Lauren Stevens - IR Philip Vachon - Chairman Dean Witter - CFO Timothy Robbins - GM Intellectual Property

Mark Argento - Lake Street Capital Markets LLC Mike Latimore - Northland Capital Markets

Good day and welcome to the Unwired Planet Third Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Lauren Stevens. Please go ahead.

Thank you. Good afternoon and thank you for joining us today to discuss the results of Unwired Planet’s third quarter 2015. Today joining me are Phil Vachon, Chairman of the Board of Directors; and Kip, Chief Financial Officer; and Timothy Robbins, General Manager, Intellectual Property. The third quarter of fiscal 2015 financial results press release was issued at the close of market today, and if you’ve not seen a copy, you can find it on our website at www.unwiredplanet.com. For your convenience, this call is being recorded and will be available for playback from our website. Further, any remarks that may be made on this call or included in our earnings press release about future performance, plans, objectives, and strategies of the Company may constitute forward-looking statements which are made pursuant to the Safe Harbor provision of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements do not constitute guarantees of future performance and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by the forward-looking statements. We assume no obligation to update any forward-looking information discussed during this call and we encourage you to refer to the Safe Harbor language included in our earnings press release and our periodic reports filed with the SEC which described risk factors that may impact our future results. And with that, I'd like to turn the call over to Phil. Please go ahead.

Thanks, Lauren. The biggest news of the quarter we hired Boris Teksler as our new CEO. We expect Boris to start June 1 after he transitions from his position at Technicolor. Boris has a wealth of experience in the patent business, both as a licensee and licensor. This unique skillset of perspectives will accelerate our discussions with prospective licensees. Boris also maintains excellent relationships with the major players in the industry that are patent search. A bit about the process, as you all are aware we waited quite a long time to hire our CEO, and we decided to wait for Boris, the Board felt like that wait for the right candidate was going to be worth it. The search committee was led by our largest shareholders, Board representative, Andy Dodge; Andy, along with Bill Marino did hardwork of vetting candidates and recommended Boris for the full Board. Andy and Bill also served on the top committee that negotiated Boris’s competition. So we want to thank them for their significant efforts over the last two quarters. Boris will also be immediately cast with the search and selection of a full time permanent CFO once he arrives. We don't have anything to discuss today on Boris’s plans or budgets for the company. We will ask him to speak to that on the next earnings call. There has a lot of activity in our various cases which are included in our blog post and Tim will touch take questions on in a moment. And now I'd like to turn over to Kip for the discussion of the financial results.

Thank you, Phil, and good afternoon, everyone. For the third quarter ending March 31, 2015, the company is reporting revenue of $1.3 million and a net loss of $9.6 million on a GAAP basis. Details behind these results are as follows. Net revenue during the third quarter of 2015, as in our second quarter, consisted of the recognition of $1.6 million in license revenue from amounts previously recorded as deferred revenue under the Lenovo licensing agreement. That reduced $5.3 million in fees payable under the Ericsson MSA. During the third quarter of 2015 patent licensing expenses decreased by $1.2 million to $7.9 million compared to the $9.1 million reported in the second quarter. This decrease in patent licensing expenses is primarily due to an increase - I beg your pardon, due to a decrease in scheduled legal activity in the U.S. partially offset by an increase in legal fees and costs in Europe associated with FRAND and competition matters related to the UK and Germany Patent Enforcement Litigations for our LTE patents during the quarter ended March 31, 2015. For the third quarter of 2015, general and administrative expenses totaled $2.1 million, no change from the previous quarter. There were no unusual charges or credits in these expenses over the quarter just ended. From a balance sheet perspective, we ended the third quarter and fiscal 2015 with $95.7 million in combined cash and investments, and $13.7 million in current liabilities, $5 million of which is deferred revenue. The reduction in cash from June 30, 2014, was $50.3 million of which $20 million was the contractual payment of the Ericsson revenue share amount related to the Lenovo transaction, and $30.3 million of which was due to operations. And with that, I'd like to turn it over now to Timothy Robbins, our General Manager of Intellectual Property.

