10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________

FORM 10-Q

________________________________________

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2012

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 0-26068

________________________________________

(Exact name of registrant as specified in its charter)

________________________________________

DELAWARE	95-4405754
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

500 Newport Center Drive, Newport Beach, California 92660

(Address of principal executive offices)

(949) 480-8300

(Registrant’s telephone number, including area code)

________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     x  Yes    o  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     x  Yes    o  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer  x	Accelerated filer  o
Non-accelerated filer  o (Do not check if a smaller reporting company)	Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  o    No  x

As of July 25, 2012, 49,714,283 shares of the registrant’s common stock, $0.001 par value, were issued and outstanding.

ACACIA RESEARCH CORPORATION
Table Of Contents
Part I.	Financial Information
	Item 1.	Financial Statements	1
		Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 (Unaudited)	1
		Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2012 and 2011 (Unaudited)	2
		Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2012 and 2011 (Unaudited)	3
		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011 (Unaudited)	4
		Notes to Consolidated Financial Statements (Unaudited)	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4.	Controls and Procedures	29
Part II.	Other Information		30
	Item 6.	Exhibits	30
Signatures			31
Exhibit Index			32

i

PART I--FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

ACACIA RESEARCH CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share information)

(Unaudited)

	June 30, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	296,866		$	314,733
Short-term investments	132,496			6,597
Accounts receivable	10,822			2,915
Prepaid expenses and other current assets	1,786			803
Total current assets	441,970			325,048
Property and equipment, net of accumulated depreciation	342			220
Patents, net of accumulated amortization	214,204			25,188
Goodwill	36,217			—
Investments - noncurrent	1,506			1,956
Other assets	462			465
	$	694,701		$	352,877
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses / costs	$	18,648		$	6,625
Royalties and contingent legal fees payable	19,103			23,508
Total current liabilities	37,751			30,133
Deferred income taxes	32,592			—
Other liabilities	654			632
Total liabilities	70,997			30,765
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 49,714,283 and 42,928,001 shares issued and outstanding as of June 30, 2012 and December 31, 2011, respectively	50			43
Additional paid-in capital	627,825			386,821
Accumulated comprehensive income (loss)	797			(1,830		)
Accumulated deficit	(8,836		)	(65,085		)
Total Acacia Research Corporation stockholders’ equity	619,836			319,949
Noncontrolling interests in operating subsidiaries	3,868			2,163
Total stockholders’ equity	623,704			322,112
	$	694,701		$	352,877

The accompanying notes are an integral part of these consolidated financial statements.

1

ACACIA RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share information)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenues	$	50,484		$	39,746		$	149,524		$	100,876
Operating costs and expenses:
Cost of revenues:
Inventor royalties	9,573			8,588			17,167			21,677
Contingent legal fees	6,607			13,039			10,355			22,406
Litigation and licensing expenses - patents	5,268			3,761			8,649			7,295
Amortization of patents	5,393			2,600			10,519			6,372
Marketing, general and administrative expenses (including non-cash stock compensation expense of $6,000 and $11,090 for the three and six months ended June 30, 2012, respectively, and $3,422 and $6,323 for the three and six months ended June 30, 2011, respectively)	11,903			8,302			25,634			18,287
Research, consulting and other expenses - business development	1,967			1,335			3,083			2,043
Total operating costs and expenses	40,711			37,625			75,407			78,080
Operating income	9,773			2,121			74,117			22,796
Interest and investment income	102			24			158			53
Income from operations before provision for income taxes	9,875			2,145			74,275			22,849
Provision for income taxes	(3,494		)	(306		)	(18,241		)	(7,454		)
Net income including noncontrolling interests in operating subsidiaries	6,381			1,839			56,034			15,395
Net (income) loss attributable to noncontrolling interests in operating subsidiaries	(60		)	300			215			(903		)
Net income attributable to Acacia Research Corporation	$	6,321		$	2,139		$	56,249		$	14,492
Net income per common share attributable to Acacia Research Corporation:
Basic earnings per share	$	0.13		$	0.05		$	1.22		$	0.38
Diluted earnings per share	$	0.13		$	0.05		$	1.19		$	0.37
Weighted average number of shares outstanding, basic	47,944,193			40,994,082			46,155,846			38,104,500
Weighted average number of shares outstanding, diluted	48,938,766			42,453,782			47,208,105			39,477,616

The accompanying notes are an integral part of these consolidated financial statements.

2

ACACIA RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net income attributable to Acacia Research Corporation	$	6,321	$	2,139	$	56,249	$	14,492
Other comprehensive income:
Unrealized gain on short-term investments, net of income tax benefit (expense) of $64 and $(332) for the three and six months ended June 30, 2012, respectively, and $0 for the three and six months ended June 30, 2011	158		—		2,588		—
Add: reclassification adjustment for losses included in net income	39		—		39		—
Comprehensive income	$	6,518	$	2,139	$	58,876	$	14,492

The accompanying notes are an integral part of these consolidated financial statements.

3

ACACIA RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2012			2011
Cash flows from operating activities:
Net income including noncontrolling interests in operating subsidiaries	$	56,034		$	15,395
Adjustments to reconcile net income including noncontrolling interests in operating subsidiaries to net cash provided by operating activities:
Depreciation and amortization	10,585			6,418
Non-cash stock compensation	11,090			6,323
Change in valuation allowance on deferred taxes	(10,237		)	—
Other	49			(9		)
Changes in assets and liabilities:
Accounts receivable	(7,907		)	(12,379		)
Prepaid expenses and other assets	(271		)	(63		)
Accounts payable and accrued expenses / costs	2,945			(497		)
Royalties and contingent legal fees payable	(4,405		)	9,931
Deferred income tax	5,522			—
Net cash provided by operating activities	63,405			25,119
Cash flows from investing activities:
Purchases of property and equipment	(188		)	(88		)
Purchase of available-for-sale investments	(239,952		)	—
Maturities and sale of available-for-sale investments	117,462			35
Purchase of ADAPTIX, Inc., net of cash acquired	(150,000		)	—
Patent acquisition costs	(40,435		)	(1,805		)
Net cash used in investing activities	(313,113		)	(1,858		)
Cash flows from financing activities:
Proceeds from sale of common stock, net of issuance costs	218,983			175,232
Distributions to noncontrolling interests in operating subsidiary	—			(2,897		)
Contributions from noncontrolling interests in operating subsidiary	1,920			877
Excess tax benefits from stock-based compensation	10,850			23
Proceeds from exercises of stock options	88			404
Net cash provided by financing activities	231,841			173,639
(Decrease) increase in cash and cash equivalents	(17,867		)	196,900
Cash and cash equivalents, beginning	314,733			102,515
Cash and cash equivalents, ending	$	296,866		$	299,415
Supplemental schedule of noncash investing activities:
Patent acquisition costs included in accrued expenses / costs	$	10,000		$	—

The accompanying notes are an integral part of these consolidated financial statements.

4

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business. As used herein, “Acacia” and the “Company” refer to Acacia Research Corporation and/or its wholly and majority-owned and controlled operating subsidiaries.  All intellectual property acquisition, development, licensing and enforcement activities are conducted solely by certain of Acacia’s wholly and majority-owned and controlled operating subsidiaries.

Acacia’s operating subsidiaries acquire, develop, license and otherwise enforce patented technologies.  Acacia’s operating subsidiaries generate revenues and related cash flows from the granting of intellectual property rights for the use of, or pertaining to, patented technologies that such operating subsidiaries own or control.  Acacia’s operating subsidiaries assist patent owners with the prosecution and development of their patent portfolios, the protection of their patented technologies from unauthorized use, the generation of revenue from users of their patented technologies and, if necessary, the enforcement against unauthorized users of their patented technologies. Currently, on a consolidated basis, Acacia’s operating subsidiaries own or control the rights to over 238 patent portfolios, which include U.S. patents and certain foreign counterparts, covering technologies used in a wide variety of industries.

In January 2012, a wholly owned operating subsidiary of Acacia acquired ADAPTIX, Inc. (“ADAPTIX”), a pioneer in the development of 4G technologies for wireless systems, for cash consideration of $160 million, as described at Note 8 to these consolidated financial statements.

Basis of Presentation.  The accompanying consolidated financial statements include the accounts of Acacia and its wholly and majority-owned and controlled subsidiaries. Material intercompany transactions and balances have been eliminated in consolidation. Noncontrolling interests in Acacia’s majority-owned and controlled operating subsidiaries (“noncontrolling interests”) are separately presented as a component of stockholders’ equity in the consolidated statements of financial position for the applicable periods presented. Consolidated net income (loss) is adjusted to include the net (income) loss attributed to noncontrolling interests in the consolidated statements of income. Refer to the accompanying consolidated financial statements for total noncontrolling interests and net income (loss) attributable to noncontrolling interests for the applicable periods presented.

In August 2010, a wholly owned subsidiary of Acacia became the general partner of the Acacia Intellectual Property Fund, L.P. (the “Acacia IP Fund”), which was formed in August 2010. The Acacia IP Fund is authorized to raise up to $250 million. The Acacia IP Fund acquires, licenses and enforces intellectual property consisting primarily of patents, patent rights, and patented technologies. The Acacia IP Fund is included in the Company’s consolidated financial statements for the periods presented, as Acacia’s wholly owned subsidiary, as the majority owner and general partner, has the ability to control the operations and activities of the Acacia IP Fund.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America in annual financial statements have been omitted or condensed in accordance with quarterly reporting requirements of the Securities and Exchange Commission (“SEC”).  These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011, as reported by Acacia in its Annual Report on Form 10-K.  The year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The consolidated financial statements of Acacia include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of Acacia’s financial position as of June 30, 2012, and results of its operations and its cash flows for the interim periods presented.  The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year.

5

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition.  Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectibility of amounts is reasonably assured.

In general, revenue arrangements provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by Acacia’s operating subsidiaries.  These rights typically include some combination of the following:  (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by Acacia’s operating subsidiaries, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation.  The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an additional minimum upfront payment.  Pursuant to the terms of these agreements, Acacia’s operating subsidiaries have no further obligation with respect to the grant of the non-exclusive retroactive and future licenses, covenants-not-to-sue, releases, and other deliverables, including no express or implied obligation on Acacia’s operating subsidiaries’ part to maintain or upgrade the technology, or provide future support or services.  Generally, the agreements provide for the grant of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the agreement, or upon receipt of the minimum upfront payment for term agreement renewals.  As such, the earnings process is complete and revenue is recognized upon the execution of the agreement, when collectibility is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition criteria have been met.

Cost of Revenues.  Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third parties and the amortization of patent-related acquisition costs.  These costs are included under the caption “Cost of revenues” in the accompanying consolidated statements of income.  

Inventor Royalties and Contingent Legal Expenses. Inventor royalties are expensed in the consolidated statements of income in the period that the related revenues are recognized.  In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by Acacia’s operating subsidiaries to acquire patents are recoverable from future net revenues.  Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the consolidated statements of income.  Any unamortized patent acquisition costs recovered from net revenues are expensed in the period recovered, and included in amortization expense in the consolidated statements of income.

Contingent legal fees are expensed in the consolidated statements of income in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement.  Legal fees advanced by contingent law firms that are required to be paid in the event that no license recoveries are obtained are expensed as incurred and included in liabilities in the consolidated balance sheets.

During the six months ended June 30, 2012 and 2011, Acacia entered into agreements with unrelated third parties resolving pending patent matters that resulted in the grant of certain intellectual property rights and recognition of revenues, a portion of which were not subject to inventor royalty and contingent legal fee arrangements, as well as the grant of certain intellectual property rights from certain of Acacia’s operating subsidiaries and recognition of revenues that were subject to inventor royalties and contingent legal fee arrangements.  Revenues recognized subject to inventor royalties and contingent legal fees are based on a determination by the respective operating subsidiaries.

Use of Estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Acacia believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, stock-based compensation expense, impairment of marketable securities, the determination of the economic useful life of amortizable intangible assets, income taxes and valuation allowances against net deferred tax assets and the application

6

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

of the acquisition method of accounting for business combinations, require its most difficult, subjective or complex judgments.

Concentrations. One licensee individually accounted for 72% of revenues recognized during the three months ended June 30, 2012, and four licensees individually accounted for 36%, 24%, 13%, and 12% of revenues recognized during the six months ended June 30, 2012. Three licensees individually accounted for 30%, 28% and 12% of revenues recognized during the three months ended June 30, 2011, and three licensees individually accounted for 45%, 12% and 11% of revenues recognized during the six months ended June 30, 2011. Two licensees individually represented approximately 65% and 23% of accounts receivable at June 30, 2012. Five other licensees individually represented approximately 18%, 15%, 14%, 13% and 10% of accounts receivable at December 31, 2011. For the three and six months ended June 30, 2012, 10% and 53%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. For the three and six months ended June 30, 2011, 20% and 54%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions.

Stock-Based Compensation. The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense, on a straight-line basis, over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. Stock-based compensation expense is recorded only for those awards expected to vest using an estimated forfeiture rate.

Fair Value Measurements. U.S. generally accepted accounting principles define fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows:

● Level 1 - Observable Inputs:  Quoted prices in active markets for identical investments;

● Level 2 - Pricing Models with Significant Observable Inputs:  Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.; and

● Level 3 - Unobservable Inputs:  Significant unobservable inputs, including the entity’s own assumptions in determining the fair value of investments.

Whenever possible, the Company is required to use observable market inputs (Level 1 - quoted market prices) when measuring fair value.

Investments in Marketable Securities. Investments in securities with original maturities of greater than three months and less than one year and other investments representing amounts that are available for current operations are classified as short-term investments, unless there are indications that such investments may not be readily sold in the short term. The fair values of these investments approximate their carrying values. At June 30, 2012, all of Acacia’s short term investments were classified as available-for-sale, which are reported at fair value on a recurring basis using significant observable inputs (Level 1), with related unrealized gains and losses in the value of such securities recorded as a separate component of comprehensive income (loss) in stockholders’ equity until realized. Realized and unrealized gains and losses are recorded based on the specific identification method. Interest on all securities is included in interest income. At June 30, 2012, short term investments were comprised of equity investments in the common stock of certain technology companies and investments in highly liquid, AAA, U.S. government fixed income securities with maturity dates ranging from 2012 to 2013.

The following table presents marketable securities’ cost, gross unrealized gains, gross unrealized losses, and fair value by major security type recorded as short-term investments as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government fixed income securities	$	124,957	$	22	$	(206	)	$	124,773
Equity securities of certain technology companies	6,410		1,489		(176		)	7,723
Total short-term investments	$	131,367	$	1,511	$	(382	)	$	132,496

7

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	December 31, 2011
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government fixed income securities	$	—	$	—	$	—		$	—
Equity securities of certain technology companies	8,427		169		(1,999		)	6,597
Total short-term investments	$	8,427	$	169	$	(1,999	)	$	6,597

Impairment of Marketable Securities. Acacia evaluates its investments in marketable securities for potential impairment, employing a methodology on a quarterly basis that considers available quantitative and qualitative evidence. If the cost or carrying value of an investment exceeds its estimated fair value, the Company evaluates, among other factors, general market conditions, credit quality of instrument issuers, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold, or plans or ability to sell. Fair value is estimated based on publicly available market information or other estimates determined by management. Investments are considered to be impaired when a decline in fair value is estimated to be other-than-temporary. Acacia reviews impairments associated with its investments in marketable securities and determines the classification of any impairment as temporary or other-than-temporary.   An impairment is deemed other-than-temporary unless (a) Acacia has the ability and intent to hold an investment for a period of time sufficient for recovery of its carrying amount and (b) positive evidence indicating that the investment’s carrying amount is recoverable within a reasonable period of time outweighs any evidence to the contrary. All available evidence, both positive and negative, is considered to determine whether, based on the weight of such evidence, the carrying amount of the investment is recoverable within a reasonable period of time. For investments classified as available-for-sale, unrealized losses that are other-than-temporary are recognized in the consolidated statements of income.  

Patents.  Patents includes the cost of patents or patent rights (hereinafter, collectively “patents”), acquired from third-parties or acquired in connection with business combinations. Patent acquisition costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to ten years.

