpoint, I know lot of patent owners once they saw the Nortel price got very encouraged and overly encouraged. Strategic from a structural standpoint, obviously the vast majority of them only have five, ten, 12, 15% market share. So to expect them to pay 100% market value for the portfolio is a stretch and then the instant they would put that on balance sheet they give away a substantial portion of what they just paid to owners, existing cross license fees. And then if they go to sort of against their competition they run into regulatory and legal issues. So we think we can provide a much better and much more efficient process by us stepping and buying the assets, slicing and dicing the rights that people need, giving people only the rights they need and being able to get premiums in doing that. And we hope the ADAPTIX portfolio will serve as a good prototype for that structure. But as you can imagine that not a lot of companies with 10% market share, want to pay 10x for what they need. They simply take the asset of the market. However they are fearful of competitor getting it. So again we think we can play that role and we don’t think that, that many auctions will be successful with strategic buyers.

Your next question comes from the line of Jonathan Skeels of Davenport. Please go ahead.

Hi guys, you mentioned in the prepared remarks that you are seeing an increase in the number of companies interested in taking early licenses when you are acquiring patent portfolios. Can you just talk about may be say specifically what is driving that? Is that competitive based, meaning they want to incentivize you to go sort of against competitors or are they simply being proactive and want you to clear the market of their risk of those patents?

Well, this is a business for us. We are not trying to clear shelf space. We are not in the market with simply licensing rights and I think more companies realize that we are pretty rational in our ability and very good in our pricing and so to engage in litigation, they oftentimes exceed the cost of the license. It is very inefficient process. So I think it is driven simply by cost. Companies are seeing that we are able to underwrite and price IP realistically and if they are willing to engage, they can probably get deals done without all of the purchasing cost. So I think that’s the primary driver.

Think about this Jonathan, think about an asset class that in order to determine the value, 95% of the times, it requires a federal lawsuit. That’s a pretty inefficient. Imagine going to a car dealer, trying to buy a car and file lawsuit first.

So it is basically driven by cost, some companies obviously are trying to be opportunistic and strategic around competitive environment. So I would expect that they think if they do an early license, that might give them advantage because they know we will enforce against all infringers and abate them. So that kind of comes with the territory.

Okay. And then can you comment on what the pipeline of acquisition candidates looks like now versus, say, 6 or 12 months ago? Specifically, what sectors are they based, is it just wireless or are you looking in other areas as well?

Interestingly, no. FOR everything that we’re looking at seriously are things that we have known about for two or three years. We just have price discipline and some of them are moving towards the price level where we think they make sense. So, it isn't as if we’ve discovered a whole new group of patents. Our patents we’ve done a lot of due diligence on, have a great deal of awareness and think we have a better feel for the licensing value because of the hundreds of transactions we’ve done in the last couple of years, realistically, as to what the full monetization value can be. Then obviously you got to buy at the price that makes sense. So, we’re probably, seriously looking at three or four transactions, with another half a dozen in the background but they are all things that we’re pretty knowledgeable about and have been looking at for a long time.

We kind of chuckled, Jonathan, when we see news releases about companies, private and public saying we had a valuation of our patents and it’s worth X. Think about it. You really can’t put a valuation on anything unless you actually gone out and try to monetize it. As Paul said earlier, we’ve done over a thousand deals. There aren’t too many companies that we haven’t had a number of licenses with, over the years. So, we think that’s our intellectual capital. We think that’s our IP. We know how to price something appropriately because we have done it before. We have done it with those parties before, many times with the same business units of those parties in their space. So, we know how they will react to certain overtures. That’s a huge advantage for us. It helps us on the business development standpoint. We can go in and talk to any company and say we’ve done this. We have licensed the people that need to be licensed. Here is what your expectations should be. We know that when we are talking about buying a user share holder capital by a 100% of an asset. We have licensed everybody out there who needs to be licensed under a certain asset and have a pretty good, much better idea than anybody else out there what its worth, what the risks are and what we should pay for it. So we think that makes us uniquely qualified and it has a huge competitive advantage as long as we have pricing discipline. Some of the portfolio we did a big partnership portfolio just recently of we have 300 patents from the Automotive. So the first conversations go back, I think four or five years on that. So you just have to be patient and do at the right price and not the right time.

