ParkerVision 2011.09.13 Rodman & Renshaw Conference Presentation

September 13, 2011

Jeff Parker

Announcer:  Our next presentation comes from Jeffrey Parker, Chief Executive officer of ParkerVision.

Jeffrey Parker:  OK. Well, thank you for joining us today. A quick introduction to our company. We're NASDAQ traded. We have about a $60 million dollar market cap on a little over 65 million shares outstanding. Basically, our company has been developing over the last number of years a pretty large volume of intellectual property primarily focused on radio frequency transmission and reception.

We have built up a patent portfolio today of about 178 patents that have been granted and about 50 patents that are still pending. We continue to file additional patents. The transmit technology of our intellectual property portfolio is where we've been focused on more recently, in terms of commercialization.

The business model of the company has been recently more of a fabless semiconductor company bringing chips to market to handset OEMs and relationships with chipset companies, but we've also had a licensing model of our intellectual property, as well.

I thought maybe a brief history of our company. How did we develop our technology and a little historical perspective might help you understand better where we are today at the company and where the company is going for its next steps.

We actually started developing our receiver and transmit technology back in the mid‑1990s. The research that we started was motivated by what we saw as a gap between what traditional radio frequency analog circuits could do back then and what we saw the future of our communications were going to require, especially in the mobile sector, mobile handsets and other devices.

Initially, we were thinking about licensing our approaches, especially focused on RF receivers, which is where our intellectual property started. Starting in 1999 and continuing to the middle of the 2005‑ish era, we had a dedicated staff and spent quite a bit of money working, showing companies what the technology could do and seeing if we could get them to license the technologies.

Also around that mid‑2000 era, because we weren't getting the kind of traction that we were hoping to get in licensing the technology, we actually fielded our own WiFi product that had our receiver and some of our transmitter intellectual property in it. In 802.11b network cards and routers - performance was very good. Lots of users loved this product. But it really wasn't a profitable venture for us and we didn't think it would be. It was more a demonstration of the technology.

We exited did that product line in 2007 or so, in favor of focusing our monies on further research and development and additional intellectual property creation in RF transmit technology, which is today where we’re focused on commercializing in chips, which I'll come to in just a minute.

In the transmit technology chips, we partnered with a company called Via Telecom. There are only two companies in the world that makes CDMA baseband processors. Qualcomm is one and Via Telecom is the other. Currently, we're seeking our first order from a mobile handset OEM for the technology which we call D2P or direct to power, from a prominent handset firm.

Very recently, we discovered and we filed a lawsuit against Qualcomm when we found them incorporating our receiver intellectual property into their chipsets. We had found that their products incorporated our technology back as far as 2007. With additional discovery we may find even earlier. Don't know yet. We filed an infringement lawsuit against them in the middle district of Florida about six weeks ago.

A little background on our technology and why was it incorporated by Qualcomm in their chipsets, and where are we in our commercialization efforts of our D2P transmit chipsets.

[4:37]

What started this whole venture with ParkerVision in wireless intellectual property is a novel approach that we developed in how you can receive a radio signal and decode it to its data. As I mentioned before, we began building intellectual property around this technique and this technology in the late '90s.

We engaged the firm Sterne, Kessler, Goldstein & Fox in Washington to assist us in creating our patent portfolio. Originally when we engaged them, our strategy was we needed a portfolio that had the kind of depth and care taken for intellectual property licensing and the ability to prosecute infringers if and when we were ever drawn into that. That was envisioned back in the late '90s.

The co‑founder of the Sterne Kessler firm, which is one of the most prominent independent patent firms in the country, is Rob Sterne, joining our Board of Directors in 2000 and yet today still remains on our Board of Directors. At that time, as I mentioned, our business was centered around intellectual property licensing.

Here's a little review of what was the legacy technology that our intellectual property was bringing to market to replace and what were the shortcomings and what did we bring to the market to improve what an RF receiver can do in a mobile product.

So that you know what and RF receiver is, first. It basically receives the data signal that's been modulated on a radio carrier and to extract the data that signal carrying.

The fundamental component that's in a radio receiver is called an RF analog mixer. And the mixer has been used for decades and decades to create receivers. And it converts the received radio signal to the baseband data that you're trying to extract which could be voice, or just the data or music.

And typically that was done, back in the '90s and earlier, in multiple steps of conversion from the radio frequency through multiple steps down to data. Those receivers are called superheterodyne receivers. When you use it in a single step, it's called a direct‑conversion receiver.