Goodwill. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31 for Acacia) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Acacia considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then applies a two-step impairment test. The two-step impairment test first compares the fair value of the Company's reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the reporting unit exceeds its fair value, the Company determines the implied fair value of the reporting unit's goodwill and if the carrying value of the reporting unit's goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded in the consolidated statement of income.

Acacia uses the management approach, which designates the internal organization that is used by management for making operating decisions and assessing performance as the basis of Acacia’s reportable segments.  Acacia’s intellectual property licensing and enforcement business constitutes its single reportable segment.

Income Taxes.  Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s consolidated financial statements or consolidated tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized.

The provision for income taxes for interim periods is determined using an estimate of Acacia’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, Acacia updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is made.  

As of June 30, 2012, Acacia’s estimated annual effective tax rate is approximately 38%, mainly comprised of U.S. federal and state incomes taxes, foreign withholding taxes and nondeductible permanent expenses. Acacia’s effective tax rate

8

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

for the six months ended June 30, 2012 was 25%. The difference between the effective tax rate and the estimated annual effective tax rate is mainly due to the benefit associated with the release of valuation allowance in the first quarter of 2012 in connection with the acquisition of ADAPTIX, as described below.

Tax expense for the three and six months ended June 30, 2012 included foreign withholding taxes totaling $28,000 and $11,890,000, respectively, withheld by the applicable foreign tax authority on revenue agreements executed with third party licensees domiciled in certain foreign jurisdictions. The tax provision for the six months ended June 30, 2012 provides for the utilization (subject to certain limitations, if any) of the foreign taxes withheld as a credit against income tax expense calculated for financial statement purposes.

For the six months ended June 30, 2011, the provision for income taxes included foreign withholding taxes totaling $7,425,000. Excluding the impact of foreign withholding taxes, the 2011 annual effective tax rate was estimated to be lower than the 35% U.S. federal statutory rate due primarily to the anticipated utilization of available net operating loss (“NOL”) carryforwards to reduce U.S. taxable income.  

Tax expense for the periods presented reflects the impact of the calculation of tax expense for financial reporting purposes without the excess tax benefit related to the exercise and vesting of equity-based incentive awards. Under U.S. generally accepted accounting principles, if a deduction reported on a tax return for an equity-based incentive award exceeds the cumulative compensation cost for such instruments recognized for financial reporting purposes, any resulting realized tax benefit that exceeds the previously calculated and recognized compensation expense for such instruments is considered an excess tax benefit, and is recognized as a credit to additional paid-in capital, not taxes payable. The deduction related to the exercise and vesting of equity-based incentive awards is available to offset taxable income, if any, on Acacia’s future consolidated tax returns. Accordingly, the noncash tax expense calculated without the benefit related to the exercise and vesting of equity-based incentive awards totaling $3,239,000 and $10,850,000 for the three and six months ended June 30, 2012 was credited to additional paid-in capital, not taxes payable, and therefore does not reflect cash taxes payable. As of and for the six months ended June 30, 2012, taxes paid or payable totaled approximately $12,400,000, primarily comprised of foreign withholding taxes, as described above, and other state related taxes payable.

At December 31, 2011, Acacia had U.S. federal and state income tax net operating losses (“NOLs”) totaling approximately $69,062,000 and $61,493,000, expiring between 2020 and 2030, and 2015 and 2030, respectively. Utilization of NOLs and credit carryforwards can be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. 

Release of Valuation Allowance. As of December 31, 2011, the Company maintained a full valuation allowance against its net deferred tax assets. The net deferred tax liability resulting from the acquisition of ADAPTIX created an additional source of income to utilize against Acacia’s existing consolidated net deferred tax assets. Under the acquisition method of accounting, the impact on the acquiring company’s deferred tax assets is recorded outside of acquisition accounting. In addition, the Company estimated that certain other deferred tax assets related to foreign tax credits and other state related deferreds, totaling approximately $1,900,000, were more likely than not realizable in future periods. Accordingly, the valuation allowance on the majority of Acacia’s net deferred tax assets was released, resulting in an income tax benefit of approximately $10,237,000, recorded as a credit to income tax expense for the six months ended June 30, 2012. The offsetting amounts reduced net deferred tax liabilities, $8.3 million of which reduced the net deferred tax liability established in connection with the application of the acquisition method of accounting for the ADAPTIX acquisition. Refer to Note 8 to these consolidated financial statements.

9

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.  EARNINGS PER SHARE

Earnings Per Share.  Basic income per share is computed based upon the weighted-average number of common shares outstanding, excluding unvested restricted stock.  Diluted income per share is computed based upon the weighted-average number of common shares outstanding, including the dilutive effect of common stock equivalents outstanding during the periods.  Potentially dilutive common stock equivalents primarily consist of employee stock options, unvested restricted stock, and restricted stock units (“Equity-based Incentive Awards”).

Potentially dilutive common shares from Equity-based Incentive Awards are determined by applying the treasury stock method to the assumed exercise of outstanding employee stock options, and the assumed vesting of outstanding unvested restricted stock and restricted stock units.  The following table presents the weighted-average number of common shares outstanding used in the calculation of basic and diluted income per share:

	Three Months Ended June 30,		Six Months Ended June 30,
	2012	2011	2012	2011
Weighted-average common shares outstanding - basic	47,944,193	40,994,082	46,155,846	38,104,500
Dilutive effect of Equity-based Incentive Awards	994,573	1,459,700	1,052,259	1,373,116
Weighted-average common shares outstanding - diluted	48,938,766	42,453,782	47,208,105	39,477,616
Anti-dilutive Equity-based Incentive Awards excluded from the computation of diluted income per share	54,260	37,760	34,260	69,960

4.  GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

Acacia’s only identifiable intangible assets at June 30, 2012 and December 31, 2011 are patents and patent rights.  Patent-related accumulated amortization totaled $46,850,000 and $36,331,000 as of June 30, 2012 and December 31, 2011, respectively.

Acacia’s patents and patent rights have remaining estimated economic useful lives ranging from one to ten years.  The weighted-average remaining estimated economic useful life of Acacia’s patents and patent rights is approximately eight years.  The following table presents the scheduled annual aggregate amortization expense as of June 30, 2012 (in thousands):

Remainder of 2012	$	13,934
2013	27,589
2014	27,336
2015	26,874
2016	25,761
Thereafter	92,710
Total	$	214,204

For the six months ended June 30, 2012 and 2011, Acacia paid patent and patent rights acquisition costs totaling $40,435,000 (excluding the acquisition of ADAPTIX) and $1,805,000, respectively.  The patents and patent rights acquired have estimated economic useful lives of approximately one to seven years. Included in net additions to capitalized patent costs during the three months ended June 30, 2011 are accrued future patent acquisition costs totaling $1,000,000, which were incurred pursuant to the terms of the underlying patent acquisition agreements. Accrued future patent acquisition costs are amortized over the estimated economic useful life of the related patents acquired.

Refer to Note 8 to these consolidated financial statements for additions to patents and goodwill in connection with Acacia’s acquisition of ADAPTIX and the related application of the acquisition method of accounting.

During the six months ended June 30, 2012 and 2011, certain operating subsidiaries recovered up-front patent portfolio acquisition costs from applicable net licensing proceeds prior to scheduled amortization of such up-front patent portfolio acquisition costs, resulting in the acceleration of amortization expense for the applicable patent related assets. Accelerated amortization expense related to the recovery of up-front patent acquisition costs totaled $0 and $442,000 for the

10

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

three and six months ended June 30, 2012, respectively, and $1,063,000 and $3,446,000 for the three and six months ended June 30, 2011, respectively.

5.  COMMITMENTS AND CONTINGENCIES

Patent Enforcement and Other Litigation

Acacia is subject to claims, counterclaims and legal actions that arise in the ordinary course of business.  Management believes that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on Acacia’s consolidated financial position, results of operations or cash flows.  Certain of Acacia’s operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights.  In connection with any of Acacia’s operating subsidiaries’ patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions.  In such event, a court may issue monetary sanctions against Acacia or its operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material.

6.  FAIR VALUE MEASUREMENTS AND AUCTION RATE SECURITIES

As of June 30, 2012 and December 31, 2011, Acacia held investment grade auction rate securities with a par value totaling $1,975,000 and $2,425,000, respectively, consisting of auction rate investments backed by student loans, issued under programs such as the Federal Family Education Loan Program, which are classified as available-for-sale and reflected at fair value. Auction rate securities are classified as noncurrent for the periods presented. Contractual maturity dates range up to 35 years, with reset dates every 7 days to 63 days. The fair values of these securities are estimated utilizing an analysis of certain unobservable inputs (Level 3) and by reference to a discounted cash flow analysis as of June 30, 2012.  These analyses considered, among other items, the underlying structure of each security, the collateral underlying the security investments, the creditworthiness of the counterparty, the present value of future principal and contractual interest payments discounted at rates considered to be reflective of current market conditions, consideration of the probabilities of default, continued auction failure, or repurchase or redemption at par for each period, and estimates of the time period over which current liquidity related issues will be resolved.  Observable market data for instruments with similar characteristics to Acacia’s auction rate securities was also considered, when possible.

As of June 30, 2012 and December 31, 2011, the net other-than-temporary loss on auction rate securities collateralized by student loan portfolios totaled $469,000. The following table presents the auction rate securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the interim periods presented (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Balance as of April 1 and January 1, respectively	$	1,956		$	1,975	$	1,956		$	2,001
Total gains (realized or unrealized):
Recognized gains included in earnings (1)	—			—		—			9
Settlements	(450		)	—		(450		)	(35		)
Balance as of June 30	$	1,506		$	1,975	$	1,506		$	1,975

(1) Total realized gains on redemptions or partial redemptions at par of auction rate securities for the periods presented.

7. STOCKHOLDERS’ EQUITY

In February 2012, Acacia raised gross proceeds of $225,000,000 through the sale of 6,122,000 shares of Acacia’s common stock at a price of $36.75 per share in a private placement offering with certain institutional accredited investors. Net proceeds, net of placement agent fees and estimated offering expenses, totaled approximately $218,983,000. Acacia intends to use the net proceeds of this private placement to finance pending and future acquisitions of patents and patent royalties and other patent licensing vehicles and companies with patent assets, and for working capital and general corporate purposes.

In March 2011, Acacia completed a registered public offering of 5,750,000 shares of common stock. The public

11

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

offering price was $31.50 per share, and the net proceeds to the Company totaled approximately $175,232,000, after deducting underwriting discounts and related offering expenses. Acacia retained broad discretion over the use of the net proceeds from this sale of common stock, including the use of the net proceeds for operations and for other general corporate purposes, including, but not limited to, working capital, strategic acquisitions and other transactions.

8. ACQUISITION

On January 12, 2012 (the “Acquisition Date”), pursuant to the terms and conditions of the Agreement and Plan of Merger dated as of November 22, 2011 (the “Merger Agreement”) among Acacia Research Group LLC (“ARG”), a wholly-owned subsidiary of Acacia, Apollo Patent Corp., a newly-formed, wholly-owned subsidiary of ARG (“Merger Sub”), ADAPTIX, a Delaware corporation, and Baker Communications Fund II (QP), L.P. solely in its capacity as shareholder representative, ARG completed its acquisition of ADAPTIX, which held no material assets other than its portfolio of patents and $10 million in cash, through a merger of Merger Sub with and into ADAPTIX, with ADAPTIX as the surviving corporation (the “Merger”). Upon completion of the Merger, the separate corporate existence of Merger Sub ceased and ADAPTIX became a wholly-owned subsidiary of ARG.

ADAPTIX, a pioneer in the development of 4G technologies for wireless systems, is an award-winning technology company long recognized in the industry as one of the first developers of cutting edge 4G wireless systems. With patents filed as early as 2000, ADAPTIX’s research and development efforts have resulted in one of the world’s most significant intellectual property portfolios focused on 4G technologies. With its rapidly growing portfolio of 230 issued and pending patents in 13 countries, ADAPTIX’s innovations extend across a broad range of 4G technologies including OFDMA and MIMO.

The Merger is being accounted for in accordance with the acquisition method of accounting under Financial Accounting Standards Board (“FASB”) ASC Topic 805, “Business Combinations” (“Topic 805”). Topic 805 requires, among other things, that identifiable assets acquired and liabilities assumed be recognized at their fair values as of the Acquisition Date. Under the acquisition method of accounting, the purchase consideration is allocated to the assets acquired, including tangible assets, patents and other identifiable intangible assets and liabilities assumed, based on their estimated fair market values on the date of acquisition. Any excess purchase price after the initial allocation to identifiable net tangible and identifiable intangible assets is assigned to goodwill. Amounts attributable to patents are amortized using the straight-line method over the estimated economic useful life of the underlying patents.

The total consideration paid by ARG in connection with the Merger was approximately $160 million, paid in cash. Based on the total purchase consideration and the estimate of the assets acquired and the liabilities assumed by ARG as of the Acquisition Date, the purchase price allocation was as follows ($ amounts in thousands):

				Amortization Period	Annual Amortization
Assets Acquired and Liabilities Assumed:
Fair value of net tangible assets acquired	$	10,000
Intangible assets acquired - patents	150,000			10 years	$	15,000
Goodwill	36,202
Net deferred income tax liability	(36,202		)
Total	$	160,000

Amounts attributable to the patents acquired are being amortized using the straight-line method over an estimated weighted average economic useful life of the underlying patents, which is estimated to be approximately ten years. Goodwill is calculated as the residual after recording the identifiable net assets acquired and associated net deferred tax assets and liabilities.

Management is primarily responsible for determining the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as of the Acquisition Date. Management considered a number of factors, including reference to a preliminary independent analysis of estimated fair values solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The analysis included a preliminary discounted cash flow analysis which estimated the future net cash flows expected to result from the licensing and enforcement of the patent portfolio as of the date of acquisition, considering assumptions and estimates related to potential infringers of the patents, applicable industries, usage of the

12

underlying patented technologies, estimated license fee revenues, contingent legal fee arrangements, other estimated costs, tax implications and other factors. A discount rate consistent with the risks associated with achieving the estimated net cash flows was used to estimate the present value of future estimated net cash flows. The Company is in the process of finalizing the estimates and assumptions developed in connection with the independent analysis of estimated fair values solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. Any adjustments to the fair values of intangibles assets acquired, or estimates of economic useful lives of the intangible assets acquired, could impact the carrying value of those assets and related goodwill, as well as the estimates of periodic amortization of intangible assets acquired to be reflected in the statement of operations. In addition, the Company is in the process of finalizing its estimate and analysis of the fair values of certain tax attributes acquired. Any adjustments to the preliminary estimates of tax attributes acquired will increase or decrease the estimated net deferred tax liability recorded in connection with the acquisition method of accounting, with an offsetting adjustment to goodwill.

The Merger is being treated for tax purposes as a nontaxable transaction and as such, the historical tax bases of the acquired assets and assumed liabilities, net operating losses, and other tax attributes of ADAPTIX will carryover. As a result, no new tax goodwill will be created in connection with the Merger as there is no step-up to fair value of the underlying tax bases of the acquired net assets. Acquisition accounting includes the establishment of a net deferred tax asset or liability resulting from book tax basis differences related to assets acquired and liabilities assumed on the date of acquisition. Acquisition date deferred tax assets primarily relate to certain net operating loss carryforwards of ADAPTIX. Acquisition date deferred tax liabilities relate to specifically identified non-goodwill intangibles acquired. The estimated net deferred tax liability was determined as follows ($ amounts in thousands):

	Book Basis		Tax Basis		Difference
Intangible assets acquired - patents	$	150,000	$	—	$	(150,000	)
Estimated net operating loss carryforwards - ADAPTIX	—		46,565		46,565
Net deferred tax liability - pretax					(103,435		)
Estimated tax rate					35		%
Estimated net deferred tax liability					$	(36,202	)

The following unaudited pro forma combined results of operations for the interim period presented are provided for illustrative purposes only and assume the acquisition occurred as of January 1, 2011. The unaudited pro forma combined financial results do not purport to be indicative of the results of operations for future periods or the results that actually would have been realized had the entities been a single entity during these periods. The unaudited pro forma combined results are presented in thousands, except share and per share information.

