Good afternoon, ladies and gentlemen and welcome to the Acacia Research Third Quarter Earnings Release Conference Call. At this time, I'd 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 question and answers after the presentation. I will now turn the conference over to Mr. Matthew Vella. 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 its wholly and majority owned operating subsidiaries. All patent rights acquisitions, development, licensing and enforcement activities are conducted solely by certain of Acacia Research Corporation's wholly and majority owned operating subsidiaries. With me today is Clayton Haynes, our Chief Financial Officer and Jaime Siegel, our Executive Vice President of Licensing. Today, Clayton will start our call by taking you through the numbers for this past quarter. Clayton?

Thank you, Matt and thank you to those joining us for today's conference call. As detailed in our earnings release today, on a consolidated basis, Q3 2014 revenues totaled $37.2 million as compared to $15.5 million in the comparable prior year quarter. Q3 2014 revenues were comprised primarily of 20 new license agreements executed in the quarter as compared to 24 new license agreements executed in the comparable prior year quarter. As we have discussed on previous conference calls, license fee revenues continue to be uneven from period to period. For the third quarter of 2014, we reported a GAAP net loss of $12.4 million or $0.26 per share, versus a GAAP net loss of $15.7 million or $0.33 per share for the comparable prior year quarter. Please note that the comparable 2013 prior year quarter's GAAP net loss included the favorable impact of $19.6 million of NOL related tax benefits recorded in the period. For Q3 2014, we have provided a full valuation allowance for NOL related tax assets and hence no comparable favorable benefit was recorded in Q3 2014. On a non-GAAP or pro forma basis, we reported net income of $5.1 million or $0.10 per share, as compared to a non-GAAP net loss of $13.2 million or $0.28 per share for the comparable prior year quarter. As discussed on previous conference calls, non-GAAP or pro forma net income or loss excludes the impact of certain non-cash charges and the impact of certain tax benefits. Please refer to our disclosures regarding the presentation of non-GAAP financial measures in today's earnings release and 8-K filed with the SEC. On a combined basis, inventor royalties and contingent legal fees expense increased 152%, relatively consistent with the 140% increase in revenues in Q3 2014 as compared to the prior year quarter.…

Thanks Clayton. The team at Acacia had another strong quarter executing on its mission that is teaming with the originators of valuable technologies, patent owners to provide them a path to compensation when their proprietary creations are being used without their permission. To date, we've returned over $640 million to these patent owners, our customers. Over the last year, we changed our approach to our business and commensurately our operating model to hone in on fewer patent portfolios that have a higher potential return for the patent holders and for us. These portfolios have highly defensible claims and sit in high-revenue markets. We call them Marquee portfolios. We're starting to see the fruits of this change in approach. Over the last year, as we've cemented these changes and executed on our strategy, our view of the future of the market and how our company will fit into it, remains unchanged. Specifically one, we see a growing need for our service, which has kept our Marquee portfolio opportunity pipeline strong and two, we also have a trial calendar populated with Marquee portfolios, which is making our revenue pipeline more robust than ever. Looking at the results over the last two quarters, we're guardedly happy about our progress. While we're still not quite ready to proclaim that we're out of the revenue trough, our performance over the last couple of quarters are a testament to two tenants of our strategy. First, our focus on Marquee portfolios is the best path to scaling revenue. Our Marquees have proven to have the high return on investment we expected. Second, we're seeing the continued association of revenues and trial dates. While we aspire to a monetization process that is not so closely tied to trial dates, one with less friction on which reliance on costly…

Thank you, sir. The question-and-answer session will now begin. (Operator Instructions) Our first question will come from Mark Argento with Lake Street Capital Markets. Mark Argento – Lake Street Capital Markets: Yes, good afternoon, guys.

Hey Mark. Mark Argento – Lake Street Capital Markets: Maybe break down the 20 dates in the first half of 2015 for us a little bit in terms of Markman's versus actual trials? Is it mostly actually trials, or does that include Markman's as well?

No, they're all trials and the breakdown is on the website. I can tell you there is a number of Adaptix, but they are all trials. Mark Argento – Lake Street Capital Markets: Got you. All right, I will check the website, too. And when you guys when you -- surveying the landscape, obviously there's been some pretty high-profile cases that have been overturned, larger-dollar jury awards that have been overturned by the appeals court. Could you talk a little bit -- and most of those have been in the software -- in and around the software. Could you talk a little bit about your exposure to software and what you think about how your portfolios are positioned right now and your overall risk relative to what's been going on in the market?

