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`Network-1 Security Solutions, Inc. (NSSI.OB-OTB: BB)
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`January
`28, 2011
`Issue
`
`The Most Powerful Name In Corporate News and Information
`The Most Powerful Name In Corporate News and Information
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`The Most Powerful Name In Corporate News and InformationThe Most Powerful Name In Corporate News and Information
`CURRENT ISSUE | COVER ARCHIVES | INDEX | CONTACT | FINANCIALS | SERVICES | HOME PAGE
`No Longer a Security Software Company, Network-1 Security Solutions, Inc. is
`Helping Other Companies Monetize Their Intellectual Property – the First Being a
`Patent Covering Power Over Ethernet, Which is a New Solution to Bringing
`Operating Power to Network Devices
`Company Profile:
`Network-1 is an intellectual property licensing company. It
`focuses on the acquisition, development, licensing and
`protection of intellectual property assets. The Company
`presently owns six patents (the “Patent Portfolio”) covering various telecommunications and data
`networking technologies including, among others, patents covering the delivery of power over Ethernet
`cable for the purpose of remotely powering network devices, and the transmission of audio, video and
`data over computer and telephony networks. The Company’s strategy is to pursue licensing
`opportunities with companies in the industries that manufacture and sell products that make use of the
`technologies underlying its patents as well as with other users of the technology.
`
`
`Network-1 has recently been licensing its remote power patent (U.S. Patent No. 6,218,930) covering the
`control of power delivery of Ethernet cables (the “Remote Power Patent”). The Company had entered
`into 11 license agreements with respect to its Remote Power Patent that includes, among others,
`license agreements with Cisco Systems, Inc. and Cisco-Linksys, Extreme Networks, Inc., Netgear, Inc.
`and several other major data networking equipment manufacturers, Microsemi Corporation and D-Link
`Corporation.
`
`
`Network-1’s strategy includes continuing to pursue licensing opportunities for the Remote Power Patent
`from vendors of Power over Ethernet equipment in order to resolve possible infringement of the Remote
`Patent by such vendors.
`
`In addition, Network-1 continually reviews opportunities to acquire or license additional intellectual
`property for the purpose of pursuing licensing opportunities. It also reviews new opportunities to form
`strategic relationships with third parties to develop, commercialize, license or otherwise monetize their
`intellectual property.
`
`
`Technology
`Security
`Software &
`Services
`(NSSI.OB-
`OTB: BB)
`
`Network-1
`Security
`Solutions,
`Inc.
`
`445 Park
`Avenue, Suite
`1028
`New York, NY
`10022
`Phone: 212-
`829-5770
`
`
`Corey M. Horowitz J.D.
`Chairman, CEO and Secretary
`Mr. Horowitz is Chairman and Chief Executive Officer of the Network-1 and has served as Chairman of
`the Board of Directors of the Company since January 1996. Mr. Horowitz is a private investor and
`President and sole shareholder of CMH Capital Management Corp., a New York investment advisory
`and merchant banking firm, which he founded in September 1991. Mr. Horowitz has a B.A in Economics
`from the University of Michigan and a J.D. from Northeastern University School of Law. He began his
`career practicing corporate law at Skadden, Arps, Slate, Meagher & Flom in New York City.
`
`
`
`Interview conducted by: Bud Wayne, Editorial Executive, CEOCFOinterviews.com, Published – January 28, 2011
`
`CEOCFO: Mr. Horowitz, how did you come to be a part of Network-1 Security Solutions, and what is your vision for the
`company?
`Mr. Horowitz: Network-1 Security Solutions was originally a security software company. It sold software that provided
`security for networks and I had been an early investor in the company. I made several investments as far back as 1995 to
`help the company grow as a security vendor in a time when networks were growing quickly and the need for security was
`increasing. We went public in 1998. The security software space became very competitive and we weren’t executing as
`well as I thought we could have so I became more involved to help make the company more successful. However, by
`2002-2003 it was clear to me that it was not going to succeed in that business so we began to look for new business
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`AVAYA INC. AV­1014
`Avaya Inc. v. Network­1 Security Solutions, Inc.