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenues	$	50,484		$	39,746		$	149,524		$	100,876
Total operating costs and expenses	40,711			41,893			76,045			86,870
Operating income (loss)	9,773			(2,147		)	73,479			14,006
Interest and investment income	102			24			158			53
Income (loss) from operations before provision for income taxes	9,875			(2,123		)	73,637			14,059
Provision for income taxes	(3,494		)	(306		)	(18,241		)	(7,454		)
Net income (loss) including noncontrolling interests in operating subsidiaries	6,381			(2,429		)	55,396			6,605
Net (income) loss attributable to noncontrolling interests in operating subsidiaries	(60		)	300			215			(903		)
Net income (loss) attributable to Acacia Research Corporation	$	6,321		$	(2,129	)	$	55,611		$	5,702

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	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
Pro forma income (loss) per common share attributable to Acacia Research Corporation:
Basic earnings (loss) per share	$	0.13	$	(0.05	)	$	1.20	$	0.15
Diluted earnings (loss) per share	$	0.13	$	(0.05	)	$	1.18	$	0.14
Weighted average number of shares outstanding, basic	47,944,193		40,994,082			46,155,846		38,104,500
Weighted average number of shares outstanding, diluted	48,938,766		42,453,782			47,208,105		39,477,616

Pro forma adjustments primarily relate to the amortization of identifiable intangible assets acquired over an estimated economic useful life of ten years, historical operating expenses of ADAPTIX for the three and six months ended June 30, 2011, and the expensing of acquisition costs incurred by ARG in connection with the Merger.

The unaudited pro forma combined statements of operations for the periods presented herein have been adjusted to give effect to pro forma events that are expected to have a continuing impact on the combined results. As such, the income tax benefit related to the release of valuation allowance reflected in the statement of income for the six months ended June 30, 2012, as described at Note 2, is not reflected in the accompanying unaudited pro forma combined statements of income for the periods presented.

9.  RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements - Adopted Effective January 1, 2012. In September 2011, the FASB issued guidance on testing goodwill for impairment. The new guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required. The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.    

In June 2011, the FASB issued new guidance on the presentation of comprehensive income. The new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in stockholders’ equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income from that of current accounting guidance. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. In December 2011, the FASB issued an amendment to defer the presentation on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for annual and interim financial statements. The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In May 2011, the FASB issued a new accounting standard on fair value measurements that clarifies the application of existing guidance and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. The standard is effective for interim and annual periods beginning after December 15, 2011. The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

14

ACACIA RESEARCH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recent Accounting Guidance Not Yet Adopted. In December 2011, the FASB issued guidance enhancing disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. The new guidance requires the disclosure of the gross amounts subject to rights of set-off, amounts offset in accordance with the accounting standards followed, and the related net exposure. The new guidance will be effective for the Company beginning January 1, 2013. The Company does not expect the adoption of this accounting guidance to have a material impact on its consolidated financial statements and related disclosures.

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Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement

You should read the following discussion and analysis in conjunction with the consolidated financial statements and related notes thereto contained in Part I, Item 1 of this Quarterly Report on Form 10-Q. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission, or the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on February 29, 2012, as amended on March 28, 2012.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and concern matters that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of this Quarterly Report on Form 10-Q. Such statements may be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “believe,” “estimate,” “anticipate,” “intend,” “predict,” “potential,” “continue,” or similar terms, variations of such terms or the negative of such terms, although not all forward-looking statements contain these terms. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Such statements address future events and conditions concerning intellectual property acquisition and development, licensing and enforcement activities, capital expenditures, earnings, litigation, regulatory matters, markets for our services, liquidity and capital resources and accounting matters. Actual results in each case could differ materially from those anticipated in such statements by reason of factors such as future economic conditions, changes in demand for our services, legislative, regulatory and competitive developments in markets in which we and our subsidiaries operate, results of litigation and other circumstances affecting anticipated revenues and costs. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements contained herein to conform such statements to actual results or to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Readers are urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the risks, uncertainties, and other factors that affect our business, including without limitation the disclosures made under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements” in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and disclosures made under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and  “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the year ended December 31, 2011.

General

As used in this Quarterly Report on Form 10-Q, “we,” “us” and “our” refer to Acacia Research Corporation, a Delaware corporation, and/or its wholly and majority-owned and controlled operating subsidiaries. All intellectual property acquisition, development, licensing and enforcement activities are conducted solely by certain of Acacia Research Corporation’s wholly and majority-owned and controlled operating subsidiaries.

Our operating subsidiaries acquire, develop, license and otherwise enforce patented technologies.  Our operating subsidiaries generate revenues and related cash flows from the granting of intellectual property rights for the use of, or pertaining to, patented technologies that our operating subsidiaries own or control.  Our operating subsidiaries assist patent owners with the prosecution and development of their patent portfolios, the protection of their patented inventions from unauthorized use, the generation of revenue from users of their patented technologies and, if necessary, with the enforcement against unauthorized users of their patented technologies.

We are a leader in licensing patented technologies and have established a proven track record of licensing success with over 1,165 license agreements executed to date across 125 of our technology licensing and enforcement programs.  Currently, on a consolidated basis, our operating subsidiaries own or control the rights to over 238 patent portfolios, which include U.S. patents, and certain foreign counterparts covering technologies used in a wide variety of industries.

We were originally incorporated in California in January 1993 and reincorporated in Delaware in December 1999.

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Executive Overview

Our operating activities for the periods presented were principally focused on the continued development, licensing and enforcement of the patent portfolios owned or controlled by our operating subsidiaries, including the continued pursuit of our ongoing technology licensing and enforcement programs and the commencement of new technology licensing and enforcement programs.  In addition, we continued our focus on business development, including the acquisition of several additional patent portfolios by certain of our operating subsidiaries and the continued pursuit of additional opportunities to acquire patent portfolios or partner with patent owners and continue our unique intellectual property licensing, development and enforcement activities.

Acquisition. In January 2012, we acquired ADAPTIX, Inc., or ADAPTIX, a pioneer in the development of 4G technologies for wireless systems, for $150 million, net of cash acquired, as described below and at Note 8 to the consolidated financial statements elsewhere herein.

Operating activities during the periods presented included the following:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Revenues (in thousands)	$	50,484	$	39,746	$	149,524	$	100,876
New agreements executed	38		29		78		64
Licensing and enforcement programs generating revenues	27		24		45		43
Licensing and enforcement programs with initial revenues	7		5		13		13
New patent portfolios	27		9		32		17
Cumulative number of licensing and enforcement programs generating revenues - inception to date	125		104		125		104

Our revenues historically have fluctuated quarterly, and can vary significantly, based on a number of factors including the following:

• the dollar amount of agreements executed each period which can be driven by the nature and characteristics of the technology or technologies being licensed and the magnitude of infringement associated with a specific licensee,

• the specific terms and conditions of agreements executed each period including the nature and characteristics of rights granted, and the periods of infringement or term of use contemplated by the respective payments,

• fluctuations in the total number of agreements executed each period,

• the timing, results and uncertainties associated with patent filings and other enforcement proceedings relating to our intellectual property rights,

• the relative maturity of licensing programs during the applicable periods, and

• other external factors.  

Although revenues from one or more of our patents or patent portfolios may be significant in a specific reporting period, we believe that none of our individual patents or patent portfolios is individually significant to our licensing and enforcement business as a whole.

We measure and assess the performance and growth of the patent licensing and enforcement businesses conducted by our operating subsidiaries based on consolidated revenues and other operating income recognized across all of our technology licensing and enforcement programs on a trailing twelve-month basis.  Trailing twelve-month revenues were as follows (in thousands):

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As of Date:	Trailing Twelve -Month Revenues		% Change
June 30, 2012	$	233,355	5	%
March 31, 2012	222,617		21	%
December 31, 2011	184,707		4	%
September 30, 2011	177,014		(1	)%
June 30, 2011	177,927		—	%

Revenues for the six months ended June 30, 2012 included fees from the following technology licensing and enforcement programs:

•	4G Wireless technology(1)	•	Messaging technology
•	Audio Communications Fraud Detection technology	•	Mobile Computer Synchronization technology
•	Camera Support technology	•	Online Auction Guarantee technology
•	Consumer Rewards technology(1)	•	Network Monitoring technology
•	Data Compression technology	•	NOR Flash technology
•	DDR SDRAM technology	•	Optical Recording technology
•	Digital Signal Processing Architecture technology	•	Optical Switching technology
•	Disk Array Systems & Storage Area Network technology	•	Pop-up Internet Advertising technology
•	DMT® technology	•	Power-over-Ethernet technology
•	Document Generation technology	•	Rule Based Monitoring technology
•	Dynamic Random Access Memory technology(1)(2)	•	Semiconductor Memory and Process Patents technology(1)
•	Facilities Operation Management System technology	•	Shape Memory Alloys technology
•	Hearing Aid technology(1)(2)	•	Software Activation technology(1)(2)
•	Impact Instrument technology	•	Targeted Content Delivery technology
•	Improved Anti-Trap Safety Technology for Vehicles technology(1)	•	Telematics technology
•	Improved Lighting technology	•	User Programmable Engine Control technology
•	Improved Memory Manufacturing technology(1)	•	Video Delivery and Processing technology(1)(2)
•	Information Storage, Searching and Retrieval technology(1)(2)	•	Video Encoding technology
•	Integrated Access technology(1)(2)	•	Videoconferencing technology(1)(2)
•	Lighting Ballast technology	•	Visual Data Evaluation technology
•	Location Based Services technology	•	Voice-Over-IP technology(1)
•	Medical Monitoring technology	•	Website Crawling technology
•	MEMS technology

__________________________________________

(1)	Initial revenues recognized during the six months ended June 30, 2012.
(2)	Initial revenues recognized during the three months ended June 30, 2012.

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Revenues for the six months ended June 30, 2011 included fees from the following technology licensing and enforcement programs:

•	Audio Communications Fraud Detection technology	•	Manufacturing Data Transfer technology
•	Camera Support technology	•	Messaging technology(1)
•	Catheter Insertion technology(1)	•	Microprocessor Enhancement technology
•	Computer Architecture and Power Management technology(1)	•	Mobile Computer Synchronization technology
•	Computer Graphics technology	•	Network Remote Access technology
•	Database Retrieval technology(1)(2)	•	NOR Flash technology(1)
•	DDR SDRAM technology(1)(2)	•	Online Auction Guarantee technology
•	Digital Signal Processing Architecture technology	•	Optical Recording technology(1)(2)
•	Digital Video Enhancement technology	•	Optical Switching technology
•	DMT® technology	•	Pop-up Internet Advertising technology
•	Document Generation technology	•	Power Management Within Integrated Circuits technology(1)
•	DRAM Memory architecture technology	•	Rule Based Monitoring technology
•	Facilities Operation Management System technology	•	Shape Memory Alloys technology(1)(2)
•	Image Resolution Enhancement technology	•	Short Messaging in Cellular Telephony technology
•	Improved Commercial Print technology	•	Storage technology
•	Improved Lighting technology	•	Telematics technology
•	Interactive Mapping technology	•	User Programmable Engine Control technology(1)
•	Lighting Ballast technology	•	Video Encoding technology(1)(2)
•	Lighting Control technology(1)	•	Virtual Server technology
•	Location Based Services technology	•	Visual Data Evaluation technology
•	Magnetic Storage technology(1)	•	Website Crawling technology

__________________________________________

(1)	Initial revenues recognized during the six months ended June 30, 2011.
(2)	Initial revenues recognized during the three months ended June 30, 2011.

Summary of Results of Operations - Overview

For the Three and Six Months Ended June 30, 2012 and 2011

(In thousands, except percentage change values)

	Three Months Ended June 30,						%		Six Months Ended June 30,						%
	2012			2011			Change		2012			2011			Change
Revenues	$	50,484		$	39,746		27	%	$	149,524		$	100,876		48	%
Operating costs and expenses	40,711			37,625			8	%	75,407			78,080			(3	)%
Operating income	9,773			2,121			*		74,117			22,796			225	%
Provision for income taxes	(3,494		)	(306		)	*		(18,241		)	(7,454		)	145	%
Net income attributable to Acacia Research Corporation	6,321			2,139			196%		56,249			14,492			288	%

________________

* Percentage change in excess of 300%

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Overview - Three months ended June 30, 2012 compared with the three months ended June 30, 2011

• Revenues increased $10.7 million, or 27%, to $50.5 million, as compared to $39.7 million in the comparable prior year quarter.

• Cost of Revenues and Other Operating Expenses:

◦ Inventor royalties and contingent legal fees, on a combined basis, decreased $5.4 million, or 25%, as compared to the 27% increase in related revenues for the same periods due primarily to a greater percentage of revenues generated during the three months ended June 30, 2012 having no inventor royalty or contingent legal fee arrangement obligations, as compared to the revenues generated during the three months ended June 30, 2011.

◦ Litigation and licensing expenses-patents increased $1.5 million, or 40%, to $5.3 million, due primarily to higher net levels of litigation support, third-party technical consulting and professional expert expenses associated with our investment in new licensing and enforcement programs commenced since June 2011.

◦ Amortization of patents increased $2.8 million, or 107%, to $5.4 million, due primarily to amortization expense related to new patent portfolios acquired since June 30, 2011, totaling $4.3 million. The increase was partially offset by a $1.1 million decrease in accelerated patent amortization related to recoupable up-front patent portfolio acquisition costs recovered during the three months ended June 30, 2012, as compared to the three months ended June 30, 2011.

◦ Marketing, general and administrative expenses increased $3.6 million, or 43%, to $11.9 million, due primarily to an increase in non-cash stock compensation charges resulting from an increase in the average grant date fair value of restricted shares expensed during the three months ended June 30, 2012, a net increase in licensing, business development, and engineering personnel since June 2011, and an increase in variable performance-based compensation costs.

◦ Research, consulting and other expenses-business development increased $632,000, or 47%, to $2.0 million, due primarily to a net increase in third-party research, consulting and other due diligence related costs incurred in connection with the identification, review, and assessment of patent portfolio acquisition opportunities during the three months ended June 30, 2012.

◦ Provision for income taxes increased $3.2 million, or +100%, to $3.5 million, reflecting the calculation of tax expense for financial reporting purposes without the excess tax benefits related to the exercise and vesting of equity-based incentive awards. Non-cash tax expense of $3.2 million was credited to additional-paid-in-capital, not taxes payable. Refer to “Comparison of Results of Operations” below for additional information.

Overview - Six months ended June 30, 2012 compared with the six months ended June 30, 2011

• Revenues increased $48.6 million, or 48%, to $149.5 million, as compared to $100.9 million in the comparable prior year period.

• Cost of Revenues and Other Operating Expenses:

◦ Inventor royalties and contingent legal fees, on a combined basis, decreased $16.6 million, or 38%, as compared to the 48% increase in related revenues for the same periods due primarily to a greater percentage of revenues generated during the six months ended June 30, 2012 having no inventor royalty or contingent legal fee arrangement obligations, as compared to the revenues generated during the six months ended June 30, 2011.

◦ Litigation and licensing expenses-patents increased $1.4 million, or 19%, to $8.6 million, due primarily to higher net levels of litigation support, third-party technical consulting and professional expert expenses associated with our investment in new licensing and enforcement programs commenced since June 2011.

◦ Amortization increased $4.1 million, or 65%, to $10.5 million, due primarily to amortization expense related to new patent portfolios acquired since June 30, 2011, totaling $7.8 million. The increase was partially offset by a $3.0 million decrease in accelerated patent amortization related to recoupable up-front patent portfolio

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acquisition costs recovered during the six months ended June 30, 2012, as compared to the six months ended June 30, 2011.

◦ Marketing, general and administrative expenses increased $7.3 million, or 40%, to $25.6 million, due primarily to an increase in non-cash stock compensation charges resulting from an increase in the average grant date fair value of restricted shares expensed during the six months ended June 30, 2012, a net increase in licensing, business development, and engineering personnel since June 2011, an increase in variable performance-based compensation costs and a net increase in corporate general and administrative costs.

◦ Research, consulting and other expenses-business development increased $1.0 million, or 51%, to $3.1 million, due primarily to a net increase in third-party research, consulting and other due diligence related costs incurred in connection with the identification, review, and assessment of patent portfolio acquisition opportunities during the six months ended June 30, 2012.