But if you use an RF mixer for direct conversion, there are some serious performance shortcomings that you have to live with. In superheterodyne, these mixers only perform frequency conversion but they do it with a minimal loss of energy from the received signal to the data. And this is why people like mixers is that they are very efficient devices.

And certainly for half a century, perhaps longer, they have been the mainstay of how superheterodyne receivers were built. But when you look at superheterodyne receivers, these multiple steps of conversion from the radio to the data domain, they have some real limitations.

If you're trying to run these superhet receivers at lower voltages you don't get great performance. And back in the '90s was the beginning of people thinking about fully integrating RF transceivers, receivers and transmitters, on silicon chips.

And you could see the voltages were going to start to get lower as the geometry of the semiconductors were getting smaller. The superheterodyne receiver has a fairly large footprint, it takes up a lot of space. It's expensive to implement because it has multiple filters for all the conversions steps that you have to go through.

It's not really practical to fully integrate a superhet because of those filters, they are off board components. And they absorb quite a bit of power. They're pretty power hungry types of receivers.

And they don't really scale nicely. In other words, you tend to set up the super heterodyne for a particular format, like GSM, or Hedge or CDMA. And then if you want to do multiple formats, it's not so easy to make that same receiver do multiple formats. It's a kind of a clunky architecture for that.

So in the late '90s, people were thinking about direct conversion. But direct conversion really hadn't been deployed in any volume at all, direct conversion from the radio signal right to the data. And people tried what's called sampling techniques. Instead of going with the analog pictures they started thinking about how can we sample in additional ways, the radio signal.

And they were using what was called, in particular, impulse sampling. The problem is these types of sampling systems didn't have very good energy transfer. Therefore, they didn't do a very efficient conversion from the radio signal to the data.

And the RF analog mixer was a much better data conversion device in terms of its efficiency but it had all kinds of problems with it, in terms of using it for direct conversion.

So, just to refresh your memory, where are we in the era? In 1999, there were 300 million phones that were shipped that year. And other technologies that were ultimately going to be deployed at very high volumes were just in their infancy. People were just thinking about the deployment of Bluetooth and wireless networking and GPS and things like that.

It was in that year that we announced that we had developed a very unique approach to enabling RF direct conversion receivers. That they would deliver the same high performance as superheterodyne receivers but eliminate all of the associated constraints because it was a direct conversion enabler.

Well, since that decade of 1999, or since that time of 1999, the industry has grown from those  300 million cell phones a year to 1.7 billion cell phones, creating the largest consumer market ever. There were 780 million wireless networking chips that will ship this year. And in addition, most of those handsets now come with GPS and Bluetooth and even other wireless bands.

When we first announced our technology in the late '90s here's what we said, this is right off the press release, "Company targets technology to become new standard to replacing RF heterodyne architecture."

I can remember those days. I have to think a little bit about it. It isn't like it was yesterday. But when we were saying that people were certainly not easily believing that we could do that.

And here's what I said in 1998: "We believe our receiver solution can become the industry standard and is vitally important to companies adopting wireless communication products because it creates a universal RF platform which is independent of RF frequency and communication formats. We are not aware of any other available solution that can deliver these same benefits."

At the same time, about a year later, Rob Stern, the patent attorney on our board, had joined our board at that time made the following statement: "We announced that we had completed multiple patent filings and we were going to be able to talk about our technology more openly.

It is rare for a patent attorney to have a pioneering invention to protect. However, that is exactly what we believe we are dealing with in this situation. Based on everything we know, what we are involved in is a fundamental breakthrough in RF technology. This filing program is one of the most extensive in which I have ever been involved and which I am aware of."

[11:35]

So what exactly is our approach and how does it differ from the long tradition of the analog mixer? Our solution is a discrete time sampling digital based type solution. It does that by sampling the radio signal. However, what's unique about it is it can actually do the same amount of energy transfer as a mixer, which it replaces.

It's an optimal single step conversion from the radio carrier to the baseband data. And it was specifically designed for direct conversion, which mixers were not. They were designed for multiple conversion steps. Ultimately, people put in direct conversions, but they had to take performance hits to do so.

The intellectual property we have contemplated the semiconductor advances back then and how we could benefit from the high levels of semiconductor integration into some on chip implementations. Unlike other sampling accounts that before us, prior arts which we cite throughout our patents , our techniques created a very practical RF sampling receiver.

As I said, the performance is equal or better than the mixer that it replaces and yet it eliminates noise that is received on the carrier signal, and all carrier signals arrive with noisier [tones?], in the conversion process from RF to baseband.