Thank you, Kip, hello, all. As has been our practice, we have put up a comprehensive blog post about an hour ago I believe, so in case those of you haven't had a chance to read it, I will summarize some parts of it. Before I get into the specific developments over the past three months, I wanted to once again layout the framework for our business. I will try not to be redundant as to what I said last time, though most of that remains equally applicable today. We are first and foremost a licensing business and not a litigation business. Most of the activity in pursuing licensing is private and confidential, and not visible to the market. Fundamentally and frustratingly, licensing is a very slow and opaque business, there are and always have been licensing discussions underway, basically with every sizeable player in the mobile space with a few exceptions. There are developments in each one of these discussions, many of them are positive and seem to be getting closer, a fewer of them are negative, and none of them unfortunately can be shared in detail with the public. I do assure you that all the details are routinely shared with our very attentive Board. Someone suggested that we should accept any available deal and there are some regardless of value just to show the market that it is possible. That's why if it's available to us but the Board of Directors and the Management Team, exercising our collective judgment has now determined that accepting such a deal at this moment is in the best interest of shareholders, even in view of the very legitimate concerns held by many. Many of your expressed concerns revolve around the increasingly difficult U.S. legal systems and the U.S. patent office. We share these concerns at least for the short term. Our primary non-cash assets consist solely of pieces of papers reflecting legal rights. In our view the U.S. courts the U.S. PTO have taken steps, intentionally or unintentionally to shift and there are those rights. I would point out that this is a pendulum that eventually will revert back towards normal or positive for IP right holders. In the meanwhile, and as a result, we have concentrated our efforts and our resources in Europe which we consider to have a very different legal environment currently in which patents retain substantial and unambiguous value. The significant majority of our spending last quarter relates to our European assertions which I address in a moment. As it relates to the U.S. we have streamlined the expenditures in two ways; number one, we can send it to a stipulation of non-infringement in the Google case pending in Nevada so that we can focus on the appeal of the claim construction. Appeal cost for those of you not aware are a tiny fraction of litigation costs. We also amended our fee arrangement to substantially reduce near term spending. Number two, we voluntarily consented to a stay of this court case pending post grant review challenges at the patent office. Our expenditures on square for 2015 have been and will be minimal. Let me now turn to specific matters pending. I will largely summarize from the blog for those listening in case you have not had a chance to access it. I'll start with the UK case, which as a reminder includes Samsung, Huawei and Google as defendants. Notably, a fourth case management conference was held March 19 and March 20 in London. The judgment resulting from that conference is found on our blog and I encourage you to read it. We consider this judgment, as well as the general progress being made in the UK to be very positive. In particular, we know that Mr. Justice Colin Birss required the defendants to make open licensing offer by June 30 if they wish to be considered willing licensees. And I would turn your attention to paragraph 77 of that judgment. The technical cases will consist of five successive single patent trials about two months apart beginning in October, with the second one at the end of November, both of those trials relate to LTE patents. And the trial will continue, the last trial will be held July of 2016. There will be a separate trial to take place in October of 2016 which will cover competition and FRAND damages issues, which the topic that the March conference was largely about. Notably, our statement of case on FRAND - how FRAND royalty should be viewed and calculated is due tomorrow, May 1. We've been hard to work at that for over a month. The defendants will respond on June 30, along with their licensing proposals. And then we will have opportunity to reply on July 31. Additionally, with respect to non-technical matters, Ericsson has filed an application to strike out, which means grant summary judgment against. Many of the defendants counterclaims regarding competition. This matter will be argued in live hearing taking place over three days in the middle of July, somewhat like a mini trial. If Ericsson is successful, and we hope they are, it would have the effect of eliminating or greatly reducing many of the competition arguments raised by the defendants and would have a substantial reduction in our cost burden going forward. This matter in the UK overall is currently the greatest portion of our litigation spending, particularly in view of the FRAND and competition matters but also the various substantial, technical trials that are upcoming. Finally about the UK, it is a loser paid system and we will be able to recover costs for issues that we win or as we would be obligated to pay cost for the issues that the other parties. In some we feel very good about the progress in the UK. In Germany, we have a corresponding case that includes the same three defendants along with HTC and LG. The judge in Germany has divided procedurally the cases in a different way, and we'll hear the LTE patents collectively on June 30 as in two months for now, against Huawei and Google. The second trial will take place in November, will relate to one of the LTE patents along with a 2G and a 3G patent including Samsung and LG as defendants. And then finally, we are informed that a third trial will take place probably in February of 2016 that will address all remaining patents against all remaining parties. One exception is HTC who is currently in an appeal regarding a request for a bond to be posted for their cost in the event if we were to lose. As expected, and as common in German system, the parties have initiated in proceedings after European office and the German patent office. To remind you in Germany, the trial itself is only related to infringement. Germany is currently our third greatest area of spending. I'll now turn to our second greatest area which is the upcoming Apple trial in San Francisco. Summary judgment and other pretrial motions were submitted in March and were recently argued in April, last week in fact in a live hearing. The parties are waiting, the results are lingering in the underlying motions. Essentially a summary judgment motion is a request for the judge to decide an issue as a matter of law, for example, non-infringement without putting into the jury. Assuming those motions are not granted, we will move forward to trial with four remaining patents. Jury selection will occur on May 28 and the trial will begin on June 1. We don't know exactly how long the trial will take but I would estimate two weeks. Finally one more matter of note which is the Microsoft case in the District Court of Delaware. As a reminder, this is a breach of contract claim to recover an additional license payment to Microsoft planning [ph]. Party had disputed the contract and how it should be interpreted and we have agreed to an early mutual case evaluation process where a magistrate judge will give us an early non-binding evaluation of the case of the parties, and we will then enter into alternative dispute resolution. If the process is unsuccessful, summary judgment motions would be filed with Judge Robinson in the fall. I will now turn the call over to the operator to allow for questions.