◦ Provision for income taxes increased $10.8 million, or 145%, to $18.2 million. Tax expense for financial reporting purposes for the periods presented was calculated without the excess tax benefits related to the exercise and vesting of equity-based incentive awards. Accordingly, $10.9 million of non-cash tax expense was credited to additional-paid-in-capital, not taxes payable. Our effective tax rate for the six months ended June 30, 2012 was 25%, reflecting the impact of the income tax benefit associated with the release of valuation allowance primarily resulting from the ADAPTIX acquisition, as described at Note 2 to the Consolidated Financial Statements elsewhere herein. As of June 30, 2012, taxes paid or payable totaled approximately $12.4 million, primarily comprised of foreign withholding taxes withheld of $11.9 million, and other state related taxes payable. Refer to “Comparison of Results of Operations” below for additional information.

Acquisition of ADAPTIX, Inc.

On January 12, 2012, pursuant to the terms and conditions of the Agreement and Plan of Merger dated as of November 22, 2011 among Acacia Research Group LLC, or ARG, a wholly-owned subsidiary of Acacia Research Corporation, Apollo Patent Corp., a newly-formed, wholly-owned subsidiary of ARG, or Merger Sub, ADAPTIX and Baker Communications Fund II (QP), L.P. solely in its capacity as shareholder representative, ARG completed its acquisition of ADAPTIX, which held no material assets other than its portfolio of patents and $10 million in cash, through a merger of Merger Sub with and into ADAPTIX, with ADAPTIX as the surviving corporation. Upon completion of the merger, the separate corporate existence of Merger Sub ceased and ADAPTIX became a wholly-owned subsidiary of ARG. The total consideration paid by ARG in connection with the merger was approximately $160 million, paid in cash.

ADAPTIX, a pioneer in the development of 4G technologies for wireless systems, is an award-winning technology company long recognized in the industry as one of the first developers of cutting edge 4G wireless systems. With patents filed as early as 2000, ADAPTIX’s research and development efforts have resulted in one of the world’s most significant intellectual property portfolios focused on 4G technologies. With its rapidly growing portfolio of 230 issued and pending patents in 13 countries, ADAPTIX’s innovations extend across a broad range of 4G technologies including OFDMA and MIMO.

Investments in Patent Portfolios

We also measure and assess the performance and growth of the patent licensing and enforcement businesses conducted by our operating subsidiaries based on the number of patent portfolios owned or controlled by our operating subsidiaries on a consolidated basis.  As of June 30, 2012, December 31, 2011, and June 30, 2011, on a consolidated basis, our operating subsidiaries owned or controlled the rights to approximately 238, 200 and 184 patent portfolios, respectively, which include U.S. patents and certain foreign counterparts, covering technologies used in a wide variety of industries.

During the six months ended June 30, 2012, certain of our operating subsidiaries continued to execute their business strategy in the area of patent portfolio acquisitions, including the acquisition of, or the acquisition of the rights to, 32 patent portfolios (of which 27 patent portfolios were acquired during the three months ended June 30, 2012) covering a variety of applications, including the following:

• In April 2012, we entered into a patent licensing alliance with TeleCommunication Systems, Inc. (TCS) to become the exclusive licensor of TCS’ inter-carrier messaging (ICM) patent portfolio.

• In May 2012, we acquired patents, originally issued to Polaroid, covering digital imaging and related technologies.

• In May 2012, we acquired rights to 6 prominent patent portfolios comprising 68 patents covering a wide range of software technologies relating to business intelligence and data analysis, office productivity, virtualization,

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graphical user interfaces, search, and software development.

• In June 2012, we acquired 7 medtech patent portfolios comprised of over 150 patents and pending applications relating to medical devices, biologics and diagnostic techniques.

• In June 2012, we acquired patents for x-ray powder diffraction technology.

• In June 2012, we acquired 5 patent portfolios with 156 U.S. and international patents from a major semiconductor technology company.

• In June 2012, we acquired patents relating to computer aided design tools.

• In June 2012, we acquired 4 patent portfolios with 48 U.S. and international patents from a major technology company.

Refer to “Liquidity and Capital Resources” below for information regarding the impact of patent and patent rights acquisitions on the consolidated financial statements for the periods presented.

As of June 30, 2012, certain of our operating subsidiaries had several option agreements with third-party patent portfolio owners regarding the potential acquisition of additional patent portfolios.  Future patent portfolio acquisitions will continue to expand and diversify our future revenue generating opportunities.

Other

In February 2012, we raised net proceeds of $219.0 million through the sale of 6,122,000 shares of our common stock at a price of $36.75 per share in a private placement offering with certain institutional accredited investors. In March 2011, we completed a registered public offering of 5,750,000 shares of our common stock. The public offering price was $31.50 per share, and the net proceeds to the Company totaled approximately $175.2 million, after deducting underwriting discounts and related offering expenses. Refer to “Liquidity and Capital Resources” below for more information regarding these offerings.

Enforcement Considerations

The pursuit of enforcement actions in connection with our licensing and enforcement programs can involve certain risks and uncertainties, including the following:

• Increases in patent-related legal expenses, including, but not limited to, increases in costs billed by outside legal counsel for discovery, depositions, economic analyses, damages assessments, expert witnesses and other consultants, case-related audio/video presentations and other litigation support and administrative costs, could increase our operating costs and decrease our revenue generating opportunities;

• Our patented technologies and enforcement actions are complex, and, as a result, we may be required to appeal adverse decisions by trial courts in order to successfully enforce our patents;

• New legislation, regulations or rules related to enforcement actions could significantly increase our operating costs and decrease our revenue generating opportunities; and

• Courts may rule that our subsidiaries have violated certain statutory, regulatory, federal, local or governing rules or standards by pursuing such enforcement actions, which may expose us and our operating subsidiaries to material liabilities, which could harm our operating results and our financial position.

Critical Accounting Estimates

Our unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these consolidated statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these consolidated financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in the audited consolidated financial statements and notes thereto and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2011.  In addition to the information below, refer to Note 2 to the consolidated financial statements included in this report.

Accounting for Business Combinations - Acquisition Method of Accounting

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Acquisitions are accounted for in accordance with the acquisition method of accounting under FASB ASC Topic 805, “Business Combinations,” or Topic 805. Topic 805 requires, among other things, that identifiable assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Under the acquisition method of accounting, the purchase consideration is allocated to the assets acquired, including tangible assets, patents and other identifiable intangible assets and liabilities assumed, based on their estimated fair market values on the date of acquisition. Any excess purchase price after the initial allocation to identifiable net tangible and identifiable intangible assets is assigned to goodwill. Amounts attributable to patents are amortized using the straight-line method over the estimated economic useful life of the underlying patents. Acquisition accounting includes the establishment of a net deferred tax asset or liability resulting from book tax basis differences related to assets acquired and liabilities assumed on the date of acquisition.

We assess fair value for financial statement purposes using a variety of methods, including the use of present value models and independent appraisers. Amounts recorded as intangible assets, including patents and patent rights, are based on assumptions and estimates regarding the amount and timing of projected revenues and costs associated with the licensing and enforcement of patents and patent rights acquired, appropriate risk-adjusted discount rates, rates of technology adoption, market penetration, technological obsolescence, product launch timing, the impact of competition or lack of competition in the market place, tax implications and other factors. Also, upon acquisition, based on several of the estimates and assumptions previously described, we determine the estimated economic useful lives of the acquired intangible assets for amortization purposes.

Management is primarily responsible for determining the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as of the acquisition date. Fair value measurements can be highly subjective, and it is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. Actual results may vary from projected results.

Consolidated Results of Operations

Comparison of the Results of Operations for the Three and Six Months EndedJune 30, 2012 and 2011

Revenues

	Three Months Ended June 30,				$		%		Six Months Ended June 30,				$		%
	2012		2011		Change		Change		2012		2011		Change		Change
	(in thousands, except percentages)
Revenues	$	50,484	$	39,746	$	10,738	27	%	$	149,524	$	100,876	$	48,648	48	%

Revenues.  In general, revenue arrangements provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by our operating subsidiaries.  These rights typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by our operating subsidiaries, (ii) covenants-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation.

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012	2011
New agreements executed	38		29		78	64
Average revenue per agreement (in thousands)	$	1,329	$	1,371	1,917	$	1,576

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A summary of the main drivers of the change in revenues for the periods presented, is as follows:

	Three Months Ended June 30,			Six Months Ended June 30,
	2012 vs. 2011			2012 vs. 2011
	(in thousands)
Increase in number of agreements executed	$	12,335		$	22,067
(Decrease) increase in average revenue per agreement executed	(1,597		)	26,581
Total	$	10,738		$	48,648

One licensee individually accounted for 72% of revenues recognized during the three months ended June 30, 2012, and four licensees individually accounted for 36%, 24%, 13%, and 12% of revenues recognized during the six months ended June 30, 2012. Three licensees individually accounted for 30%, 28% and 12% of revenues recognized during the three months ended June 30, 2011, and three licensees individually accounted for 45%, 12% and 11% of revenues recognized during the six months ended June 30, 2011. On a consolidated basis, as of June 30, 2012, 125 of our licensing programs had begun generating revenues and other operating income, up from 112 as of December 31, 2011, and 104 as of June 30, 2011.

Cost of Revenues

	Three Months Ended June 30,				$			%		Six Months Ended June 30,				$			%
	2012		2011		Change			Change		2012		2011		Change			Change
	(in thousands, except percentages)
Inventor royalties	$	9,573	$	8,588	$	985		11	%	$	17,167	$	21,677	$	(4,510	)	(21	)%
Contingent legal fees	6,607		13,039		(6,432		)	(49	)%	10,355		22,406		(12,051		)	(54	)%

Inventor Royalties and Contingent Legal Fees Expense.  The economic terms of the inventor agreements, operating agreements and contingent legal fee arrangements associated with the patent portfolios owned or controlled by our operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by our operating subsidiaries.  As such, these costs fluctuate period to period, based on the amount of revenues and other operating income recognized each period, the terms and conditions of agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period.

The percentage change in inventor royalties expense for the three and six month periods presented, as compared to the 27% increase in revenues for the same periods, was primarily due to a higher percentage of revenues recognized during the three and six months ended June 30, 2012 having no corresponding inventor royalty obligations, as compared to the revenues recognized during the three and six months ended June 30, 2011, respectively. A summary of the main drivers of the change in inventor royalties expense for the three and six months ended June 30, 2012, as compared to the three and six months ended June 30, 2011, is as follows:

	Three Months Ended June 30,			Six Months Ended June 30,
	2012 vs. 2011			2012 vs. 2011
	(in thousands)
Increase in inventor royalty rates	$	3,248		$	6,177
Increase in total revenues	2,323			11,530
(Increase) in revenues without inventor royalty obligations	(4,586		)	(22,217		)
Total	$	985		$	(4,510	)

The percentage decrease in contingent legal fees expense for the three and six month periods presented, as compared to the 27% increase in revenues for the same periods, was primarily due to a higher percentage of revenues recognized during the three and six months ended June 30, 2012 having no corresponding contingent legal arrangement obligations, as compared to the revenues recognized during the three and six months ended June 30, 2011, respectively. A summary of the main drivers of the change in contingent legal fees expense for the three and six months ended June 30, 2012, as compared to the three and

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six months ended June 30, 2011, is as follows:

	Three Months Ended June 30,			Six Months Ended June 30,
	2012 vs. 2011			2012 vs. 2011
	(in thousands)
(Decrease) in contingent legal fee rates	$	(3,762	)	$	(612	)
Increase in total revenues	3,545			10,855
(Increase) in revenues without contingent legal fee obligations	(6,215		)	(22,294		)
Total	$	(6,432	)	$	(12,051	)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(in thousands)
Litigation and licensing expenses - patents	$	5,268	$	3,761	$	8,649	$	7,295
Amortization of patents	5,393		2,600		10,519		6,372

Litigation and Licensing Expenses - Patents.  Litigation and licensing expenses-patents include patent-related prosecution and enforcement costs incurred by outside patent attorneys engaged on an hourly basis and the out-of-pocket expenses incurred by law firms engaged on a contingent fee basis.  Litigation and licensing expenses-patents also includes licensing and enforcement related third-party patent research, development, consulting, and other costs incurred in connection with the licensing and enforcement of patent portfolios.  Litigation and licensing expenses-patents fluctuate from period to period based on patent enforcement and prosecution activity associated with ongoing licensing and enforcement programs and the timing of the commencement of new licensing and enforcement programs in each period.  

Litigation and licensing expenses-patents increased for the three and six month periods presented due primarily to higher net levels of litigation support, third-party technical consulting and professional expert expenses associated with our investment in new licensing and enforcement programs commenced since the end of the prior year period. We expect patent-related legal expenses to continue to fluctuate period to period based on the factors summarized above, in connection with upcoming scheduled and/or anticipated trial dates and our current and future patent acquisition, development, licensing and enforcement activities.

Amortization of Patents.  The increase for the periods presented was due primarily to amortization expense related to new patent portfolios acquired since June 30, 2011, totaling $4.3 million and $7.8 million, for the three and six months ended June 30, 2012, respectively, comprised primarily of non-cash patent amortization expense related to the patents acquired in connection with our acquisition of ADAPTIX in the first quarter of 2012, totaling $3.7 million and $7.0 million, for the three and six months ended June 30, 2012, respectively. The increase was partially offset by a decrease in accelerated patent amortization related to recoupable up-front patent portfolio acquisition costs that were recovered from related net licensing proceeds during the three and six months ended June 30, 2012, as compared to the three and six months ended June 30, 2011. Accelerated amortization expense related to the recovery of up-front patent acquisition costs totaled $0 and $442,000 for the three and six months ended June 30, 2012, respectively, and $1.1 million and $3.4 million for the three and six months ended June 30, 2011, respectively.

Operating Expenses (in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(in thousands)
Marketing, general and administrative expenses (including non-cash stock compensation expense of $6,000 and $11,090 for the three and six months ended June 30, 2012, respectively, and $3,422 and $6,323 for the three and six months ended June 30, 2011, respectively)	$	11,903	$	8,302	$	25,634	$	18,287

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Marketing, General and Administrative Expenses.  Marketing, general and administrative expenses include employee compensation and related personnel costs, including non-cash stock compensation expenses, office and facilities costs, legal and accounting professional fees, public relations, marketing, stock administration, gross receipts based state taxes and other corporate costs.  A summary of the main drivers of the change in marketing, general and administrative expenses, including the impact of non-cash stock compensation charges, for the periods presented, is as follows:

	Three Months		Six Months
	Ended June 30,		Ended June 30,
	2012 vs. 2011		2012 vs. 2011
	(in thousands)
Addition of business development, engineering and other personnel costs	$	492	$	1,236
Increase in annual variable performance-based compensation and other variable performance-based compensation costs	438		710
Corporate, general and administrative costs	93		634
Non-cash stock compensation expense	2,578		4,767
Total	$	3,601	$	7,347

Income Taxes

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Provision for income taxes (in thousands)	$	3,494		$	306		$	18,241		$	7,454
Effective tax rate	35		%	14		%	25		%	33		%

Provision for Income Taxes. For financial reporting purposes, tax expense is calculated without the excess tax benefit related to the exercise and vesting of equity-based incentive awards. Under U.S. generally accepted accounting principles, if a deduction reported on a tax return for an equity-based incentive award exceeds the cumulative compensation cost for those instruments recognized for financial reporting purposes, any resulting realized tax benefit that exceeds the previously calculated and recognized compensation expense for those instruments is considered an excess tax benefit, and is recognized as a credit to additional paid-in capital, not taxes payable, as the expense does not reflect cash taxes payable. The deductions related to the exercise and vesting of equity-based incentive awards is available to offset taxable income on our consolidated tax returns.

Tax expense for the three and six months ended June 30, 2012 included the impact of the following:

• Noncash tax expense calculated without the excess tax benefit related to the exercise and vesting of equity-based incentive awards, totaling approximately $3.2 million and $10.9 million for the three and six months ended June 30 2012, respectively, which was credited to additional paid-in capital, not taxes payable, and other state related taxes.