`IPR2013­00071
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`

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`opportunities. One of the opportunities presented to us was to help a company named Merlot Communications that was
`affiliated with us that needed some funding support. We analyzed the company and agreed that we would provide some
`funding for that company and in return we acquired their intellectual property and agreed to license it for the benefit of
`both companies.
`
`
`Between 1995 and 2004 a lot of companies were innovating and creating a lot of great technologies and as a result a lot
`of new patents were issued. However, a lot of companies failed and couldn’t succeed in their businesses but still had a lot
`of very interesting intellectual property. They deserve to reap the benefits of those inventions and the intellectual property,
`so we decided that we would build a business based on licensing intellectual property. We acquired the intellectual
`property from Merlot, we gave it some cash to fund its business and we gave it an interest in the outcome of our licensing
`of the intellectual property. Therefore, our vision was and is to work with companies that have intellectual property that
`don’t have the financial where-with-all or the resources to monetize that intellectual property. Network-1 will undertake to
`do it for them and share in the benefits of such licensing.
`
`
`CEOCFO: What is your current technology or product focus?
`Mr. Horowitz: Between 2004 and 2010, we spent six years licensing intellectual property related to a technology
`standard called Power over Ethernet. That standard is a standard that allows companies to send operating power over
`their data and computer networks to certain devices connected to the network. Therefore, devices attached to the
`network, whether they are VOIP telephones, network security cameras or Wi-Fi wireless access points that require power
`to operate, now can receive that operating power over the data network. Instead of having to plug every one of those
`devices into the wall, they can just plug it into their computer network and the companies can then send operating power
`over the network to those devices. Companies want to have the central delivery of operating power to power those
`devices because its easier to control the power by having it centrally supplied and backed up so you can provide for
`power in the event of a power failure.
`
`In 2003, the IEEE, which is standard body for technology improvements, came up with a way of sending operating power
`over data networks, call Power over Ethernet, that happens to use the technologies described in our patent. So basically,
`our product focus related to Power over Ethernet is to license the vendors of Power over Ethernet products to the
`technologies described in our patent.
`
`
`CEOCFO: What is your revenue model?
`Mr. Horowitz: We focus on licensing revenues. In the case of our Power over Ethernet patent we have now licenses from
`a selection of companies that pay us royalties for the use of the technologies described in the patent. Some have paid us
`one-time payments and others pay royalties through the expiration of the patent, which is 2020. They pay us based on
`the sales of those products that are licensed; those products that are compliant with the industry standard for Power over
`Ethernet. It is very good model because those are very high margin royalties. We don’t have a big infrastructure, we don’t
`have a lot of cost of goods, but we do have very high margin licensing revenues.
`
`
`CEOCFO: How many players are in this particular area you are in?
`Mr. Horowitz: Virtually every large technology company licenses their intellectual property. There are also several so-
`called non-practicing entities or partnerships that accumulate intellectual property for the purpose of licensing the patents
`to third parties.
`
`
`CEOCFO: What about the Power over Ethernet?
`Mr. Horowitz: In the Power over Ethernet space, I believe there are one or two other companies trying to license patents
`related to the technology. They have different patents than ours and I think they are in litigation presently. We have been
`in litigation twice, and both times we went were successful in licensing the patent to the defendants in the case. In fact,
`we went to trial this summer and settled during the trial resulting in licenses with Cisco Systems, Adtran, Foundry
`Networks, Extreme Networks, and Enterasys Networks. We also have licenses with NetGear, D-Link Corporation and
`Microsemi. There are also probably over two hundred other companies practicing the same Power over Ethernet
`standard that we would like to license.
`
`
`CEOCFO: Would you tell us about your revenue and financial position for Network-1?
`Mr. Horowitz: We recently released our financials for the 3rd Quarter. We had approximately $31 million in royalties
`during the quarter, but that was because we had a large payment from the settlement of our recent litigation. In 2009, we
`had royalties of about $800,000. At the end of the 3rd quarter we had about $24 million in cash.