Well, you're right. Most of those have related to software cases and our exposure to -- I am going to use business method Mark instead, which is I think what they’ve really been attacking if you will. Our exposure there is minimal because we've anticipated I guess if you will this change and we've just have not been focusing our resources on helping folks with those patents in the last couple of years. To the extent there is some big damages awards on non-business method patents that have been reversed, again, the idea of marquee portfolios to have a lot of patents and to not necessarily rely on any one patent in a portfolio to earn all the income. I will say that amidst all of the disappointing results for patent plaintiffs that a lot of folks have been focusing on -- there’ve been some equally encouraging results in the patent licensing business at large. Tessera has done a great job monetizing its portfolio. Certainly there are a lot of practicing entities out there that can point to success stories monetizing the portfolio. So I wouldn’t say that the news has all been bad. In fact, I would say the news has been mixed. I would say the news has been worst for smaller entities relying on smaller portfolios. It's been better for entities with larger portfolios and we definitely see ourselves in the latter category. Mark Argento – Lake Street Capital Markets: Great. That's helpful. And when you talk about the strong pipeline that you see right now, obviously on the IP intake side, is it -- what is drawing -- what's driving the pipeline? Is it a specific vertical? Is it the fact that you have been -- you have run at kind of a multi-vertical strategy for a few years now like, say, energy, which you have been focused on for over a year, starting to bear fruit. What's the key driver to building that pipeline and ultimately converting it?

Today it's still what I am going to call technology, meaning smartphones, telecommunications, computing, but we're seeing promising signs and we hope to make announcements that reflect the promising signs on the other two verticals we have, but as of today to be perfectly candid that's where we've had the reputation, that's where we have a very good in-depth understanding of portfolios that we've seen time and time again over the last seven years and that's where we're seeing a lot of the opportunity. Mark Argento – Lake Street Capital Markets: Great. Congrats on a strong quarter guys. Thanks.

Thanks.

Thank you. Our next question will come from Brian Prohm, Cowen and Company. Brian Prohm – Cowen and Company: Hey Matt, how are you?

Am good, Brian. How are you? Brian Prohm – Cowen and Company: Am well, thanks. Hey, a quick question on the quarter. The revenue is real solid. Profitability may be a little bit lower than expected even with the one-timer in there related to the expense accrual for the negative rulings in NetApp and the other case. What is driving this? Can we expect any improvement over the near term as revenue builds, as more marquee portfolios are monetized in the coming quarters?

Yes, I think while there's a couple of things going on right now. One is obviously the revenue is not where we think it can be right now. So that's where we see the profitability increasing. We see that that profitability increasing without a commensurate increase in the expense line, so that's the first thing and the most important thing. I think the second thing that's going on is there are a lot of trial dates coming up and the trial portion of litigation is expensive and we have as many trial dates as we do. And you know when I say 20 for the first half year that's probably a little light. You can go to the website and count them up yourself or anyone out there on the call. So lot of trial dates, and so you're going to see some expense mount up as a leading indicator of what we think is going to be future revenue. So I think between those two things the fact that we expect the revenue to go up and the fact that expenses around litigation tend to go up as you hit trial dates, that is a large part of what you're seeing on that profitability line. Brian Prohm – Cowen and Company: Okay. Understood. So next I'll build on Mark's questions a bit. On the outlook, 20-plus in the first half of next year, but you alluded to 10 this year. I know there are a few left here in the fourth quarter. And as much as I do look at the website for that information, I see that there are some trials in -- on Adaptix in Japan here to the end of the year. And then I know that there were still some things pending in the med tech portfolio world in Germany. Can you update us on those and whether or not they are still something we should be modeling for 4Q? Thanks.

You know, it's always difficult to respond to questions and inadvertently provide guidance, which of course, you know, we're not doing. Having said that I can give you some facts and you guys can use them in any way you want in your models. One is the trials on MedTech in Germany primarily resulting to what I'm calling the Boston Scientific patents around stent grafts and primarily against four -- are proceeding, they're progressing and we expect those to be wrapped up in this coming quarter. Secondly, there are a number of cases in Adaptix for Japan. Those are occurring. I don’t think they are going to be wrapped up this quarter. I think there's a higher likelihood of the U.S. cases wrapping up on Adaptix before the Japanese cases. So those are my responses with respect to those two fact points. Brian Prohm – Cowen and Company: Okay. And let me just fill on that Adaptix in the U.S. piece. Because I know that there are -- there was a Markman order, I believe it was in September, maybe it was in August and it seem like the claims construction was quite favorable. And then as much as there seems to be a high correlation between in your prepared remarks these Markmen orders and some resolution maybe that's a good way to read that into what we might expect between down the balance of the year, is that fair?