• Foreign withholding taxes, totaling $28,000 and $11.9 million for the three and six months ended June 30, 2012, withheld by the applicable foreign tax authority on revenue agreements executed with third party licensees domiciled in certain foreign jurisdictions. The tax provision for the three and six months ended June 30, 2012 provides for the utilization of a substantial portion of the $11.9 million in foreign taxes withheld during 2012 as a credit against income tax expense calculated for financial statement purposes.

• As of December 31, 2011, we maintained a full valuation allowance against our net deferred tax assets. The net deferred tax liability resulting from the acquisition of ADAPTIX created an additional source of income to utilize against the majority of our existing consolidated net deferred tax assets. In addition, we estimated that certain other deferred tax assets related to foreign tax credits and other state related deferreds, totaling approximately $1.9 million, were more likely than not realizable in future periods. Accordingly, the valuation allowance on the majority of our net deferred tax assets was released, resulting in a first quarter 2012 financial statement income tax benefit of approximately $10.2 million. The offsetting amounts reduced net deferred tax liabilities, $8.3 million of which decreased the net deferred tax liability established in connection with the application of the acquisition method of accounting for the ADAPTIX acquisition.

Tax expense for the three and six months ended June 30, 2011 primarily relates to foreign taxes withheld totaling $7.6

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million and other state taxes.

As of June 30, 2012, taxes paid or payable totaled approximately $12.4 million, primarily comprised of $11.9 million of foreign withholding taxes withheld by the applicable foreign tax authority on revenue agreements executed with third party licensees domiciled in certain foreign jurisdictions, and other state related taxes payable.

Liquidity and Capital Resources

General

Our primary sources of liquidity are cash, cash equivalents and investments on hand generated from our operating activities and proceeds from recent equity financings. Refer to "Cash Flows from Financing Activities" below for information regarding recent equity financings. We retained broad discretion over the use of the net proceeds from the offerings and intend to use the net proceeds for operations and for other general corporate purposes, including, but not limited to, working capital, strategic acquisitions and other transactions.

Our management believes that our cash and cash equivalent balances, investments, anticipated cash flow from operations, and other external sources of available credit, will be sufficient to meet our cash requirements through at least August 2013 and for the foreseeable future. We may, however, encounter unforeseen difficulties that may deplete our capital resources more rapidly than anticipated, including those set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011.  Any efforts to seek additional funding could be made through issuances of equity or debt, or other external financing.  However, additional funding may not be available on favorable terms, or at all. The capital and credit markets have experienced extreme volatility and disruption since late 2007, and the volatility and impact of the disruption has continued into 2012.  At times during this period, the volatility and disruption has reached unprecedented levels. In several cases, the markets have exerted downward pressure on stock prices and credit capacity for certain issuers, and there can be no assurance that the commercial paper markets will be a reliable source of short-term financing for us.

Cash and Investments

Our consolidated cash and cash equivalents and investments totaled $430.9 million at June 30, 2012, compared to $323.3 million at December 31, 2011.  The net change in cash and cash equivalents for the periods presented was comprised of the following (in thousands):

	Six Months Ended June 30,
	2012			2011
Net cash provided by (used in):
Operating activities	$	63,405		$	25,119
Investing activities	(313,113		)	(1,858		)
Financing activities	231,841			173,639

Cash Flows from Operating Activities.  Cash receipts from licensees for the six months ended June 30, 2012 increased to $141.6 million, from $88.6 million in the comparable 2011 period, primarily reflecting the net increase in revenues for the same periods, as discussed above.  Cash outflows from operations for the six months ended June 30, 2012 increased to $67.4 million, as compared to $63.5 million in the comparable 2011 period due to the impact of the net increase in licensing, business development, and engineering personnel since June 2011, marketing, general and administrative expenses including variable performance-based compensation costs and foreign withholding taxes, as discussed above, and the timing of payments to inventors, attorneys and other vendors.

Cash Flows from Investing Activities. Net cash used in investing activities for the six months ended June 30, 2012 included cash consideration paid in connection with the acquisition of ADAPTIX, totaling $150.0 million (net of cash acquired), and patent-related acquisition costs totaling $40.4 million, as compared to $1.8 million in patent-related acquisition costs in the comparable 2011 period. Purchases of short term investments totaled $240.0 million for the six months ended June 30, 2012. Sales and maturities of short term investments totaled $117.5 million for the six months ended June 30, 2012, as compared to $35,000 in the comparable 2011 period.

Cash Flows from Financing Activities.  Net cash provided by financing activities during the six months ended June 30, 2012 included net proceeds from the sale of our common stock totaling $219.0 million, proceeds from exercises of stock

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options totaling $88,000, and $1.9 million in capital contributions from non-controlling interests. Net cash provided by financing activities during the six months ended June 30, 2011 included net proceeds from the sale of our common stock totaling $175.2 million, proceeds from exercises of stock options totaling $404,000, $877,000 in capital contributions from non-controlling interests and $2.9 million in distributions to noncontrolling interests.

 Working Capital

Working capital at June 30, 2012 increased to $404.2 million, compared to $294.9 million at December 31, 2011. Consolidated accounts receivable from licensees increased to $10.8 million at June 30, 2012, compared to $2.9 million at December 31, 2011. Consolidated royalties and contingent legal fees payable decreased to $19.1 million at June 30, 2012, compared to $23.5 million at December 31, 2011.  

The majority of accounts receivable from licensees at June 30, 2012 were collected or scheduled to be collected in the third quarter of 2012, in accordance with the terms of the related underlying agreements.  The majority of royalties and contingent legal fees payable are scheduled to be paid in the third or fourth quarter of 2012, subsequent to receipt by us of the related fee payments from licensees, in accordance with the underlying contractual arrangements. 

Off-Balance Sheet Arrangements

We have not entered into off-balance sheet financing arrangements, other than operating leases.  We have no significant commitments for capital expenditures in 2012.  We have no committed lines of credit or other committed funding or long-term debt. The following table lists our known contractual obligations and future cash commitments as of June 30, 2012 (in thousands):

	Payments Due by Period (In thousands)
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating leases	$	2,846	$	311	$	1,451	$	1,084
Scheduled patent acquisition related payments	10,500		10,000		250		250		—
Payments to consultants	—		—		—		—		—
Total contractual obligations	$	13,346	$	10,311	$	1,701	$	1,334	$	—

As of June 30, 2012, the liability for uncertain tax positions, associated primarily with state income taxes, was $86,000, none of which is expected to be paid within one year. The liability for uncertain tax positions is recorded in other long-term liabilities in our consolidated balance sheets included in this report.

Recent Accounting Pronouncements

Refer to Note 9 to the consolidated financial statements included in this report.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve principal while concurrently maximizing the income we receive from our investments without significantly increasing risk. In addition, we sometimes invest in marketable equity securities for strategic purposes related to our patent monetization based businesses. Some of the securities that we invest in may be subject to interest rate risk and/or market risk. This means that a change in prevailing interest rates, with respect to interest rate risk, or a change in the value of the United States equity markets, with respect to market risk, may cause the principal amount or market value of the investments to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the current value of the principal amount of our investment may decline. To minimize these risks in the future, we intend to maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including commercial paper, money market funds, high-grade corporate bonds, U.S. government and non-government debt securities and certificates of deposit. However, to the extent that our marketable equity securities have strategic value, we typically do not attempt to reduce or eliminate market risk with respect to such securities through hedging activities.

At June 30, 2012, our investments were comprised of AAA rated money market funds that invest in first-tier only

28

securities, which primarily include domestic commercial paper, securities issued or guaranteed by the U.S. government or its agencies, U.S. bank obligations, fully collateralized repurchase agreements (included in cash and cash equivalents in the accompanying consolidated balance sheets), direct investments in highly liquid, AAA, U.S. government securities, and strategic investments in marketable equity securities (included in short term investments in the accompanying consolidated balance sheet as of June 30, 2012), and certain auction rate securities (included in noncurrent investments in the accompanying consolidated balance sheets).

In general, money market funds are not subject to market risk because the interest paid on such funds fluctuates with the prevailing interest rate. Accordingly, a 100 basis point increase in interest rates or a 10% decline in the value of the United States equity markets would not be expected to have a material impact on the value of such money market funds. Similarly, a 100 basis point increase in interest rates or a 10% decline in the value of the United States equity markets would not be expected to have a direct material impact on the value of our auction rate securities, although auction rate securities may generally be subject to greater market risk than money market funds. Investments in U.S. government fixed income securities are subject to interest rate risk and will decline in value if interest rates increase. However, due to the relatively short duration of our investment portfolio, an immediate 10% change in interest rates would have no material impact on our financial condition, results of operations or cash flows. Declines in interest rates over time will, however, reduce our interest income. Marketable equity securities are subject to increased market risk sensitivity, but are not directly impacted by interest rate risk. To determine reasonably possible decreases in the value of our marketable equity investments, we analyzed the expected market price sensitivity of our marketable equity investment portfolio. Assuming a loss of 10% in the value of the United States equity markets, the aggregate value of our marketable equity investments could decrease by approximately 14%.

Item 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation and under the supervision of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this quarterly report. Based on that evaluation, our chief executive officer and our chief financial officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

Changes in Internal Control Over Financial Reporting.

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter (the quarter ended June 30, 2012) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II--OTHER INFORMATION

Item 6.  EXHIBITS

EXHIBIT NUMBER	EXHIBIT
10.1	Form of Indemnification Agreement
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
32.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
32.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T.*

*Furnished herewith

30

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ACACIA RESEARCH CORPORATION

/s/  Paul R. Ryan

By: Paul R. Ryan

President and Chief Executive Officer

(Principal Executive Officer and Duly Authorized Signatory)

/s/  Clayton J. Haynes  

By: Clayton J. Haynes

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

Date:     July 30, 2012

31

EXHIBIT INDEX

EXHIBIT NUMBER	EXHIBIT
10.1	Form of Indemnification Agreement
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
32.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
32.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T.*

*Furnished herewith

32

EX-10.1

Exhibit 10.1

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is made as of the ____ day of ______________, ____ by and between Acacia Research Corporation, a Delaware corporation (the “Company”), and ____________________ (“Indemnitee”).

WHEREAS, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself;

WHEREAS, highly competent persons have become more reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

WHEREAS, Indemnitee does not regard the protection available under the Company’s Bylaws and insurance as adequate in the present circumstances, may not be willing to serve as an officer or director without adequate protection, and is willing to serve on the condition that he be so indemnified;

WHEREAS, although the Bylaws of the Company require indemnification of the officers and directors of the Company or any other Enterprise, and Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”), the Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification; and

WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as a [director] [officer] [employee] [agent] [fiduciary] after the date hereof, the parties hereto agree as follows:

#PageNum#

Exhibit 10.1

1.Definitions. For purposes of this Agreement:

(a)“Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or any other Enterprise.

(b)“Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(c)“Enterprise” shall mean the Company, any wholly- or majority-owned subsidiary of the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other entity or enterprise that Indemnitee is or was serving at the request or consent of the Company, or any subsidiary, as a director, officer, employee, agent or fiduciary.

(d)“Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types that may be incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding. Expenses also shall include the foregoing incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(e)“Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company, any other Enterprise, or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company, any other Enterprise, or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(f)“Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company, or any other Enterprise, or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was acting in his or her Corporate Status, by reason of any action taken by him or of any inaction on his part while acting in his or her Corporate Status, or by reason of the fact that he or she is or was serving at the request of the Company, or any other Enterprise, as a director, officer, employee, agent or fiduciary; in each case whether or not he was or is acting or serving in any such capacity before or after the date of this Agreement and whether or not he was

#PageNum#

Exhibit 10.1

or is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by Indemnitee pursuant to Section 8 of this Agreement to enforce his rights under this Agreement.

2.Indemnity of Indemnitee. The Company hereby agrees to defend, hold harmless and indemnify Indemnitee to the fullest extent permitted by applicable law, as such may be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof:

(a)    Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 2(a) if, by reason of his or her Corporate Status or otherwise, Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding other than a Proceeding by or in the right of the Company. Pursuant to this Section 2(a), Indemnitee shall be indemnified against all Expenses, judgments, penalties, excise taxes, fines and amounts paid or to be paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee, or on Indemnitee’s behalf, in connection with such Proceeding or any claim, issue or matter therein until such time as it has been determined in accordance with Section 7 or 8 that Indemnitee (i) did not act in good faith and did not act in a manner Indemnitee not unreasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, or (ii) did not have a reasonable cause to believe Indemnitee’s conduct was lawful.

(b)    Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 2(b) if, by reason of Indemnitee’s Corporate Status or otherwise, Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 2(b), Indemnitee shall be indemnified against all Expenses, judgments, penalties, fines, excise taxes and amounts paid or to be paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee, or on Indemnitee’s behalf, in connection with such Proceeding or any claim, issue or matter therein until such time as it has been determined in accordance with Section 7 or 8 that Indemnitee (i) did not act in good faith and did not act in a manner Indemnitee not unreasonably believed to be in or not opposed to the best interests of the Company, or (ii) did not have a reasonable cause to believe Indemnitee’s conduct was lawful; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which it shall be finally determined (under the procedures, and subject to the presumptions, set forth in Section 7 and Section 8 hereof), that Indemnitee is liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnification may be made.

(c)    Overriding Right to Indemnification if Successful on the Merits. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status or otherwise, a party to and is successful, on the merits or otherwise, in any

#PageNum#

Exhibit 10.1

Proceeding, he shall be indemnified to the maximum extent permitted by applicable law, as such may be amended from time to time, against all Expenses, judgments, penalties, excise taxes, fines and amounts paid or to be paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with (i) each successfully resolved claim, issue or matter and (ii) each other claim, issue or matter not resolved in Indemnitee’s favor that does not or did not involve a violation of law or a demonstration of bad faith by Indemnitee. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

3.Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in Section 2 of this Agreement, and subject to the other provisions of this Agreement, the Company shall, and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, excise taxes, fines and amounts paid or to be paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status or otherwise, he or she is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the alleged or actual negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Section 7 and Section 8 hereof) to be unlawful.

4.Contribution.

(a)    Whether or not the indemnification provided in Section 2 and Section 3 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company or any other Enterprise is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. Neither the Company nor any other Enterprise shall enter into any settlement of any action, suit or proceeding in which the Company or any other Enterprise is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

(b)    Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company or any other Enterprise is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount

#PageNum#

Exhibit 10.1

of Expenses, judgments, penalties, excise taxes, fines and amounts paid or to be paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company or any other Enterprise and all officers, directors or employees of the Company or any other Enterprise, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company or any other Enterprise and all officers, directors or employees of the Company or any other Enterprise other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which the law may require to be considered. The relative fault of the Company or any other Enterprise and all officers, directors or employees of the Company or any other Enterprise, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

(c)    The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claim of contribution brought by officers, directors, employees, or former employees of the Company and any other Enterprise, other than Indemnitee, based upon a claim of liability which, if made against Indemnitee directly, would be indemnifiable under this Agreement.

(d)    To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company (together with its directors, officers, employees and agents) and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

5.Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status or otherwise, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

6.Advancement of Expenses. Notwithstanding any other provision of this Agreement,

#PageNum#

Exhibit 10.1

to the extent not prohibited by law, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status or otherwise within twenty (20) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and, upon request of the Company, shall include an undertaking to repay the advancement of Expenses if and to the extent that it is finally determined by a court of competent jurisdiction in a non-appealable decision, that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 6 shall be unsecured, interest-free and without regard to Indemnitee’s ability to repay the Expenses. Advances shall include any and all Expenses actually and reasonably incurred by Indemnitee pursuing an action to enforce Indemnitee’s right to indemnification under this Agreement, or otherwise and this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The right to advances under this Section shall continue until final disposition of any Proceeding, including any appeal therein.

7.Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

(a)    Indemnitee shall give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Such notice shall include Indemnitee’s request for indemnification and such documentation and information as is reasonably available to Indemnitee and as is reasonably necessary for the Company to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification. Failure to provide the notice required hereby shall not impair Indemnitee’s rights of indemnification and contribution under this Agreement except to the extent that such failure to provide notice actually prejudices the rights of the Company to defend any action or proceeding which is the basis of the claimed indemnification.

