The Company's business is focused on assisting its clients to realize a return on their intellectual property investments. There is a real and substantial profit opportunity for many companies in the exploitation of valuable IP portfolios, particularly patents, through a focused licensing program. The business of patent licensing has grown from three billion dollars in 1980 to over one hundred-thirty billion dollars worldwide, in the US alone, according to several analysts.

A wide range of IP management styles are practiced today, ranging from R&D with no focus on obtaining patents, to defensive or reactive licensing, opportunistic ad hoc licensing, and proactive core and non-core licensing, to the highly effective, but rare, practice of treating licensing as a business. In parallel with these styles, the value these entities earn from their IP ranges from minimal, apart from what they embody in their products, to a substantial fraction of their total corporate net income. The latter has been a relatively recent trend. IBM, one of the leaders in this trend, saw its total licensing income grow from less than twenty million dollars in 1987 to over a billion dollars annually by 1997, representing a consistent yearly return of more than a dollar per share. By 2000, it grew to over $1.7 billion!

Today there are a handful of major companies, including IBM, Lucent, Texas Instruments, Hitachi and Canon, which earn hundreds of millions of dollars annually from licensing their patents. More recently, companies, such as Ford, Xerox, Boeing, and Seimens are putting the infrastructure in place to join the leaders. Unlike revenue that comes from product sales, licensing fees usually go almost entirely to the bottom line, and best-in-class licensing organizations often achieve a return of over 90%.

The typical large high tech company exerts minimal licensing effort to extract the potential of its IP. Although senior executives are becoming more aware of such potential, income is frustratingly negligible and derived from a small number of patents; a few companies are licensed and infringers are not challenged; a small percentage of their patented inventions are even used in their own products; and they get less than one patent per $10 million of R&D investment. All of these metrics can be improved, often by an order of magnitude, as the Fairfield Resources has demonstrated to many of its clients.

There are many published reports of substantial "non-core" licensing deals. Honeywell has generated over $400 Million from broad licenses to its auto focus camera patents, as did Pitney Bowes for inkjet technology. IBM received $15 Million for the sale of two excimer laser patents to LaserSight. Cirrus Logic sold twenty-five graphics patents to S3 for $40 Million, and there are many other instances in which companies have gained substantially in this way with minimum risk of reciprocal cost or exposure.

The principals of Fairfield have considerable direct experience and success in negotiating profitable licenses for the companies at which they were previously employed. By employing this experience, FRI and its clients can realize significant revenues by sharing licensing revenues from contingency fee arrangements. The Company had more than forty such arrangements in place as of January 1, 2002. In some cases, the Company has exclusive rights to large portfolios of several thousand patents issued throughout the world; in other cases the arrangement involves patents highly focused on emerging technologies, and in a number of situations, single patents covering important inventions.

Through the use of proprietary means of analyzing intellectual property portfolios, FRI can locate significant reservoirs of unrealized revenue potential. These may include cases where competitors are using a party's patents without a proper license and without the knowledge of the patent owner, and others where technology evolution will lead to such use. Still others represent substantial market opportunities for new products and services.