Thank you. [Operator Instructions] We'll go first to Mark Argento with Lake Street Capital Markets.

Hi, good afternoon. I have a couple of questions, first one being regarding and this is preferred on the stipulation you entered into with Google Nevada case. Could you explain what the stipulation is and what does it allow you to going forward in terms of appeal?

Sure Mark, shall I - do you want to ask them all now or should we take them one by one?

Well, we'll just go one by one.

Okay. So following the Marksman ruling which came out in December of last year, we put heads together with Google and their council and agreed to negotiate a stipulation of non-infringement on the basis of the claim construction. That stipulation also includes a severance meaning the matters that had been decided - a construction could be severed into a new case which would allow us to them appeal the claim construction to the federal circuit which as I mentioned is first of all necessary for our case, and second of all much less expensive. There is one element the parties are waiting on the judge to rule which is, in defense of indefiniteness, essentially it's a technical argument that there are words in one of the claims of one of the patents, they are indefinite and the patent should be invalid on the basis of that indefiniteness. Once that final issue is resolved, the stipulation will be final and we will then be right for appeal which is, we are eager to do. Does that make sense or was that too legal?

No, no, I mean it makes sense. I guess the new part for me is this negotiation with Google and effectively that just preserves your right to be able to appeal at some point in time?

Well, sometimes the legal system seems rather RK [ph], we - we are not - we would not otherwise be able to appeal in the middle of the case. We would have to wait for all matters to be completed, procedural substantive etcetera. Before we would be committed with a final judgment, to then go to appeal which could have pushed us out of here. So this is a way for us to get a portion of the issue severed into its own matter, have a final judgment related to it and allow us to appeal it.

Got you, alright, that's helpful. And then in regards to the Apple case which I believe is set to go to trial in June, could you just review a couple of the key, I know on the blog post you had mentioned there is a few different summary judgment items that could crop up between now and then. What are some of those key items that waiting to hear back on?

Sure, so in all patent cases summary judgment motions are typical and I think different venues tend to handle them differently. The north Distract of Northern California is statistically inclined to take that summary judgment matters more so than say East Texas would be. And what it basically means is the judge will decide that a matter is in fact the case without needing a jury to decided it. And typically that is either because it's a matter of law or because no reasonable jury could conclude X, Y or Z. And defendants often file many, many summary judgment motions; in this case it's no exception. In the case of Apple they have requested summary judgment of non-infringement on each one of the four patents on a technical argument that they make about their product being different than the claiming of the patent. And they have one of those for each patent, and then in addition to that they have variety of other defenses such as summary judgment invalidity, summary judgment related to on-sale bar which basically means the product was sold by open wave more than a year before the patent was filed. And I can't - I've lost count, but there maybe a dozen of those summary judgment motions. And the judge could grant or deny, or in fact carry many or all of those motions. And what I mean by carry means so to do the trial and decide it afterwards. In case he disagrees with the jury verdict. So because this is the Northern District of California, it is - I guess like, as I said statistically, summary judgment is more possible than one would expect in other venues.

That's helpful. And then when you look at and kind of a little bit bigger picture and obviously, with Boris coming in as well, I'm sure there could be some reach to the program. But when you think about the opportunity to expand, I know you talked about being a licensing company but as we've all learned, even with the best of intentions it's hard sometimes to compel somebody that won - get a license deal put in place until you brought with [ph] some level of litigation. When you look at the deal you have with Ericsson and in particular and the way that set up, they have become prohibited just from a pure economics perspective to scale up the monetization campaigns in terms of using contingent legal, just given the structure of those deals and the revenue splits, especially being offered gross revenue. Yes, do you like you have to do something with those splits to be able to be effective in freeing up enough of the economics to be able to really expand those monetization campaigns?

Is that directed towards Tim, Phil…

Whoever wants it can take it, and if you want to take the can, take the can [ph].

This is Phil, I'll take it. You never want to out run your capital, one; and so Kip told you we have about $95 million to repay. You see what these cases cost and to carry. And, so you got to be pick your places right. Sure, what I like to have a better deal from Ericsson on rates and structure, and lots of, lots of flexibility but that's not what I have and what we have all the time is making sure that the amount of money that we're spending is to the kind of returns we can get, and not out running our capital. So, it's not a perfect world, sure I get a better deal but that's not what I have today.