Well, the mark men… Brian Prohm – Cowen and Company: Only there's few questions, right, I mean that there are multiple Adaptix litigations in multiple jurisdiction.

Right. And you'll notice that we've executed some Adaptix licenses with one company that was not a defendant and one company -- well, we haven't just been executing Adaptix licenses with companies that are on the trial doc sort to speak in Q1, right. Having said that look, I mean a markmen is to potential catalyst, the trail date is a much stronger potential catalyst. The trial date is a much stronger potential catalyst if the mark men went well. That's the way this business works and that was an assumption I was using building out your models. Brian Prohm – Cowen and Company: All right, very good. Last question for me then, no top-tier portfolio in the quarter, I mean the Renesas partnership effectively filling that role in the quarter and when will we -- I believe, we actually starting to get some litigation there. Is that something that you expect could be monetized in 4Q or is that more of a '15 of that for the model? Thanks.

We did just file some suits on Renesas. We expect to file some more quite soon. Renesas is really something that pushes out beyond the first half of '15, probably even beyond '15. It's going to be populating trial dates; I would imagine the, '16 timeframe. The activity with respect to new marquees, I think some cycles in our company were definitely diverted by Renesas in a good way and it is one of those things where a bird in hand as oppose to two in the bush, might be what's it play there. The arrangement is there. The patents are there to be monetized and we're obviously focused efforts on them, and people will see the results of those efforts in the coming months as we show our hand more and more so to speak. But we certainly have been extremely busy with either portfolio. Sometimes portfolios can be quite completion. It can take a bit of time to make sure that we're paying the right price and we've done the right amount of diligence on them. And I would say we run into that phenomenon a couple of times this quarter and that's what's really going on. Brian Prohm – Cowen and Company: Understood. Hey, one last quick one. Are there any other older portfolios that might be impacted adversely by the Alice ruling where you are accruing expenses in the current quarter?

I don't think we've had portfolios impacted by the Alice ruling expect for Digitech. Brian Prohm – Cowen and Company: Right.

And we did not -- we'd not accrue, in other words the accrual you just saw was not on Alice matter. So as mentioned before Alice exposure we think it's quite minimal. Brian Prohm – Cowen and Company: Okay. They are not correlated then.

They're not, no. They're not probably. Brian Prohm – Cowen and Company: All right. Congratulations on the solid revenue and I'll pass it on. Thanks guys take care.

Thank you.

Thank you. The next question will come from Darrin Peller with Barclays.

Hi guys. Thank you very much. It's James Berkely stopping in for Darrin.

Hi James.

How are you doing?

Good

I guess my first question just on the pipeline of trial dates given the correlation with the revenue there. Could you just speak to the sustainability of that real quick? Obviously you said you've got 20-plus coming up in the first half, and that compares to the three in 2013 and the 10 or so in 2014. So if you could just speak to that first, I would appreciate it.

As I said, we might have in fact have bit more than 20% quite a bit more for the first half of '15, but you're going to see a general upward trend. And of course, as part of that general upward trend you're going to see some spikes as you see a general upward trend. So I'm not saying that you're going to be seeing 25% in Q2 and 30% in Q3 and 40% in Q4, but you should see and we think you will see if you look on for example 12 -- or 1 year, 12 month kind of increments, you should see a general rising trend. So I mean that's what all I can see at this point. It's very difficult to get these things timed exactly right. Sometimes you get the dates sooner than you think. A lot of time they slip. But all in all, you should see a very nice, solid trial date calendar going forward with some spikes. I miss that general increase in trail date density.

Okay. Thanks. And then just on interparty reviews, if you could just talk to how you see the tactic trending in terms of usage and your focus on higher-quality patents, how that's playing out relative to those trends.