(b)    Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 7(a) hereof, a determination, if, and only if, required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four (4) methods within thirty (30) days of receipt of such written request, which shall be at the election of the Board of Directors: (i) by a majority vote of the Disinterested Directors, even though less than a quorum, (ii) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (iii) if there are no Disinterested Directors or if the Disinterested Directors so direct, by Independent Counsel, in a written opinion of such counsel to the Board of Directors and Indemnitee, or (iv) if so directed by the Board of Directors, by the stockholders of the Company.

#PageNum#

Exhibit 10.1

(c)    If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) hereof, the Independent Counsel shall be selected as provided in this Section 7(c). The Independent Counsel shall be selected by the Board of Directors. Indemnitee may, within 10 days after such written notice of selection shall have been given, deliver to the Company, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the counsel so selected does not satisfy the definition of “Independent Counsel” set forth at Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection made in accordance with the foregoing sentence, the person so selected shall act as Independent Counsel. In the event of a proper and timely objection, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within thirty (30) days after submission by Indemnitee of a written request for indemnification pursuant to Section 7(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 7(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 7(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 7(c), regardless of the manner in which such Independent Counsel was selected or appointed.

(d)    In making a determination with respect to entitlement to indemnification hereunder with respect to Section 7(b), the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(e)    In making a determination with respect to whether Indemnitee acted in good faith and in a manner that Indemnitee not unreasonably believed to be in or not opposed to the best interests of the Company, the person or persons or entity making such determination shall presume that Indemnitee acted in good faith and in a manner that Indemnitee not unreasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence which shall be determined only by a court of competent jurisdiction. Any action, or failure to act, by Indemnitee based on Indemnitee’s good faith reliance on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the

#PageNum#

Exhibit 10.1

officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise shall not, in and of itself, constitute grounds for an adverse determination with respect to whether Indemnitee acted in good faith and in a manner that Indemnitee not unreasonably believed to be in or not opposed to the best interests of the Company. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

(f)    If the person, persons or entity empowered or selected under Section 7(b) to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such sixty 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto.

(g)    Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board of Directors or stockholder of the Company shall act reasonably and in good faith in making a determination regarding Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(h)    In the event the Company shall be obligated under Section 5 hereof to pay the Expenses of any proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ his counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have not unreasonably concluded that there may be a conflict of interest between the Company and

#PageNum#

Exhibit 10.1

Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

(i)    The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(j)    The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification under this Agreement or create a presumption that Indemnitee did not act in good faith and in a manner which he not unreasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

8.Remedies of Indemnitee.

(a)    In the event that (i) a determination is made pursuant to Section 7 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 6 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 7(b) of this Agreement within sixty (60) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within forty-five (45) days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 7 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification. The Company shall not oppose Indemnitee’s right to seek any such adjudication.

(b)    In the event that a determination shall have been made pursuant to Section 7(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 8 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 7(b).

(c)    If a determination shall have been made pursuant to Section 7(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 8, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make

#PageNum#

Exhibit 10.1

Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d)    In the event that Indemnitee, pursuant to this Section 8, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on his behalf, in advance, any and all Expenses actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement of Expenses or insurance recovery.

(e)    The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.

(f)    Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

9.Non-Exclusivity; Survival of Rights; Insurance.

(a)    The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the certificate of incorporation of the Company, the Bylaws, any agreement, a vote of stockholders, a resolution of directors or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status or otherwise prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. Notwithstanding anything in this Agreement to the contrary, the indemnification and contribution provided for in this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of Indemnitee or any of Indemnitee’s agents.

#PageNum#

Exhibit 10.1

(b)    To the extent that the Company, or any entity within the Enterprise, maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall use commercially reasonable efforts to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

(c)    In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers reasonably required and take all action reasonably necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d)    The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any Company insurance policy, Company contract, Company agreement or otherwise (except to the extent that Indemnitee is required (by court order or otherwise) to return such payment or to surrender it to the Company).

(e)    The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (except to the extent that Indemnitee is required (by court order or otherwise) to return such payment or to surrender it to the Company).

10.Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity:

(a)    in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, if a court of competent jurisdiction finally determines in a non-appealable decision that each of the material assertions made by Indemnitee in such Proceeding (or any part of any Proceeding) was not made in good faith or was frivolous;

(b)    in connection with any Proceeding (or any part of any Proceeding) for which payment has actually been made to or on behalf of Indemnitee under any Company insurance policy or other Company indemnity provision, except with respect to any excess beyond the amount paid

#PageNum#

Exhibit 10.1

under any Company insurance policy or other Company indemnity provision;

(c)    in connection with any Proceeding for which a final, non-appealable judgment has been rendered against Indemnitee for an accounting, disgorgement or repayment of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law; or

(d)    in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees (other than any Proceeding initiated by Indemnitee pursuant to Section 8(d), which shall be governed by the terms of such section), unless (i) the Board of Directors of the Company authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

11.Duration of Agreement. All agreements and obligations of the Company contained herein shall continue until six (6) years after the end of any period Indemnitee is an officer or director of the Company or any other Enterprise (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) but shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 8 hereof) by reason of his Corporate Status or otherwise, whether or not he is acting or serving in any such capacity at the time any liability or Expense is incurred for which indemnification can be provided under this Agreement, notwithstanding such six (6) year period. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. The Company may not assign this agreement and/or the obligations hereunder to any other entity without the express written consent of Indemnitee.

12.Security. To the extent requested by Indemnitee and approved by the Board of Directors of the Company, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of Indemnitee.

13.Enforcement.

(a)    The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

(b)    This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings,

#PageNum#

Exhibit 10.1

oral, written and implied, between the parties hereto with respect to the subject matter hereof.

14.Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

15.Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

16.Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder unless Indemnitee has actual knowledge that Company is already in receipt of any such document relating to any Proceeding or matter. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

17.Notices. Unless otherwise provided herein, any notice required or permitted under this Agreement shall be deemed effective upon the earlier of (a) actual receipt, or (b) (i) one (1) business day after the date of delivery by confirmed facsimile transmission, (ii) one (1) business day after the business day of deposit with a nationally recognized overnight courier service for next day delivery, freight prepaid, or (iii) three (3) business days after deposit with the United States Post Office for delivery by registered or certified mail, postage prepaid. Any such notice shall be in writing and shall be addressed to the party to be notified at the address indicated for such party indicated on the signature pages or exhibits hereto, as otherwise set forth in this Section 17, or at such other address as such party may designate by ten (10) days’ advance written notice to the other parties. All communications shall be sent:

(a)    To Indemnitee at the address set forth below Indemnitee signature hereto;

(b)    To the Company at the address set forth below Company signature hereto;

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

18.Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall

#PageNum#

Exhibit 10.1

constitute one and the same instrument.

19.Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

20.Governing Law and Consent to Jurisdiction. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

21.Construction. The parties acknowledge that both parties have contributed to the drafting of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

[Remainder of page intentionally left blank]

#PageNum#

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

INDEMNITEE:

Signature:

Name Typed or Printed: ______________________

Address:    

_________________________________

_________________________________

COMPANY:

ACACIA RESEARCH CORPORATION

By:    __________________

    Name: _________________________

Title: _________________________

Address:

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Paul R. Ryan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Acacia Research Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: July 30, 2012	/s/ Paul R. Ryan
	Paul R. Ryan President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Clayton J. Haynes, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Acacia Research Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: July 30, 2012	/s/ Clayton J. Haynes
	Clayton J. Haynes Chief Financial Officer and Treasurer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

In connection with the Quarterly Report of Acacia Research Corporation (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2012, as filed with the Securities and Exchange Commission on July 30, 2012 (the “Report”), I, Paul R. Ryan, President and Chief Executive Officer of the Company, hereby certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ Paul R. Ryan                                     

Paul R. Ryan

President and Chief Executive Officer

July 30, 2012

This certification accompanies the Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.  This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

EXHIBIT 32.2

CERTIFICATION

In connection with the Quarterly Report of Acacia Research Corporation (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2012, as filed with the Securities and Exchange Commission on July 30, 2012 (the “Report”), I, Clayton J. Haynes, Chief Financial Officer of the Company, hereby certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ Clayton J. Haynes                                   

Clayton J. Haynes

Chief Financial Officer and Treasurer

July 30, 2012

This certification accompanies the Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.  This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference.

XML

Stockholders' Equity (Details) (USD $)	0 Months Ended		6 Months Ended
	Feb. 21, 2012	Mar. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Class of Stock [Line Items]
Gross proceeds from the issuance of common stock	$ 225,000,000
Stock issued during period	6,122,000	5,750,000
Sale of stock, price per share	$ 36.75	$ 31.50
Proceeds from sale of common stock, net of issuance costs	$ 218,983,000		$ 218,983,000	$ 175,232,000

XML

Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Summary of Significant Accounting Policies [Line Items]
Estimated annual effective tax rate		38.00%
Effective tax rate		25.00%
Foreign withholding taxes	$ 28,000	$ 11,890,000	$ 7,425,000
U.S. federal statutory rate			35.00%
Excess tax benefits from stock-based compensation	3,239,000	10,850,000	23,000
Cash paid for income taxes		12,400,000
Operating loss carryforwards, federal				69,062,000
Operating loss carryforwards, state				61,493,000
Business acquisition deferred tax asset	1,900,000	1,900,000
Income tax benefit from release of valuation allowance		10,237,000	0
Change in deferred tax liability, business acquisition		$ 8,300,000
Minimum [Member]
Summary of Significant Accounting Policies [Line Items]
Vesting period of equity awards		2 years
Useful life of patents and patent rights		1 year
Maximum [Member]
Summary of Significant Accounting Policies [Line Items]
Vesting period of equity awards		4 years
Useful life of patents and patent rights		10 years

XML

Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2012

Description of Business and Basis of Presentation [Abstract]

Description of Business and Basis of Presentation

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business. As used herein, “Acacia” and the “Company” refer to Acacia Research Corporation and/or its wholly and majority-owned and controlled operating subsidiaries.  All intellectual property acquisition, development, licensing and enforcement activities are conducted solely by certain of Acacia’s wholly and majority-owned and controlled operating subsidiaries.

Acacia’s operating subsidiaries acquire, develop, license and otherwise enforce patented technologies.  Acacia’s operating subsidiaries generate revenues and related cash flows from the granting of intellectual property rights for the use of, or pertaining to, patented technologies that such operating subsidiaries own or control.  Acacia’s operating subsidiaries assist patent owners with the prosecution and development of their patent portfolios, the protection of their patented technologies from unauthorized use, the generation of revenue from users of their patented technologies and, if necessary, the enforcement against unauthorized users of their patented technologies. Currently, on a consolidated basis, Acacia’s operating subsidiaries own or control the rights to over 238 patent portfolios, which include U.S. patents and certain foreign counterparts, covering technologies used in a wide variety of industries.

In January 2012, a wholly owned operating subsidiary of Acacia acquired ADAPTIX, Inc. (“ADAPTIX”), a pioneer in the development of 4G technologies for wireless systems, for cash consideration of $160 million, as described at Note 8 to these consolidated financial statements.

Basis of Presentation.  The accompanying consolidated financial statements include the accounts of Acacia and its wholly and majority-owned and controlled subsidiaries. Material intercompany transactions and balances have been eliminated in consolidation. Noncontrolling interests in Acacia’s majority-owned and controlled operating subsidiaries (“noncontrolling interests”) are separately presented as a component of stockholders’ equity in the consolidated statements of financial position for the applicable periods presented. Consolidated net income (loss) is adjusted to include the net (income) loss attributed to noncontrolling interests in the consolidated statements of income. Refer to the accompanying consolidated financial statements for total noncontrolling interests and net income (loss) attributable to noncontrolling interests for the applicable periods presented.

In August 2010, a wholly owned subsidiary of Acacia became the general partner of the Acacia Intellectual Property Fund, L.P. (the “Acacia IP Fund”), which was formed in August 2010. The Acacia IP Fund is authorized to raise up to $250 million. The Acacia IP Fund acquires, licenses and enforces intellectual property consisting primarily of patents, patent rights, and patented technologies. The Acacia IP Fund is included in the Company’s consolidated financial statements for the periods presented, as Acacia’s wholly owned subsidiary, as the majority owner and general partner, has the ability to control the operations and activities of the Acacia IP Fund.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America in annual financial statements have been omitted or condensed in accordance with quarterly reporting requirements of the Securities and Exchange Commission (“SEC”).  These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011, as reported by Acacia in its Annual Report on Form 10-K.  The year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The consolidated financial statements of Acacia include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of Acacia’s financial position as of June 30, 2012, and results of its operations and its cash flows for the interim periods presented.  The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year.

XML

Goodwill and Other Identifiable Intangible Assets (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Finite-Lived Intangible Assets [Line Items]
Patents, accumulated amortization	$ 46,850,000		$ 46,850,000		$ 36,331,000
Weighted average useful life of patents and patent rights			8 years
Patent acquisition costs paid			40,435,000	1,805,000
Accrued patent acquisition related payments		1,000,000		1,000,000
Accelerated amortization expense - up-front payments	$ 0	$ 1,063,000	$ 442,000	$ 3,446,000
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life of patents and patent rights			1 year
Finite lived intangible asset acquired during the year, useful life			1 year
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful life of patents and patent rights			10 years
Finite lived intangible asset acquired during the year, useful life			7 years

XML

Earnings Per Share (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Earnings Per Share [Abstract]
Weighted-average common shares outstanding - basic	47,944,193	40,994,082	46,155,846	38,104,500
Dilutive effect of Equity-based Incentive Awards	994,573	1,459,700	1,052,259	1,373,116
Weighted-average common shares outstanding - diluted	48,938,766	42,453,782	47,208,105	39,477,616
Anti-dilutive Equity-based Incentive Awards excluded from the computation of diluted income per share	54,260	37,760	34,260	69,960

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Goodwill and Other Identifiable Intangible Assets Future Amortization Expense for Intangible Assets (Details) (USD $)	Jun. 30, 2012
Finite-Lived Intangible Assets [Line Items]
For the remainder of 2012	$ 13,934,000
2013	27,589,000
2014	27,336,000
2015	26,874,000
2016	25,761,000
Thereafter	92,710,000
Total expected amortization expense	$ 214,204,000

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Fair Value Measurements and Auction Rate Securities (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Auction Rate Securities [Line Items]
Auction rate securities par value	$ 1,975,000	$ 2,425,000
Maximum contract period, investments	35 years
Other than temporary impairment losses, investments	$ 469,000	$ 469,000
Minimum [Member]
Auction Rate Securities [Line Items]
Auction rate securities rate setting interval	7 days
Maximum [Member]
Auction Rate Securities [Line Items]
Auction rate securities rate setting interval	63 days

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Consolidated Statements of Cash Flows Statement (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities:
Net income including noncontrolling interests in operating subsidiaries	$ 56,034	$ 15,395
Adjustments to reconcile net income including noncontrolling interests in operating subsidiaries to net cash provided by operating activities:
Depreciation and amortization	10,585	6,418
Non-cash stock compensation	11,090	6,323
Change in valuation allowance	(10,237)	0
Other	49	(9)
Changes in assets and liabilities:
Accounts receivable	(7,907)	(12,379)
Prepaid expenses and other assets	(271)	(63)
Accounts payable and accrued expenses / costs	2,945	(497)
Royalties and contingent legal fees payable	(4,405)	9,931
Deferred income tax	(5,522)	0
Net cash provided by operating activities	63,405	25,119
Cash flows from investing activities:
Purchases of property and equipment	(188)	(88)
Purchase of available-for-sale investments	(239,952)	0
Maturities and sale of available-for-sale investments	117,462	35
Purchase of ADAPTIX, Inc., net of cash acquired	(150,000)	0
Patent acquisition costs	(40,435)	(1,805)
Net cash used in investing activities	(313,113)	(1,858)
Cash flows from financing activities:
Proceeds from sale of common stock, net of issuance costs	218,983	175,232
Distributions to noncontrolling interests in operating subsidiary	0	(2,897)
Contributions from noncontrolling interests in operating subsidiary	1,920	877
Excess tax benefits from stock-based compensation	10,850	23
Proceeds from exercises of stock options	88	404
Net cash provided by financing activities	231,841	173,639
(Decrease) increase in cash and cash equivalents	(17,867)	196,900
Cash and cash equivalents, beginning	314,733	102,515
Cash and cash equivalents, ending	296,866	299,415
Supplemental schedule of noncash investing activities:
Patent acquisition costs included in accrued expenses / costs	$ 10,000	$ 0