I'd like to supplement that answer as well, if I could Mark. One thing that may not be readily apparent is that the matters that we have ongoing in the UK and Germany - we have an opportunity to scale across the industry. And what I mean by that is, if we have judicial determination that our LTE patents are essential to LTE. And we also have judicial ruling that are royalty demands are complying with FRAND inappropriate. We ought to be able to leverage that across OEMs, even those that aren’t necessarily in the litigation. I don't know if that's clear, I think that's one of the benefits in standard essential patents because the standard is the same for all phones, it's not quite the same as saying open way of legacy patent where particular infringement must be demonstrated to a particular product. So there is a scaling opportunity also what we're doing in Europe.

Got you. Hoping that acted to be kind of the battering around so to speak and being able to get some deals done on a more global basis.

And even more so, with that judgment in hand I don't believe a court, the English courts, if they decide a patent is valid essential and the royalty is reasonable, I don't believe they will another party take up those same arguments again and waste three years. I think those matters well have been determined.

Alright, that's helpful. Alright guys, I appreciate it.

And we'll go next to Mike Latimore with Northland Capital Markets

Hi, great, thanks. This UK case is interesting, can you talk a little bit about this requirement to have an open licensing offer. It almost sounds like they scheduled at the kind of midst they have to license. I guess that's one question, is that kind of the implication as almost sort of suggesting that admit your license, having your license in a second - if they do that does it have to be some visible range or can I just - $2 or something - maybe just still little more details on that open licensing offer meaning?

Mike, I assume that was directed to Tim. I'll tell you what we are somewhat - we are believing in new trails, I'm not aware that this has happened before and anywhere in the world, quite frankly. I believe the judge has the best of intentions that the parties make reasonable offers that are - that he is able to examine himself. What the defendants choose to do is entirely up to them. I will point out that the guidelines we were given regarding these offers was that they were to be made in the same level of generality and specificity as the offers that we have previously made that are in the public domain. And moreover, it's to be assumed that the patents are valid and essential in making that offer. So tuning amount of compilery [ph] might occur but I certainly take it with a level of gravity that - and I would hope all the other parties do as well that this should be a serious offer. And I think I should point out, you will see within that judgment there is a lot of discussion about the term, willing licensee and that term is used very often in the context of essential patent licensing under FRAND terms, and the general notion is, if you are a willing licensee to pay for standard essential patents, you should not be subject to injunction. And so I think what you will see in examining that judgment is that there is a tone there that suggests if you want to claim to be a willing licensee, show me how willing you are, otherwise an injunction may come into play in the UK market. I think that's the backdrop that you should be thinking about.

Brilliant answer [ph]. And I guess I'm misinterpreting this but it almost sounds like - we are seeing that there is some infringement going on here sort about the outlook.

You know that would be probably an overly optimistic view, I mean I believe he thinks we have serious intellectual property that needs to be examined and given its day in court. Technically, I believe he probably thinks it's likely that some of this is legitimate, we probably doesn't yet to what. But I wouldn’t want you to draw the conclusion that it means we've already won the cases.

Okay. And then the LTE trends, does they relate to both, the handset and sort of infrastructure part of the ecosystem?

The patents in the lawsuit I believe all have claims that we are on the handset, and I also independently and separately have claims that read on a base station, they both - they are all related to the area interface which is the communication between the base station and the phone. So that is not true of every LTE patent we have, but I believe it is true of all the patents that are in the cases.

Okay, and then just wanted to get some clarity on the U.S. dual case, is sort of sounds like - it tends to fully appeal the both marked men ruling, as well as the patent office IPR ruling there, fully appealing both.

We have a variety of options in the context of the PTO, we have other claims and we have other pending applications. So we're able to make amendments and certain things like that in some cases. So it's not completely clean but yes, there are elements we will appeal and other elements we will fix in a different way. But with respect to the five patents that have been construed in the December ruling, we feel that we must reverse certain of the claim constructions to preserve the value of this patents.

And just last question on cost, you said that there was some streamlining of the U.S. litigation cost, I believe - I guess anyway to quantify that?

I guess you could - an easier way to do it would be to see - I think Kip said, we've been $1.3 million less than last quarter, I think that's largely - it's probably, savings are probably given a little bit better than that with respect to the two U.S. cases.

So then we can assume that's roughly - that will also stay at that level going forward, the U.S.?

Kip, do you want to take that - there will be continued realized savings from that streamlining, I'm afraid I haven't done the numbers in my head.

That will be event driven but I think they are in steady state for the moment.

Okay, thanks a lot.

And that concludes our question-and-answer session. I'd like to turn things back to Phil Vachon for closing remarks.

Thank you, all very much for participating. And we will have further information as it becomes available and we'll see you on the next call. Thanks very much.