Yeah. The first off, let's just be frank with each other. The IPR is do make assertion, costlier and riskier, and that's just reality. Now the nice thing is that that increase in cost and risk is offset in two ways. One, because the process of monetization in general is getting costlier and riskier. The patent owners are turning to us more frequently with higher quality assets and so the increase in quality that we are experiencing on the intake more than offsets the extra cost and risk we're talking on the licensing side. The second thing is that when patent survive IPRs they're going to command a far higher royalty rate than patents that are never subjected to IPRs. And so, we think we're going to have plenty of patents that will survive IPRs and we're looking forward to putting those into play. We think that affect is going to offset the increase in cost and risk. The final thing I'll say is that as the industry is reacting, and by the industry I don't just mean company like ours but I mean the law fire arms out there. As we're all collectively reacting to this new phenomena what you're seeing is effectively the cost structure is adapting remember when you and I PR there is less work to do for the litigation firm. So you're going to see the cost come more into line, people are going to get smarter about where they spend their dollars on these IPRs. Final thing I will say is that ended the tree month's proceeding September 22 only 58% of the cases have seen institution of the IPRs. So you're getting a lot cases we're not even getting going on the IPRs and in a situation like that the deleterious effect on the company that brings those IPR applications that's still the remains in place. So again, I think we definitely saw some folks getting caught a little by surprise by the IPRs initially, but I think as we go in that steady state understanding in reaction to IPRs we see it as and the impact versus being somewhere between neutral and probably positive.

Hey, great. Thanks that's really helpful. And then just lastly, if you don't mind, if you could just walk us through the income tax line, just how to think about that going forward when modeling it out?

Sure, sure.

For tax rate basically.

Sure, sure. So as we indicated in the press release today with respect to the Q3 2014 it really for all 2014 we are recording a full valuation allowance related to any net operating loss, a tax assets generated during the period. So at the end of the day what we're looking at least for the foreseeable future is a tax line that primarily will just reflect foreign taxes paid to the extent we are executing license agreements with licensees and foreign jurisdictions where withholding taxes would be a factor. And so, we are not anticipating showing the tax benefit mind and to the extent that we do have NOLs that we are able to utilize and to offset I guess any tax expense that tax line really will just be related to foreign taxes.

All right. Thanks you very much. I'll turn it over.

Thank you. And we'll now hear from Mike Latimore with Northland Capital Markets.

Thanks Mia, thanks a lot. Just on that last comment about IPR. You gave a statistic there of 58%, can you mention what that relates to one more time?

Actually, I'm going to turn the call over to Jamie Siegal.

Sure. Hi this is, Jamie. That statistic is based on data released by the patent and trademark office with regard to 58% of the IPRs that are requested to be instituted actually getting instituted. So 42% of the IPRs that are requested are rejected.

Run out of gates.

Yeah, run out of gates.

Yeah. All right. And then, obviously Adaptix is in a number of trials and negotiations. After -- if I recall, Adaptix related -- Adaptix related revenue generally are the higher gross margin so it's really what that isn't in line?

Well, yeah, the way Adaptix fuming to this company was not in a normal manner right in the sense that we within M&A transaction. I can't really go into much more detail because I guess I might be inadvertently telling you what a more normal manner of revenue is, but let's put it this way the return on Adaptix, the way the revenue looks to margin are going to be different.

Yeah. And he has you know had this I guess that was a one-time coast in the third quarter here. Are there any events in my cost or one time cost in the fourth quarter?

By one-time cost we mean the -- the Shalamo and the Summit Data, summit data. My view on that is a very small handful of cases that could come into play I don't see happening, but there's always a small number potentially. One thing I should say is that those two cases they are especially, unusual And that’s fair for two reasons. One, as mentioned earlier, we are looking at cases, the standard changed on us, right, at some point recently. And so when the standard changed as we're doing with inventory that's a couple of years old then you're inevitably are going to see some stress testing of your previous judgments, right, they are based on old standards. You'll see less and less of that because we're dealing with older inventory. The second thing I'll say is that even within that subset of assets where the assumptions change on us midway through in an unexpected fashion so to speak, this is still a minority because we're really talking about two cases where the awards were made based on license defenses that are not very typical in our portfolio. So again, we do see these two cases as relatively as outliers.

Got it, okay. And for the three deals that amount to over 10% of revenue. I don't know if you can provide any detail around that such as who they are with or whether there were murky portfolio involved there can you provide any color on those three?

No, I can't. regulations are regulations, but we do in our report try and give you as much information as we can if you read the queue closely. That's all the deal I can give you.

Got it, got it. Okay. Thank you.

Thank you. Our next question will come from Richard Kramer with Arete Research.

Hi. Thanks very much. A couple of quick ones. First of all, when you are heading into a trial with a company like Apple in February 15, you touched on the cost. And given the lengths of Apple-Samsung that we've watched over the last four or so years, can you give us a sense of your expectations or your theories of how long these trial processes could take? I'm just conscious that expectations will be that first half series of trials turn very quickly into revenue. And how are you thinking about that especially with respect to the cost?

