Note 8. Business Combinations

6 Months Ended

Jun. 30, 2012

Business Combination Disclosure [Text Block]

8.         Business Combinations

On March 30 2012, the Company entered into a number of agreements with Digitude Innovations, LLC (“Digitude”), Preservation Technologies LLC (“Preservation”), and Robert and Susan Kramer (collectively the “Agreements”). The Agreements were subject to closing conditions that were satisfied on April 19, 2012. Pursuant to the Agreements, the Company paid $45.8 million and acquired among other things (i) certain patents, patent rights and a covenant not so sue and (ii) all of the issued and outstanding membership interests in Altitude Capital Management LLC (“ACM”).

The following table summarizes the estimated fair values of the components of identifiable intangible assets acquired and liabilities assumed as of the date of acquisition (in thousands):

Patent assets	$	27,850
Proprietary data and models		1,500
Trademark		1,000
Covenant not to compete		400
Deferred tax asset		8,373
Deferred tax liability		(8,143	)
Goodwill		14,785
Net assets acquired	$	45,765

The fair values assigned to identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. The excess of purchase consideration over the fair value of identifiable intangible assets acquired and liabilities assumed was recorded as goodwill. Patent assets represent the ownership or rights to more than 500 U.S. (and more than 50 non-U.S.) patents that were held by Digitude, certain sub-license rights to patents licensed exclusively by Preservation and a covenant not to sue entered into with Robert Kramer.  The patent assets have an estimated weighted-average life of 55 months.  The portfolios acquired cover a broad range of technologies including Mobile Handsets, TVs, Cameras, PCs, Media Players, Content Delivery, Video-on-Demand, Internet Streaming, and Enterprise Networks and have increased the Company’s total portfolio of patent assets by more than 30%. Proprietary data and models primarily consist of specialized data and processes related to patent analysis and valuation methodologies. These assets have an estimated weighted-average useful life of 48 months. Trademark represents the value of the Altitude Capital trademark with an estimated useful life of 48 months. The covenant not to compete represents certain restrictive covenants pursuant to which Robert Kramer has agreed to refrain from competing against any of the Company’s lines of business for a period of 21 months. Goodwill recorded as a result of this acquisition is primarily related to enhancing the Company’s position as a market leader capable of executing highly complex structured acquisitions. The value of goodwill is deductible for tax purposes.

Under ASC 805-10, acquisition-related costs are not included as a component of consideration transferred but are required to be expensed as incurred. Acquisition-related costs were $0.4 million and $0.5 million for the three and six months ended June 30, 2012 and are included in selling, general and administrative expenses. Pro forma results of operations reflecting the acquisition have not been presented because the effect of the acquisition is not material to the company's results of operations.