`
`
`CEOCFO: You are on the cutting edge of technology as far as I can see!
`Mr. Horowitz: I think a lot of companies now understand the benefits of intellectual property licensing as you can see by
`all the articles and patent litigation stories that always appear in the news. Many big companies are starting to sue
`companies for patent infringement and many companies are realizing that they have a valuable asset on their balance
`sheet. Therefore, they believe its proper to monetize the asset if possible. Again, it is very expensive, very time
`consuming, very difficult, and we would like to be able to partner with companies that don’t want to do it themselves, or
`don’t know how to do it themselves. We have an expertise in the field and the people know that we can help monetize an
`asset that they otherwise wouldn’t be able to monetize.
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`CEOCFO: You are actually sending operating power to devices over an Ethernet cable? Are there any complications to
`watch out for?
`Mr. Horowitz: You will recall those days when your phone in your home would ring when somebody called you. You
`never plugged in your phone at home into a power source. What happened was the phone company sent you power over
`the phone line. Those were telephone lines, not Ethernet cables. This is almost the same thing, but now the technology
`allows you to send it over the lines that carry data in an Ethernet network. It is going to be mixed with data. The beauty of
`the regular phone system was that everything attached to the phone lines was a telephone. In an Ethernet environment,
`lots of things can be attached to those Ethernet cables, so you don’t want to send power without knowing what is at the
`other end because the thing at the other end may not be built to accept power. What the invention covers is making sure
`that before you send power, you can be sure that the thing at the other end is something that can accept the power.
`
`
`CEOCFO: To accomplish growth what do you need to do going forward, are you going to remain focused on this remote
`power patent or are you going to look for other technologies to add to the mix?
`Mr. Horowitz: We see the industry growing by virtue of companies recognizing that they have patents and that it would
`be wise to monetize these patents. They are sitting on company’s balance sheets and they either don’t know what to do
`with them or don’t want to spend the time building a licensing company. Their business is to build products and build
`technology. Therefore, they may choose to partner with Network-1 and let us do it for them. That is where the growth is
`going to come from, aside from the fact that our royalties are growing from Power over Ethernet, because that’s a growth
`industry. We are also going to get growth because we are going to be doing this for other partners with strong patents as
`well. We are presently in conversations with lots of companies who have patents who are saying why don’t you do this for
`us? They are more than happy to let us do the work. We will do the financing; we will take the stress, take the time,
`monitor the effort and make sure it is done the right way because they don’t really know how to do this.
`
`
`CEOCFO: So this is the first of many to come then?
`Mr. Horowitz: That is our plan and objective.
`
`
`CEOCFO: In closing, why should potential investors be interested in Network-1 Security Solutions?
`Mr. Horowitz: They should be interested because companies are starting to realize how valuable intellectual property is.
`It is a very difficult endeavor, so very few people have the expertise that we have. It is not as though you are going to
`have lots of competition because at the end of the day patents are monopolies, so nobody else can have the same patent
`you have. We manage the process well, we have low overhead, low expenses and high margin revenues and we have an
`expertise that few other people have. It makes for an interesting story because there are very few public opportunities to
`do this. We believe our stock is very attractive for these reasons and because it is trading at a discount to the value of the
`deals we already have in place.
`
`disclaimers
`
`Any reproduction or further distribution of this article without the express written consent of
`CEOCFOinterviews.com is prohibited.
`
`We are presently in conversations with lots of companies who have patents who are saying
`why don’t you do this for us? They are more than happy to let us do the work. We will do the
`financing; we will take the stress, take the time, monitor the effort and make sure it is done the
`right way because they don’t really know how to do this. - Corey M. Horowitz J.D.
`
`Therefore, our vision was and is to work with companies that have intellectual property that
`don’t have the financial where-with-all or the resources to monetize that intellectual property.
`Network-1 will undertake to do it for them and share in the benefits of such licensing. - Corey
`M. Horowitz J.D.
`
`
`
`
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`
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`ceocfointerviews.com does not purchase or make
`recommendation on stocks based on the interviews published.
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