I can't give you a complete unvarnished answer because it's part of our trial and licensing strategy with respect to, in this example Apple, right. But generally speaking we have not been in disputes that have been as long running or frankly as costly as the Apple against Samsung if you will, it's a different animal all together. Having said that I don't rule out the possibilities that you can have a trail come and go and even when and you might have some one win deal that's certainly a possibility, but historically what we know is looking back at our company and what's been happened with our matters we've tended to see revenue. Now if we're talking about any one matter I suppose you could certainly see it go upon an appeal and maybe that doesn't cash out, but we do have 20 of these dates and we do think all of those are going to resolve -- are going to be resolved settlements in and around the trial time.

I guess next question is with respect to the recently announced Blackberry settlement, how should we think about a company that might not be making smartphones in a year's time or few years' time? And how does that affect at all the upcoming litigations you have with Blackberry? I think I counted four or five upcoming trials with them on your listing.

Well, you can't. I think frankly you look at Blackberry the way your question implies one would look at blackberry right. It's a company that had plummeting sales. Company whose dedication to these spaces being questioned right. And there's no point spending a lot of resources is necessarily on the company like that except to the extent that you have to protect the loyalty rates.And sometimes what you need to is protect a royal of your age that you're not -- you've got a race you can go with, rig that that and they won't be attacked by other companies. But having said that it is a company that is struggling and we're mindful of that.

Okay. And I guess the last one is relating to the portfolio like Cellular Communications where, looking at it, you've got a whole heap of trial dates in 2016. But you mentioned that the first patents start expiring in 2018. And how do you mitigate the risk that potential licensees just try to delay the process and then start to say that, well, there's just not enough time left in the portfolio for you to really monetize?

Well, total communications as the Nokia, Seaman's portfolio the dates go up beyond 2018 so and three's more of those patents coming. So in that particular case we're not so worried about people delaying and patent expiring. Number two, I'd say that there are cases, a minority of them where you've got under expiring, but the reality is that as people sell units the damages go up, right and you can't be in it and your royalty that's where damages case is damages case. It is what it is so to speak and so whether the patents expired or not at least we're not looking for any injunction in a lot of these cases right especially in the U.S. we're looking just for damage, also what they sell. Look like what we can collect and that's the end of it. In Europe it’s a different case because obviously the injection to available remedy but be careful not to insert patterns in Europe. We definitely look at the expiry date and then part of the factors we look at before decide to certain Europe.

Okay. Thanks that's really helpful.

Thank you. And our next question will come from [David Hoff] (ph) Private Investor.

Hi Matthew, great quarter I just had two quick questions. The Renesas portfolio with Hitachi patents we saw litigation filed in California late last week and early this week. Were there any matching litigation -- foreign litigation filed?

Not as of now.

Okay. Okay. My second question is Pantech filed bankruptcy. I know that they were scheduled early in the Adaptix case schedule. Is there plans to move them and slide someone else in.

I am looking at my list. I don't even see Pantech meaning, maybe the date is still hanging around, the trial date, but I don't think anyone is planning on actually having that trial. So definitely it's going to free up some cycles. Whether or not the court will let us slide someone else in, I am not sure, but as you know probably been just about anyone else there, we've got plenty to keep us busy in Q1.

Right. Okay. Thank you. My last question relates to the American Vehicle Appliances portfolio, we should some of the interparty reviews, final decisions in the next maybe three months or so. Any patents that get through, should we see the cases -- the case stays lifted almost immediately and that they'll be added to the trial schedule?

Well, you should. Will they, it depends. It's a great question. We ask ourselves that question. But the reality is, look, if it comes through unscathed or if it comes through intact, then, yes, at some point, it's going to get lifted. When, who knows, but we're hoping it would be soon after.

Well, there is a lot of patents being challenged, there is a lot of patents in the case. There's kind of one being challenged you may be get with five or more, you're doing okay. So that's just my point of view.

Yes, absolutely. We'll see what comes out, but any of the profiles it's going to vary but let's see, you're right.

Okay. Thanks for taking the questions. You had a great quarter.

Thanks David. Have a great day.

Thank you. Ladies and gentlemen, this will conclude the question-and-answer session. I'll now turn the call back over to Mr. Vella.

Thanks everybody for your support and for your attention to this call today. Again we will be in the Park Hotel in New York City, sorry, the Palace Hotel in New York City on November 5. Look forward to seeing you guys now. Bye for now.