What does benefits would someone like Qualcomm gets in implementing our receiver intellectual property in their products. Why did they use it? A number of reason, but here in my opinion is the best four.

Number one. They have the best direct conversion receiver in the industry bar none. Their performance is the best direct conversion receiver that you can get, in sensitivity, how far can you listen to a signal, dynamic range, all kinds of benefits.

Number two. They absolutely lead the industry in adopting the next generation semiconductor processes in the smallest geometries. Our sampling receiver technology continues to work better and better with smaller and smaller semiconductor geometries.

Number three. One receiver can process multiple air interfaces ‑‑ GSM, Hedge, wide‑band CDMA, CDMA ‑‑ all through one receiver. This was considered crazy when we introduced it, but it could be done.

Number four. Transceivers and base band processors fully integrated on the same die. One of the products that we found that they're using our IP for is a full baseband processor with a transmitter and receiver on one die.

If you would have told somebody in this industry in 1999 that you could have put an entire cell phone on a chip, much less CDMA‑type cell phone or wide band CDMA, they would have thought you were crazy. These are the things that we talked about back in the late '90s, early 2000s and this is exactly what Qualcomm has gotten in their products.

As I mentioned, the first product that we found with our technology and then started shipping as early as 2007. We may find that other products even earlier were shipping. We'll find out through the discovery process.

How broadly has it been incorporated by Qualcomm? We think pretty broad. We still have discovery to do, but when you look at their product line and the performance they achieve and the kind of clients they appeal to, it appears that they have very broadly deployed this, perhaps even standardized on this throughout their entire product line.

How much does Qualcomm ship? How big a user could they be? Well, this year they're forecasted to ship between 450 and 500 million chipsets. They are the single largest wireless chipset company in the world, generating about $9, maybe, 10 billion in revenue this year from their RF chipsets. The rest of their revenue comes from licensing their technologies.

[15:29]

When I go back and think about what we had predicted what our technology could do, I think about the year 2000 when our CTO and inventor, lead inventor on the technology, David Sorrells, who is still our CTO today, went to an Agilent Conference and was a speaker and he basically predicted that 50 percent or more of all receivers built by the middle of that decade would be direct conversion receivers. I kid you not he was almost laughed out of the conference. He, by the way, turned out to be wrong. It was almost 100 percent five years later.

I predicted, and I stand by my prediction, that this technology has the potential to become an industry de facto standard and, certainly, if it's as broadly deployed by Qualcomm as we believe it is, it is probably well on its way.

In conclusion, on our receiver IP, we have a fundamental breakthrough in converting radio signals to baseband data. It is protected by a lot of patents that have already issued and more that are still pending. The seven patents that we've been asserted against Qualcomm is not the entire portfolio for this receiver technology. The piece of the portfolio that it alone has over 400 claims that Qualcomm will have to avoid in order to avoid infringement.

We continue to be recognized as an innovator in this area. The patent board, a company that ranks patent portfolios and their importance within the industry continues to score us on their quarterly Telecom scorecard, sometimes in the top 10. We're the only non‑Fortune company to be scored there in the reports. Sometimes in the top 25 and we're probably the only non‑billion dollar company to be on that list.

[17:06]

In the meantime, while we're cranking up our lawsuit against Qualcomm, we will continue to focus on the commercialization of our transmit chips. What do our transmit chips bring to the market? Well, today we see poor battery life in 3 and 4G phones, expensive to build these things in the factory, they generate a lot of heat, the network connectivity is spotty. Our solution helps improve all of those areas that people struggle with today in building three and 4G phones, and smart phones.

Phones with our technology chips inside will run longer. They will enable much thinner form factors because they generate almost no heat, active heat as in a traditional transmit solution. We have no production calibration and we eliminate parts on the production line, thereby eliminating or reducing the manufacturing costs.

Currently, we're actively engaged in sales and product demonstrations with more than one handset OEM, however, there is one in particular that is designing our chip that is designed for the Asian handset market, CDMA along with Via Telecom's baseband into a platform that they developed which will be on multiple phones.

We and the OEM currently have a team dedicated to this effort. Once the chip has been put on their boards, which will be in the coming few weeks, they'll test it, and after that [inaudible 18:39] a long road. We expect to get an order, stay tuned for more on that.

Our sales team stays focused on that particular space and continues to work with not only that handset OEM, but with some other OEMs and ODMs who use Via baseband processors for CMDA.