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Fair Value Measurements and Auction Rate Securities Level 3 Reconciliation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance as of	$ 1,956	$ 1,975	$ 1,956	$ 2,001
Total gains (realized or unrealized):
Recognized gains included in earnings (1)	0	0	0	9
Settlements	(450)	0	(450)	(35)
Balance as of	$ 1,506	$ 1,975	$ 1,506	$ 1,975

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 296,866	$ 314,733
Short-term investments	132,496	6,597
Accounts receivable	10,822	2,915
Prepaid expenses and other current assets	1,786	803
Total current assets	441,970	325,048
Property and equipment, net of accumulated depreciation	342	220
Patents, net of accumulated amortization	214,204	25,188
Goodwill	36,217	0
Investments - noncurrent	1,506	1,956
Other assets	462	465
Total assets	694,701	352,877
Current liabilities:
Accounts payable and accrued expenses / costs	18,648	6,625
Royalties and contingent legal fees payable	19,103	23,508
Total current liabilities	37,751	30,133
Deferred income taxes	32,592	0
Other liabilities	654	632
Total liabilities	70,997	30,765
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; no shares issued or outstanding	0	0
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 49,714,283 and 42,928,001 shares issued and outstanding as of June 30, 2012 and December 31, 2011, respectively	50	43
Additional paid-in capital	627,825	386,821
Accumulated comprehensive income (loss)	797	(1,830)
Accumulated deficit	(8,836)	(65,085)
Total Acacia Research Corporation stockholders' equity	619,836	319,949
Noncontrolling interests in operating subsidiaries	3,868	2,163
Total stockholders' equity	623,704	322,112
Total liabilities and stockholders' equity	$ 694,701	$ 352,877

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net income attributable to Acacia Research Corporation	$ 6,321	$ 2,139	$ 56,249	$ 14,492
Other comprehensive income:
Unrealized gain on short-term investments, net of income tax benefit (expense) of $64 and $(332) for the three and six months ended June 30, 2012, respectively, and $0 for the three and six months ended June 30, 2011	158	0	2,588	0
Add: reclassification adjustment for losses included in net income	39	0	39	0
Comprehensive income	$ 6,518	$ 2,139	$ 58,876	$ 14,492

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Acquisitions Purchase Price Allocation (Details) (ADAPTIX, Inc. [Member], USD $) In Thousands, unless otherwise specified	0 Months Ended	6 Months Ended
	Jan. 12, 2012	Jun. 30, 2012
ADAPTIX, Inc. [Member]
Business Acquisition [Line Items]
Fair value of net tangible assets acquired	$ 10,000
Intangible assets acquired - patents	150,000
Goodwill	36,202
Net deferred income tax liability	(36,202)
Total purchase price	160,000	160,000
Intangible assets acquired - patents - amortization period	10 years
Intangible assets acquired - patents - annual amortization	$ 15,000

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Fair Value Measurements and Auction Rate Securities (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Measurements and Auction Rate Securities [Abstract]

Fair Value, Assets Measured on Recurring Basis

The following table presents the auction rate securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the interim periods presented (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Balance as of April 1 and January 1, respectively	$	1,956		$	1,975	$	1,956		$	2,001
Total gains (realized or unrealized):
Recognized gains included in earnings (1)	—			—		—			9
Settlements	(450		)	—		(450		)	(35		)
Balance as of June 30	$	1,506		$	1,975	$	1,506		$	1,975

(1) Total realized gains on redemptions or partial redemptions at par of auction rate securities for the periods presented.

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Acquisitions Pro Forma Information (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Business Acquisition [Line Items]
Revenues	$ 50,484	$ 39,746	$ 149,524	$ 100,876
Total operating costs and expenses	40,711	41,893	76,045	86,870
Operating income (loss)	9,773	(2,147)	73,479	14,006
Interest and investment income	102	24	158	53
Income (loss) from operations before provision for income taxes	9,875	(2,123)	73,637	14,059
Provision for income taxes	(3,494)	(306)	(18,241)	(7,454)
Net income (loss) including noncontrolling interests in operating subsidiaries	6,381	(2,429)	55,396	6,605
Net (income) loss attributable to noncontrolling interests in operating subsidiaries	(60)	300	215	(903)
Net income (loss) attributable to Acacia Research Corporation	$ 6,321	$ (2,129)	$ 55,611	$ 5,702
Pro forma income (loss) per common share attributable to Acacia Research Corporation: Basic earnings (loss) per share	$ 0.13	$ (0.05)	$ 1.20	$ 0.15
Pro forma income (loss) per common share attributable to Acacia Research Corporation: Diluted earnings (loss) per share	$ 0.13	$ (0.05)	$ 1.18	$ 0.14
Weighted average number of shares outstanding, basic	47,944,193	40,994,082	46,155,846	38,104,500
Weighted average number of shares outstanding, diluted	48,938,766	42,453,782	47,208,105	39,477,616

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Description of Business and Basis of Presentation (Details) (USD $)	0 Months Ended	6 Months Ended
	Jan. 12, 2012	Jun. 30, 2012
Description of Business and Basis of Presentation [Abstract]
Number of patent portfolios		238
Partners capital, authorized		$ 250,000,000
ADAPTIX, Inc. [Member]
Business Acquisition [Line Items]
Cash payments to acquire businesses	$ 160,000,000	$ 160,000,000

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Consolidated Statements of Comprehensive Income (Parentheticals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income tax benefit (expense) included in unrealized gain on short-term investments	$ 64	$ 0	$ (332)	$ 0

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Stockholders' Equity:
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	49,714,283	42,928,001
Common stock, shares outstanding	49,714,283	42,928,001
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements - Adopted Effective January 1, 2012. In September 2011, the FASB issued guidance on testing goodwill for impairment. The new guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required. The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.    

In June 2011, the FASB issued new guidance on the presentation of comprehensive income. The new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in stockholders’ equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income from that of current accounting guidance. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. In December 2011, the FASB issued an amendment to defer the presentation on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for annual and interim financial statements. The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In May 2011, the FASB issued a new accounting standard on fair value measurements that clarifies the application of existing guidance and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. The standard is effective for interim and annual periods beginning after December 15, 2011. The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recent Accounting Guidance Not Yet Adopted. In December 2011, the FASB issued guidance enhancing disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. The new guidance requires the disclosure of the gross amounts subject to rights of set-off, amounts offset in accordance with the accounting standards followed, and the related net exposure. The new guidance will be effective for the Company beginning January 1, 2013. The Company does not expect the adoption of this accounting guidance to have a material impact on its consolidated financial statements and related disclosures.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 25, 2012
Entity Information [Line Items]
Entity Registrant Name	ACACIA RESEARCH CORP
Entity Central Index Key	0000934549
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		49,714,283

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Revenue Recognition

Revenue Recognition.  Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectibility of amounts is reasonably assured.

In general, revenue arrangements provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by Acacia’s operating subsidiaries.  These rights typically include some combination of the following:  (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by Acacia’s operating subsidiaries, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation.  The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an additional minimum upfront payment.  Pursuant to the terms of these agreements, Acacia’s operating subsidiaries have no further obligation with respect to the grant of the non-exclusive retroactive and future licenses, covenants-not-to-sue, releases, and other deliverables, including no express or implied obligation on Acacia’s operating subsidiaries’ part to maintain or upgrade the technology, or provide future support or services.  Generally, the agreements provide for the grant of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the agreement, or upon receipt of the minimum upfront payment for term agreement renewals.  As such, the earnings process is complete and revenue is recognized upon the execution of the agreement, when collectibility is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition criteria have been met.

Cost of Revenues

Cost of Revenues.  Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third parties and the amortization of patent-related acquisition costs.  These costs are included under the caption “Cost of revenues” in the accompanying consolidated statements of income.

Inventor Royalties and Contingent Legal Expenses

Inventor Royalties and Contingent Legal Expenses. Inventor royalties are expensed in the consolidated statements of income in the period that the related revenues are recognized.  In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by Acacia’s operating subsidiaries to acquire patents are recoverable from future net revenues.  Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the consolidated statements of income.  Any unamortized patent acquisition costs recovered from net revenues are expensed in the period recovered, and included in amortization expense in the consolidated statements of income.

Contingent legal fees are expensed in the consolidated statements of income in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement.  Legal fees advanced by contingent law firms that are required to be paid in the event that no license recoveries are obtained are expensed as incurred and included in liabilities in the consolidated balance sheets.

During the six months ended June 30, 2012 and 2011, Acacia entered into agreements with unrelated third parties resolving pending patent matters that resulted in the grant of certain intellectual property rights and recognition of revenues, a portion of which were not subject to inventor royalty and contingent legal fee arrangements, as well as the grant of certain intellectual property rights from certain of Acacia’s operating subsidiaries and recognition of revenues that were subject to inventor royalties and contingent legal fee arrangements.  Revenues recognized subject to inventor royalties and contingent legal fees are based on a determination by the respective operating subsidiaries.

Use of Estimates

Use of Estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Acacia believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, stock-based compensation expense, impairment of marketable securities, the determination of the economic useful life of amortizable intangible assets, income taxes and valuation allowances against net deferred tax assets and the application of the acquisition method of accounting for business combinations, require its most difficult, subjective or complex judgments.

Concentrations

Concentrations. One licensee individually accounted for 72% of revenues recognized during the three months ended June 30, 2012, and four licensees individually accounted for 36%, 24%, 13%, and 12% of revenues recognized during the six months ended June 30, 2012. Three licensees individually accounted for 30%, 28% and 12% of revenues recognized during the three months ended June 30, 2011, and three licensees individually accounted for 45%, 12% and 11% of revenues recognized during the six months ended June 30, 2011. Two licensees individually represented approximately 65% and 23% of accounts receivable at June 30, 2012. Five other licensees individually represented approximately 18%, 15%, 14%, 13% and 10% of accounts receivable at December 31, 2011. For the three and six months ended June 30, 2012, 10% and 53%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. For the three and six months ended June 30, 2011, 20% and 54%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions.

Stock-Based Compensation

Stock-Based Compensation. The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense, on a straight-line basis, over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. Stock-based compensation expense is recorded only for those awards expected to vest using an estimated forfeiture rate.

Fair Value Measurements

Fair Value Measurements. U.S. generally accepted accounting principles define fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows:

● Level 1 - Observable Inputs:  Quoted prices in active markets for identical investments;

● Level 2 - Pricing Models with Significant Observable Inputs:  Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.; and

● Level 3 - Unobservable Inputs:  Significant unobservable inputs, including the entity’s own assumptions in determining the fair value of investments.

Whenever possible, the Company is required to use observable market inputs (Level 1 - quoted market prices) when measuring fair value.

Investments in and Impairment of Marketable Securities

Investments in Marketable Securities. Investments in securities with original maturities of greater than three months and less than one year and other investments representing amounts that are available for current operations are classified as short-term investments, unless there are indications that such investments may not be readily sold in the short term. The fair values of these investments approximate their carrying values. At June 30, 2012, all of Acacia’s short term investments were classified as available-for-sale, which are reported at fair value on a recurring basis using significant observable inputs (Level 1), with related unrealized gains and losses in the value of such securities recorded as a separate component of comprehensive income (loss) in stockholders’ equity until realized. Realized and unrealized gains and losses are recorded based on the specific identification method. Interest on all securities is included in interest income. At June 30, 2012, short term investments were comprised of equity investments in the common stock of certain technology companies and investments in highly liquid, AAA, U.S. government fixed income securities with maturity dates ranging from 2012 to 2013.

The following table presents marketable securities’ cost, gross unrealized gains, gross unrealized losses, and fair value by major security type recorded as short-term investments as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government fixed income securities	$	124,957	$	22	$	(206	)	$	124,773
Equity securities of certain technology companies	6,410		1,489		(176		)	7,723
Total short-term investments	$	131,367	$	1,511	$	(382	)	$	132,496

	December 31, 2011
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government fixed income securities	$	—	$	—	$	—		$	—
Equity securities of certain technology companies	8,427		169		(1,999		)	6,597
Total short-term investments	$	8,427	$	169	$	(1,999	)	$	6,597

Impairment of Marketable Securities. Acacia evaluates its investments in marketable securities for potential impairment, employing a methodology on a quarterly basis that considers available quantitative and qualitative evidence. If the cost or carrying value of an investment exceeds its estimated fair value, the Company evaluates, among other factors, general market conditions, credit quality of instrument issuers, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold, or plans or ability to sell. Fair value is estimated based on publicly available market information or other estimates determined by management. Investments are considered to be impaired when a decline in fair value is estimated to be other-than-temporary. Acacia reviews impairments associated with its investments in marketable securities and determines the classification of any impairment as temporary or other-than-temporary.   An impairment is deemed other-than-temporary unless (a) Acacia has the ability and intent to hold an investment for a period of time sufficient for recovery of its carrying amount and (b) positive evidence indicating that the investment’s carrying amount is recoverable within a reasonable period of time outweighs any evidence to the contrary. All available evidence, both positive and negative, is considered to determine whether, based on the weight of such evidence, the carrying amount of the investment is recoverable within a reasonable period of time. For investments classified as available-for-sale, unrealized losses that are other-than-temporary are recognized in the consolidated statements of income.

Patents

Patents.  Patents includes the cost of patents or patent rights (hereinafter, collectively “patents”), acquired from third-parties or acquired in connection with business combinations. Patent acquisition costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to ten years.

Goodwill

Goodwill. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31 for Acacia) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Acacia considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then applies a two-step impairment test. The two-step impairment test first compares the fair value of the Company's reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the reporting unit exceeds its fair value, the Company determines the implied fair value of the reporting unit's goodwill and if the carrying value of the reporting unit's goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded in the consolidated statement of income.

Acacia uses the management approach, which designates the internal organization that is used by management for making operating decisions and assessing performance as the basis of Acacia’s reportable segments.  Acacia’s intellectual property licensing and enforcement business constitutes its single reportable segment.

Income Taxes

Income Taxes.  Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s consolidated financial statements or consolidated tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized.

The provision for income taxes for interim periods is determined using an estimate of Acacia’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, Acacia updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is made.  

As of June 30, 2012, Acacia’s estimated annual effective tax rate is approximately 38%, mainly comprised of U.S. federal and state incomes taxes, foreign withholding taxes and nondeductible permanent expenses. Acacia’s effective tax rate for the six months ended June 30, 2012 was 25%. The difference between the effective tax rate and the estimated annual effective tax rate is mainly due to the benefit associated with the release of valuation allowance in the first quarter of 2012 in connection with the acquisition of ADAPTIX, as described below.

Tax expense for the three and six months ended June 30, 2012 included foreign withholding taxes totaling $28,000 and $11,890,000, respectively, withheld by the applicable foreign tax authority on revenue agreements executed with third party licensees domiciled in certain foreign jurisdictions. The tax provision for the six months ended June 30, 2012 provides for the utilization (subject to certain limitations, if any) of the foreign taxes withheld as a credit against income tax expense calculated for financial statement purposes.

For the six months ended June 30, 2011, the provision for income taxes included foreign withholding taxes totaling $7,425,000. Excluding the impact of foreign withholding taxes, the 2011 annual effective tax rate was estimated to be lower than the 35% U.S. federal statutory rate due primarily to the anticipated utilization of available net operating loss (“NOL”) carryforwards to reduce U.S. taxable income.  

Tax expense for the periods presented reflects the impact of the calculation of tax expense for financial reporting purposes without the excess tax benefit related to the exercise and vesting of equity-based incentive awards. Under U.S. generally accepted accounting principles, if a deduction reported on a tax return for an equity-based incentive award exceeds the cumulative compensation cost for such instruments recognized for financial reporting purposes, any resulting realized tax benefit that exceeds the previously calculated and recognized compensation expense for such instruments is considered an excess tax benefit, and is recognized as a credit to additional paid-in capital, not taxes payable. The deduction related to the exercise and vesting of equity-based incentive awards is available to offset taxable income, if any, on Acacia’s future consolidated tax returns. Accordingly, the noncash tax expense calculated without the benefit related to the exercise and vesting of equity-based incentive awards totaling $3,239,000 and $10,850,000 for the three and six months ended June 30, 2012 was credited to additional paid-in capital, not taxes payable, and therefore does not reflect cash taxes payable. As of and for the six months ended June 30, 2012, taxes paid or payable totaled approximately $12,400,000, primarily comprised of foreign withholding taxes, as described above, and other state related taxes payable.