And just one on ADAPTIX. So that was not a profitable company in the past, did you require NOLs in that deal as well?

Yes there are some NOL that come along with the acquisition of the company, the pre tax number is roughly $50 million in NOL and on a tax effective present value basis we’d represent approximately between $10 to $15 million of tax benefit over the three or four year period, which includes to an estimate of the impact of other limitations on the Section 382 associated with the change in control.

It didn’t affect our attitude as the price we should pay them.

Your next question comes from the line of Darrin Peller of Barclay’s Capital. Please go ahead.

Hi Thanks guys just one question on the access pans again I know its been a major driver revenue of the past quarters. Can you give us a little color on why it seemed a little bit of a lower contribution in the fourth quarter and then can you comment on how conversations might be progressing with Apple or HTC?

We of course grew lower in the quarter as we didn’t do as many deals, that’s...

From an opportunity stand point though, is there still more to come?

Well, obviously the last thing we want to do to our shareholders is disadvantage by answering those kinds of questions on the call. I mean no, seriously you guys say you know we are the best, we are really good at three things, finding IP, buying IP and licensing it. And we just need, if you agree that we are good at that, the reason we didn’t have as much in the fourth quarter so we didn't do as many deals. We still have some independents out there and that’s all I’ll say.

Maybe we could just then shift gears over to the RPX announcement with Alcatel-Lucent, can you just give me a sense, I would love to hear your color on what you think have that sort of is from an impact to the industry standpoint and what does it mean for companies like yourself from a competitive standpoint given, is that a successful, seems like, it seems somewhat similar to what you guys have done all over in a different manner obviously, they are not generally accepting fees from Alcatel-Lucent for it?

Well, we can't really speak to that. I don’t know the terms of the agreement or the nuances of it. I think it’s an indication certainly that more and more large companies are in rest of them getting paid for their patents and that’s one approach that they are using. And to the degree that RPX has a fabulous group of members that maybe encouraged given the overture to voluntarily license for a limited window period of time it could be a good thing.

I think strategically what it does say that Alcatel-Lucent is probably one of the more sophisticated major corporations in IP and they have decided that there is a role for a third-party to help them monetize their IP and I think that’s the trend that everybody ought to be focused on. They are a very sophisticated group that has generated hundreds of millions, if not billions of dollars over their life and is looking to independent third parties to help them with the monetization and that kind of chatter is happening in 20 extra companies in the last year and there is a lot of unique contest and depending on the opportunity that’s out there we’ll then move in our fair share given what we’ve done.

Your next question comes from the line of Jon Evans of Edmunds White Partners. Please go ahead.

Could I just ask a follow-up to Tim’s questions; and I guess, I am really curious just about the timing of the deal and why you wanted to do deal or you gave an 8% discount in the market because it sounds like your business is on fire and it sounds like you are….

Because the reason is, because we were prohibited from doing a registered offering given the status of our negotiations with that company; it was deemed that we cannot do a registered deal and we’re interested in doing the deal, we think it could be very accretive for a shareholders if we completed and therefore we were willing to leave with the discount on a private placement to accomplish that.

May I ask you a question, why would you put the car before the horse, I guess because it sounded like the deal may not even happen till the second quarter; why would you announce the deal and then go do an equity offering?

You can’t announce the deal unless you’re ready to close it, because the other side we wouldn’t allow us to do that. In other words, we have to have the funds to transact and do the rest of our business and be prepared for other acquisitions that we are looking at.

And this was a deal specific; the fact that we had is not by any LOI triggered the ability to do or the inability to do a registered deal and we felt this is right time, the right place to take advantage of the opportunities, I mean we’re not macro players, we don’t know what’s happening in Greece and Germany, we don’t know if an issues going to break out in the Middle East, I mean and there is a lot of things beyond our control; we can control our business. The difference between the registered and the non-registered we did eight months ago was about 2% we felt that the opportunities that afforded themselves out there were worth that risk.

So then just to finish that thought, the reason is if you do, do this deal it will be substantially bigger than the cash that you have on your balance sheet and that’s why you needed this extra cash?

