RPX Corporation
`Attn: Board of Directors
`c/o Mr. Marty Roberts
`One Market Plaza, Suite 800
`San Francisco, CA 94105
`
`March 17, 2016
`
`Dear Members of the Board:
`
`We are writing today as your fifth largest shareholder. We wish to express our great displeasure with
`numerous important aspects of the performance of RPX Corporation (the “Company”). Unfortunately,
`based on our disappointing recent meeting with the Company’s CEO, it appears that current
`management is not just unaware of its poor track record, but actually defends it.
`
`With the Company’s stock having declined 44% since its IPO and with the Board having made no visible
`changes to what we see as an obviously flawed strategy, we had no choice but to nominate a slate of
`highly qualified candidates to replace the current class of directors, including the current CEO. As you
`doubtlessly saw in our nomination letter, we sought a compromise with the Company by offering to
`work with you behind the scenes without resorting to a public campaign to gain director representation.
`Unsurprisingly, our overture has been met with silence, which we cannot help but interpret as a sign of
`entrenchment. As a result, we will now communicate our concerns to you publicly so that shareholders
`have the opportunity to compare our common sense ideas to your dismal track record.
`
`Below is a partial list of what we believe to be the Company’s failings along with suggested remedies:
`
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`Poor capital allocation: The Company’s purchase of Inventus Solutions appears to be a
`costly mistake. Not only did the Company purchase Inventus for 12.7x its 2015 Adjusted
`Pro-forma EBITDA, but it also did so when the Company was trading at only 1.6x its 2015
`EBITDA. Moreover, we believe that Inventus had negligible organic revenue growth in
`2015 after stripping out the effect of acquisitions. Going forward, we believe the
`Company should forgo any M&A activity unless the returns from that activity are greater
`than both the Company’s cost of capital and the returns from repurchasing stock.
`
`Excessive employee compensation: While the Company’s shareholders have suffered
`from underperformance relative to the Company’s peer group over every measurable
`period, its employees have not. Based on our estimates for employee compensation,
`which includes share-based compensation, we estimate that the average RPX employee
`earned approximately $400,000 in 2015. This is plainly excessive. We believe that the
`Company should refocus on its core business and reduce non-core employees. Further,
`we encourage the Company to replace departing employees with less expensive hires in
`other geographies by opening a satellite office in a less expensive locale or even
`relocating the headquarters in due time.
`
`(cid:120) Wasteful growth projects: The Company has been investing substantial sums in
`“growth” projects that appear to have little chance of ever being profitable. Based on
`our conversations with management, we believe that there is the equivalent of
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`VIRNETX EXHIBIT 2055
`Mangrove v. VirnetX
`Trial IPR2015-01047
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`

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`approximately 20 full time employees dedicated to insurance-related efforts. We also
`estimate that there is the equivalent of another 20 full-time employees dedicated to
`other speculative projects such as creating a B2B marketplace or clearinghouse for
`patents. Based on the average compensation of employees at the Company, these pet
`projects cost shareholders approximately $16 million annually. We note that the
`Company has been discussing many of these projects for the past five years, yet we
`believe they produce minimal revenues. We believe the Company should stop investing
`in these projects and should instead externally fund them by raising venture capital. If
`venture capital cannot be found, these projects should be discontinued.
`
`Stagnant core business growth: The Company’s core subscription revenue growth has
`steadily slowed from 21% in 2013 to nearly 0% in 2016, based on the Company’s
`guidance. We are puzzled that the Company is unable to grow even after compensating
`its employees more highly on average than Goldman Sachs.* We suggest that the
`Company restructure its sales force to refocus compensation on growing the core,
`profitable business. We further suggest that the board re-evaluate the Company’s
`management team to determine whether the right managers are present to guide the
`Company to a new phase of growth.
`
`Insular corporate governance: The Company went public five years ago and from the
`start adopted numerous shareholder-unfriendly defense mechanisms, including a
`classified board, no right for shareholders to call a special meeting or act by written
`consent, and super majority voting provisions to amend the bylaws. Each of these
`significantly reduces the Board’s accountability to its shareholders. We also believe that
`they stand in contrast to recent trends, such as the declassifying of many public
`Company boards. We believe the Board should immediately create a Chairperson
`position and appoint an independent director to that role. The Board should also
`remove the Company’s defenses and institute in their place best-in-class corporate
`governance practices for the benefit of shareholders. A Board that is not creating value
`for the Company’s shareholders should at least be able to improve corporate
`governance as a show of good faith.
`
`Cash hoarding: In the last five years, the Company has generated over $165 million of
`free cash flow yet it has paid no dividends to shareholders and repurchased only $26
`million of stock. Instead of returning cash to shareholders, the Company has hoarded
`cash and made expensive acquisitions. We believe that the Company should refocus its
`cash allocation priorities towards returning cash to its shareholders. Based on the
`Company’s subscription-based business, we believe a moderately leveraged balance
`sheet of 2.0-2.5x net debt/EBITDA should be targeted over the medium term. Over the
`next three years, we believe that the Company can return over $800 million to
`shareholders considering the Company’s likely cash generation, its current cash balance,
`and its capacity for incremental debt.
`
`When we recently met with management, we were hopeful that they would show some accountability
`for the resulting losses to shareholders. Instead, we were summarily invited to “sell the stock” if we
`didn’t like management’s decisions. In our view, that attitude betrays a fundamental misunderstanding
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`that the Company somehow belongs to senior management and shows an overt disdain for the true
`owners of the Company, the shareholders. We believe that shareholders should decide whether they
`want the current regime to continue guiding the Company or whether it is time to elect a new set of
`fiduciaries. From our perspective, change is desperately needed, and we have therefore nominated
`three directors for election to the Company’s Board of Directors.
`
`We reserve all rights and you will receive our books and records requests shortly.
`
`
`
`Sincerely,
`
`Nathaniel August
`
`
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` http://money.cnn.com/2016/01/20/investing/goldman-sachs-bonuses/
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