I know I've probably given you guys a lot of information in a short period. I think we have five minutes for questions so I'm opening up for any questions you might have.

Audience Member:  [inaudible 19:13]

Jeffrey:  It's a good question and if you look in the field you don't necessarily see too many  that can do both licensing and products, right? One of the fewthat can is a company called Qualcomm, but they also own the standard around which everone builds CDMA cellphones.

Right now, we discovered this infringement at a time when we have already launched the ship, with our transmit chips. A lot of our investors that have been counting on us to secure orders then. At this point, we still think it's still best for the company, because we're so far down the road, to see if we can't secure that order. And if we secure that order as we hope we do we'll have options, how we take the order, how we fulfill it, who knows? Stay tuned, that’s a good question.

Audience Member:  [inaudible 20:45] How did you discover the Qualcomm infringement [inaudible 20:49] You don’t have a law firm pursuing this right now?

Jeffrey:  Oh, no, we do. [A law firm is on retainer ?].

Audience Member:  [inaudible 20:55] retainer?

Jeffrey:  Let me come to that. A good question. OK. I'm sorry, folks, [inaudible 20:58] questions.

Audience Member:  That's fine.

Audience Member:  How do we find it?

Jeffrey:  I can't really go into the details how it will come out in court. That's a piece of information that really we want that to be attorney-client privilege right now. But we found them, conclusively, 100 percent certainty, and in terms of, is it only them, this has provided a road map for ParkerVision to look at finding other infringers.

It's unusual that an industry leader would adopt an intellectual property or technology and that their competition wouldn't figure it out and start to copy them. So is there likely there are other infringements? Probably. Have we found them yet? Not ready to make any announcements, but it won't be surprising to us if we find a number of other infringements.

In terms of attorneys, right now we have a litigator in Jacksonville, an intellectual property firm, who is also a litigator in Orlando. They are the ones who helped us sort through the infringement, do the analysis, make sure we were looking at this correctly. We didn't want to make any missteps here.

By the way, they're not the only firms. We want other law firms to further verify that there is an infringement here and that we understand what we are looking at.

We are in the process of choosing who will become a lead litigator, who is more of a nationally recognized name in the business of litigating patents. We expect that we will be choosing that lead litigator probably in the next four to six weeks. Somewhere in that time frame. It could be a little shorter than that, but....

Audience Member:  [inaudible 21:09] pay them cash…

Jeffrey:  So far, the firms that we have spoken to have been, and we have spoken to a number of them, of them introduced to us by Rob Sterner, a board member and tax expert. He has taken us to extraordinary firms. All the firms we're talking to are willing to work on this on a full contingency, partial contingency, or we pay the full fee.

My opinion, and I reserve the right to changes I'll know more, is that we'll probably ending up with what’s called a blended fee, where fees are either greatly reduced and maybe even capped, where we'll share the award with the attorneys.

The problem I have, personally, with full contingency is you tend to give away about 40‑45 percent of your award. I think we can do much better than that by capping their fees at a fairly reasonable rate and getting a much lower percentage of award and they’ll be just as motive and just as happy.

Audience Member:  Does Rob Sterne do litigation?

Jeffrey:  Not really. His firm's real expertise is in the prosecution of patents, forming portfolios, and then his firm has also formed a lot of expertise in what's called the patent re‑exams.

One of the things today that's become pretty popular for infringers is to try to get your patent into re‑exams, but they've got to go back a further review by the patent office to make sure that the validity of the patent is good and that there wasn't some mistake that was made.

Audience Member:  Jeff, do you have any idea whether Qualcomm's itself has attempted to secure IP coverage on this whole Internet [inaudible 23:14] so that they try to get the patent office between you and them?

Jeffrey:  I do have a little bit of knowledge on Qualcomm's trying to trying secure some IP in this area. What I can tell you is that they're too late. Our IP goes back to filings in 1997 or 1998. This isn't going to be one of those, "Gee, I got to the patent office five minutes too late." The kind of stuff that we see them trying to secure are things that were filed in 2005, 2006, 2007, way too late.

By the way, I want to point out, if you look at the complaint we filed against Qualcomm, it's for willful infringement guys. This isn't something that we believe they just accidentally stumbled into. They know they were using the technology that's covered by somebody else's intellectual property.

Audience Member:  Have they responded yet?

Jeffrey:  They will this week.

Announcer:  Sorry to interrupt. We do have to move to the next presentation.

Audience Member:  Thank you, guys.

Transcription by CastingWords