Not necessarily, no, no. We would never put ourselves in a position there. Look, we want to be financially strong and opportunistic. We see a lot of potential transactions in the market if they come in at the right price, we want to be ready, willing and able with capital to transact and our ability in the ADAPTIX case was very critical. You want to have cash on the balance sheet, so you are able to transact. You are not out scrambling trying to find money.

When we did our deal last March or April, we didn’t have the ADAPTIX deal even in our radar. We had looked at it prior the expectation after the Nortel deal was for much higher price than we thought we would transact to that and came back to us. We made the deal. I mean it’s about being opportunistic.

The last question then, you said that you, so you believe now that you’ve raised this capital, you won’t need to raise any more capital?

Certainly not in the foreseeable future. We think we would buy additional things out of retained earnings. If we are able to do early licenses on acquisitions and generate cash, we would like to use the same capital.

Well, it looks like to us, there has been this kind of the exception and after all there has been a huge amount of opportunities that all have started to call us that we’ve been tracking for two or three years and we think it’s probably, what’s happened is it’s probably the effort-low of Nortel. For years we would call on IP departments and they were very receptive to our overtures, may be it was, they didn’t want us doing their job, they didn’t want to look at the management; but I think as you analysts have done such a good job of creating the awareness of this new asset class, CEOs, CFO, COOs all over the world are now demanding plans of actions from IP departments who up until now have been pretty much left alone. Because of that, we’ve been getting calls left and right and see a multitude of opportunities. We have the right size of the treasury to take advantage of whatever combination we saw coming down the road.

Your next question comes from the line of Michael McCormick of Gilder Gagnon & Howe. Please go ahead.

Maybe I am doing this wrong, but if you look at the year-end numbers and you strip out the amortization of patents and the verdicts on the insurance proceeds and you look at the kind of what would be the operating profit under that situation. It looks like your margins are down under that strategy. But you spent a lot of time talking about, you’ve been moving away from kind of contingent legal fees, because this movement to settlement. But the contingent to legal fees are up 100% year-over-year on the revenue, isn’t so. Maybe you can help me reconcile those two comments?

It just depends on the portfolios, Michael. There are certain portfolios that are deeper into litigation and some others are ones where our law firms get 30%, 35% contingency fees and so just depends on the mix of those and so sometimes that definitely impacts margins and some of the portfolios that we’ve had earlier that have gone deeper in litigation have had that kind of a cut. And most of the revenues that we generated even through last year were partnering deals, we think going forward, obviously, more and more of these are going to be 100% owned in the fourth quarter. Of the 15 portfolios we brought in, 11 of them were from major companies. I think eight of them we acquired either outright ownership of 100% or significantly more than 50%. So that’s why we think margins will drive. And then we’re also, we’re just at the beginning, I think of seeing a behavior shift of companies and we’ve now demonstrated some of those transactions with the purchase of ADAPTIX where we are able to get companies to license without litigation. So we just think that will be an increasing trend. But you’re right, between 2011 and 2010 there wasn’t a lot of impact from that trend.

So you’re saying that this trend will be more relevant next year than this year?

We think so, yes.

And then the other is with the acquisition of ADAPTIX and this potential other acquisition capital, the business is becoming much more capital intensive for you. You’ve never been wanting to – want to use kind of retained earnings or capital to acquire patents now. But now it seems like that trend might be changing and maybe that’s due to the acceleration of the business model, but maybe you can talk to us about how you think about your deployment of capital and those returns are required for you to capital out versus your older model of just kind of licensing?

Obviously, when we were doing our partner model, those were really the only deals we ever did and we didn’t feel comfortable enough in deploying large amounts of capital. As we talked about earlier, we’ve done over 1,000 deals now. I think as you see us start to deploy capital to own a 100% to think we can get some early deals done without the high cost of litigation. They are going to be in areas that we are pretty familiar with, where we have multiple relationships, multiple deals, multiple licenses with people, because that will drive margins, and will drive return. But like ADAPTIX was a liquidation of that company; under our partner model, that was a non-starter. So it’s usually the IP owner who determines for us, we don’t really make the determination going in, should we buy this or should we partner it. The ATI model, the one we just closed on, it was not available for sale, it was still a partner model. It’s hard to tell you what we are going to, is it going to be two-thirds partnering and one-third purchases going forward, its really hard to tell because we don't set that policy, that is set for us by the IP owner usually before they even call us. They either have a determination they want to partner with us or they have some sort of liquidation or they need some money.

Okay. So this is almost like an expansion of the plan is the way I'm thinking about it. But is it right for me for me to think that the bigger opportunities are going to require capital investment on your part now?

No, I mean we have a big order portfolio we just brought in 300 patents, that was a partnering deal. So we…

You know actually it was not available for sale. The [Renaissance] portfolio was not available for sale. So I think its hard for us to determine because those decisions are made before we get up. My gut tells me that people want to see, they don't want to let their patents go unless they absolutely have to because the difference in pricing, what they can get versus what they think its worth in the long haul, is pretty significant still. Obviously it drives our returns. So we think that most people with good patents are going to still want to do the partnering deal rather than the acquisition deal but not everybody can afford to wait or be in that position. I think we will still do the vast majority of our deals, two-thirds, one-thirds, three quarters, one quarter, 80-20 I don't know, in partnering deals.

Your next question comes from the line of Tim Quillin of Stephens, Inc. Please go ahead.

Thanks for taking my follow-up and then I don't want to parse your words too closely Paul but would you have had enough capital to fund the current acquisition you had teed up and was the additional capital raised more a function of wanting to make sure that you had a little dry powder for other opportunities after that.

Yes. We’ve got other things we are looking at. We want to be in a position for shareholders, if we can buy and assets right and earn multiples on that, we want to be ready to go.

Got it.

And we found in the past that and also we have the general philosophy.

This deal was not driven by the letter of intent that we have signed. The only part of this deal was driven by the non-binding letter of intent we have signed has it hit requirements to not allow it to be a registered offering. We apparently have made that clear and I think that’s important. This deal was not driven because of a letter of intent.

Got it. And then in terms of patent intakes you set a pretty high bar with 15 patent portfolios in the door in the fourth quarter and you know its quality not quantity but what’s your expectations be in terms of new patent portfolios in 2012?

Probably about the same run rate, yeah. Our quality in revenue requirements have continued to go up. Fortunately our due diligence teams have research, they’ve done due diligence in theses markets so many times, we can actually now process many more opportunities much more quickly. I like to say probably run about the same amount of total portfolios that we did last year albeit we always are looking for ones with greater revenue opportunities for our shareholders.

Got it. And fourth quarter you spent $12 million on patent acquisitions cost. Was that one patent portfolio or was it multiple patent portfolios?

Actually we had, we invested capital in seven of the different transactions. Some of which we bought wholly, some of which we made upfront payments to get better percentage splits with the owner. So actually eight of the fifteen. We did apply some capital too.

And then if just a couple of modeling questions, but the MG&A expectations, I know it kind of spiked up with incentive compensation in the first quarter of last year, do you expect kind of a similar first quarter relatively high quarter in terms of MG&A expenses?

It depends how successful our quarter is. If we knock it out of the park, there will be incentive compensation paid to people; it will be a larger number probably less as a percentage. But yeah, we want to have those quarters, they have been great quarters.

But we already know, I guess based on what you put in the press release, it’s going to be a pretty darn and good quarter?

Well, the first month is off to a good start.

And then Clayton, on the tax rate, I know the guess is going to be a lot of different puts and takes, but how many, what’s the total NOL you have now including ADAPTIX?

Well, as I mentioned in my prepared remarks, we’re still in the process of finalizing the year-end tax provision. So I don’t want to give out an estimate yet of what the NOL or remaining is going to be as of the end of the year, because it is still subject to completion. I think as of the end of the third quarter, we estimated around $70 million remaining of the NOL for tax return purposes, but again that is subject to adjustment based upon finalization of the year end tax provision.

So 2012 taxes will probably still be state, I guess fair enough especially here you have the state taxes and foreign taxes, but probably have federal taxes in 2012. Is that fair?

We hope not.

Well or maybe hope you do, because you burned through those NOLs that…

Yeah, we would like to burn through as fast as we can.

We hope that your assumption of wholly foreign tax and state was incorrect.

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 participating in the year-end call. If you have any questions following the call, you can get myself or [Rob Stewart] to call and look forward to speaking with you again in April. Thanks.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 855-859-2056 or 404-537-3406 with confirmation code 42073131. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.