At December 31, 2011, Acacia had U.S. federal and state income tax net operating losses (“NOLs”) totaling approximately $69,062,000 and $61,493,000, expiring between 2020 and 2030, and 2015 and 2030, respectively. Utilization of NOLs and credit carryforwards can be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. 

Release of Valuation Allowance. As of December 31, 2011, the Company maintained a full valuation allowance against its net deferred tax assets. The net deferred tax liability resulting from the acquisition of ADAPTIX created an additional source of income to utilize against Acacia’s existing consolidated net deferred tax assets. Under the acquisition method of accounting, the impact on the acquiring company’s deferred tax assets is recorded outside of acquisition accounting. In addition, the Company estimated that certain other deferred tax assets related to foreign tax credits and other state related deferreds, totaling approximately $1,900,000, were more likely than not realizable in future periods. Accordingly, the valuation allowance on the majority of Acacia’s net deferred tax assets was released, resulting in an income tax benefit of approximately $10,237,000, recorded as a credit to income tax expense for the six months ended June 30, 2012. The offsetting amounts reduced net deferred tax liabilities, $8.3 million of which reduced the net deferred tax liability established in connection with the application of the acquisition method of accounting for the ADAPTIX acquisition. Refer to Note 8 to these consolidated financial statements.

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Consolidated Statements of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenues	$ 50,484	$ 39,746	$ 149,524	$ 100,876
Cost of revenues:
Inventor royalties	9,573	8,588	17,167	21,677
Contingent legal fees	6,607	13,039	10,355	22,406
Litigation and licensing expenses - patents	5,268	3,761	8,649	7,295
Amortization of patents	5,393	2,600	10,519	6,372
Marketing, general and administrative expenses (including non-cash stock compensation expense of $6,000 and $11,090 for the three and six months ended June 30, 2012, respectively, and $3,422 and $6,323 for the three and six months ended June 30, 2011, respectively)	11,903	8,302	25,634	18,287
Research, consulting and other expenses - business development	1,967	1,335	3,083	2,043
Total operating costs and expenses	40,711	37,625	75,407	78,080
Operating income	9,773	2,121	74,117	22,796
Interest and investment income	102	24	158	53
Income from operations before provision for income taxes	9,875	2,145	74,275	22,849
Provision for income taxes	(3,494)	(306)	(18,241)	(7,454)
Net income including noncontrolling interests in operating subsidiaries	6,381	1,839	56,034	15,395
Net (income) loss attributable to noncontrolling interests in operating subsidiaries	(60)	300	215	(903)
Net income attributable to Acacia Research Corporation	$ 6,321	$ 2,139	$ 56,249	$ 14,492
Net income per common share attributable to Acacia Research Corporation:
Basic earnings per share	$ 0.13	$ 0.05	$ 1.22	$ 0.38
Diluted earnings per share	$ 0.13	$ 0.05	$ 1.19	$ 0.37
Weighted average number of shares outstanding, basic	47,944,193	40,994,082	46,155,846	38,104,500
Weighted average number of shares outstanding, diluted	48,938,766	42,453,782	47,208,105	39,477,616

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Goodwill and Other Identifiable Intangible Assets

6 Months Ended

Jun. 30, 2012

Goodwill and Other Identifiable Intangible Assets [Abstract]

Goodwill and Other Identifiable Intangible Assets

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

Acacia’s only identifiable intangible assets at June 30, 2012 and December 31, 2011 are patents and patent rights.  Patent-related accumulated amortization totaled $46,850,000 and $36,331,000 as of June 30, 2012 and December 31, 2011, respectively.

Acacia’s patents and patent rights have remaining estimated economic useful lives ranging from one to ten years.  The weighted-average remaining estimated economic useful life of Acacia’s patents and patent rights is approximately eight years.  The following table presents the scheduled annual aggregate amortization expense as of June 30, 2012 (in thousands):

Remainder of 2012	$	13,934
2013	27,589
2014	27,336
2015	26,874
2016	25,761
Thereafter	92,710
Total	$	214,204

For the six months ended June 30, 2012 and 2011, Acacia paid patent and patent rights acquisition costs totaling $40,435,000 (excluding the acquisition of ADAPTIX) and $1,805,000, respectively.  The patents and patent rights acquired have estimated economic useful lives of approximately one to seven years. Included in net additions to capitalized patent costs during the three months ended June 30, 2011 are accrued future patent acquisition costs totaling $1,000,000, which were incurred pursuant to the terms of the underlying patent acquisition agreements. Accrued future patent acquisition costs are amortized over the estimated economic useful life of the related patents acquired.

Refer to Note 8 to these consolidated financial statements for additions to patents and goodwill in connection with Acacia’s acquisition of ADAPTIX and the related application of the acquisition method of accounting.

During the six months ended June 30, 2012 and 2011, certain operating subsidiaries recovered up-front patent portfolio acquisition costs from applicable net licensing proceeds prior to scheduled amortization of such up-front patent portfolio acquisition costs, resulting in the acceleration of amortization expense for the applicable patent related assets. Accelerated amortization expense related to the recovery of up-front patent acquisition costs totaled $0 and $442,000 for the three and six months ended June 30, 2012, respectively, and $1,063,000 and $3,446,000 for the three and six months ended June 30, 2011, respectively.

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Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

Earnings Per Share.  Basic income per share is computed based upon the weighted-average number of common shares outstanding, excluding unvested restricted stock.  Diluted income per share is computed based upon the weighted-average number of common shares outstanding, including the dilutive effect of common stock equivalents outstanding during the periods.  Potentially dilutive common stock equivalents primarily consist of employee stock options, unvested restricted stock, and restricted stock units (“Equity-based Incentive Awards”).

Potentially dilutive common shares from Equity-based Incentive Awards are determined by applying the treasury stock method to the assumed exercise of outstanding employee stock options, and the assumed vesting of outstanding unvested restricted stock and restricted stock units.  The following table presents the weighted-average number of common shares outstanding used in the calculation of basic and diluted income per share:

	Three Months Ended June 30,		Six Months Ended June 30,
	2012	2011	2012	2011
Weighted-average common shares outstanding - basic	47,944,193	40,994,082	46,155,846	38,104,500
Dilutive effect of Equity-based Incentive Awards	994,573	1,459,700	1,052,259	1,373,116
Weighted-average common shares outstanding - diluted	48,938,766	42,453,782	47,208,105	39,477,616
Anti-dilutive Equity-based Incentive Awards excluded from the computation of diluted income per share	54,260	37,760	34,260	69,960

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2012

Acquisitions [Abstract]

Schedule of Purchase Price Allocation

Based on the total purchase consideration and the estimate of the assets acquired and the liabilities assumed by ARG as of the Acquisition Date, the purchase price allocation was as follows ($ amounts in thousands):

				Amortization Period	Annual Amortization
Assets Acquired and Liabilities Assumed:
Fair value of net tangible assets acquired	$	10,000
Intangible assets acquired - patents	150,000			10 years	$	15,000
Goodwill	36,202
Net deferred income tax liability	(36,202		)
Total	$	160,000

Deferred Tax Liability, Acquisition

The estimated net deferred tax liability was determined as follows ($ amounts in thousands):

	Book Basis		Tax Basis		Difference
Intangible assets acquired - patents	$	150,000	$	—	$	(150,000	)
Estimated net operating loss carryforwards - ADAPTIX	—		46,565		46,565
Net deferred tax liability - pretax					(103,435		)
Estimated tax rate					35		%
Estimated net deferred tax liability					$	(36,202	)

Business Acquisition, Pro Forma Information

The unaudited pro forma combined results are presented in thousands, except share and per share information.

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenues	$	50,484		$	39,746		$	149,524		$	100,876
Total operating costs and expenses	40,711			41,893			76,045			86,870
Operating income (loss)	9,773			(2,147		)	73,479			14,006
Interest and investment income	102			24			158			53
Income (loss) from operations before provision for income taxes	9,875			(2,123		)	73,637			14,059
Provision for income taxes	(3,494		)	(306		)	(18,241		)	(7,454		)
Net income (loss) including noncontrolling interests in operating subsidiaries	6,381			(2,429		)	55,396			6,605
Net (income) loss attributable to noncontrolling interests in operating subsidiaries	(60		)	300			215			(903		)
Net income (loss) attributable to Acacia Research Corporation	$	6,321		$	(2,129	)	$	55,611		$	5,702

	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
Pro forma income (loss) per common share attributable to Acacia Research Corporation:
Basic earnings (loss) per share	$	0.13	$	(0.05	)	$	1.20	$	0.15
Diluted earnings (loss) per share	$	0.13	$	(0.05	)	$	1.18	$	0.14
Weighted average number of shares outstanding, basic	47,944,193		40,994,082			46,155,846		38,104,500
Weighted average number of shares outstanding, diluted	48,938,766		42,453,782			47,208,105		39,477,616

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies Investments in Marketable Securities [Abstract]

Marketable Securities

The following table presents marketable securities’ cost, gross unrealized gains, gross unrealized losses, and fair value by major security type recorded as short-term investments as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government fixed income securities	$	124,957	$	22	$	(206	)	$	124,773
Equity securities of certain technology companies	6,410		1,489		(176		)	7,723
Total short-term investments	$	131,367	$	1,511	$	(382	)	$	132,496

	December 31, 2011
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government fixed income securities	$	—	$	—	$	—		$	—
Equity securities of certain technology companies	8,427		169		(1,999		)	6,597
Total short-term investments	$	8,427	$	169	$	(1,999	)	$	6,597

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Stockholders' Equity

6 Months Ended

Jun. 30, 2012

Stockholders' Equity Note [Abstract]

Stockholders' Equity

STOCKHOLDERS’ EQUITY

In February 2012, Acacia raised gross proceeds of $225,000,000 through the sale of 6,122,000 shares of Acacia’s common stock at a price of $36.75 per share in a private placement offering with certain institutional accredited investors. Net proceeds, net of placement agent fees and estimated offering expenses, totaled approximately $218,983,000. Acacia intends to use the net proceeds of this private placement to finance pending and future acquisitions of patents and patent royalties and other patent licensing vehicles and companies with patent assets, and for working capital and general corporate purposes.

In March 2011, Acacia completed a registered public offering of 5,750,000 shares of common stock. The public offering price was $31.50 per share, and the net proceeds to the Company totaled approximately $175,232,000, after deducting underwriting discounts and related offering expenses. Acacia retained broad discretion over the use of the net proceeds from this sale of common stock, including the use of the net proceeds for operations and for other general corporate purposes, including, but not limited to, working capital, strategic acquisitions and other transactions.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Patent Enforcement and Other Litigation

Acacia is subject to claims, counterclaims and legal actions that arise in the ordinary course of business.  Management believes that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on Acacia’s consolidated financial position, results of operations or cash flows.  Certain of Acacia’s operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights.  In connection with any of Acacia’s operating subsidiaries’ patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions.  In such event, a court may issue monetary sanctions against Acacia or its operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material.

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Fair Value Measurements and Auction Rate Securities

6 Months Ended

Jun. 30, 2012

Fair Value Measurements and Auction Rate Securities [Abstract]

Fair Value Measurements and Auction Rate Securities

FAIR VALUE MEASUREMENTS AND AUCTION RATE SECURITIES

As of June 30, 2012 and December 31, 2011, Acacia held investment grade auction rate securities with a par value totaling $1,975,000 and $2,425,000, respectively, consisting of auction rate investments backed by student loans, issued under programs such as the Federal Family Education Loan Program, which are classified as available-for-sale and reflected at fair value. Auction rate securities are classified as noncurrent for the periods presented. Contractual maturity dates range up to 35 years, with reset dates every 7 days to 63 days. The fair values of these securities are estimated utilizing an analysis of certain unobservable inputs (Level 3) and by reference to a discounted cash flow analysis as of June 30, 2012.  These analyses considered, among other items, the underlying structure of each security, the collateral underlying the security investments, the creditworthiness of the counterparty, the present value of future principal and contractual interest payments discounted at rates considered to be reflective of current market conditions, consideration of the probabilities of default, continued auction failure, or repurchase or redemption at par for each period, and estimates of the time period over which current liquidity related issues will be resolved.  Observable market data for instruments with similar characteristics to Acacia’s auction rate securities was also considered, when possible.

As of June 30, 2012 and December 31, 2011, the net other-than-temporary loss on auction rate securities collateralized by student loan portfolios totaled $469,000. The following table presents the auction rate securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the interim periods presented (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Balance as of April 1 and January 1, respectively	$	1,956		$	1,975	$	1,956		$	2,001
Total gains (realized or unrealized):
Recognized gains included in earnings (1)	—			—		—			9
Settlements	(450		)	—		(450		)	(35		)
Balance as of June 30	$	1,506		$	1,975	$	1,506		$	1,975

(1) Total realized gains on redemptions or partial redemptions at par of auction rate securities for the periods presented.

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Acquisitions

6 Months Ended

Jun. 30, 2012

Acquisitions [Abstract]

Acquisitions

ACQUISITION

On January 12, 2012 (the “Acquisition Date”), pursuant to the terms and conditions of the Agreement and Plan of Merger dated as of November 22, 2011 (the “Merger Agreement”) among Acacia Research Group LLC (“ARG”), a wholly-owned subsidiary of Acacia, Apollo Patent Corp., a newly-formed, wholly-owned subsidiary of ARG (“Merger Sub”), ADAPTIX, a Delaware corporation, and Baker Communications Fund II (QP), L.P. solely in its capacity as shareholder representative, ARG completed its acquisition of ADAPTIX, which held no material assets other than its portfolio of patents and $10 million in cash, through a merger of Merger Sub with and into ADAPTIX, with ADAPTIX as the surviving corporation (the “Merger”). Upon completion of the Merger, the separate corporate existence of Merger Sub ceased and ADAPTIX became a wholly-owned subsidiary of ARG.

ADAPTIX, a pioneer in the development of 4G technologies for wireless systems, is an award-winning technology company long recognized in the industry as one of the first developers of cutting edge 4G wireless systems. With patents filed as early as 2000, ADAPTIX’s research and development efforts have resulted in one of the world’s most significant intellectual property portfolios focused on 4G technologies. With its rapidly growing portfolio of 230 issued and pending patents in 13 countries, ADAPTIX’s innovations extend across a broad range of 4G technologies including OFDMA and MIMO.

The Merger is being accounted for in accordance with the acquisition method of accounting under Financial Accounting Standards Board (“FASB”) ASC Topic 805, “Business Combinations” (“Topic 805”). Topic 805 requires, among other things, that identifiable assets acquired and liabilities assumed be recognized at their fair values as of the Acquisition Date. Under the acquisition method of accounting, the purchase consideration is allocated to the assets acquired, including tangible assets, patents and other identifiable intangible assets and liabilities assumed, based on their estimated fair market values on the date of acquisition. Any excess purchase price after the initial allocation to identifiable net tangible and identifiable intangible assets is assigned to goodwill. Amounts attributable to patents are amortized using the straight-line method over the estimated economic useful life of the underlying patents.

The total consideration paid by ARG in connection with the Merger was approximately $160 million, paid in cash. Based on the total purchase consideration and the estimate of the assets acquired and the liabilities assumed by ARG as of the Acquisition Date, the purchase price allocation was as follows ($ amounts in thousands):

				Amortization Period	Annual Amortization
Assets Acquired and Liabilities Assumed:
Fair value of net tangible assets acquired	$	10,000
Intangible assets acquired - patents	150,000			10 years	$	15,000
Goodwill	36,202
Net deferred income tax liability	(36,202		)
Total	$	160,000

Amounts attributable to the patents acquired are being amortized using the straight-line method over an estimated weighted average economic useful life of the underlying patents, which is estimated to be approximately ten years. Goodwill is calculated as the residual after recording the identifiable net assets acquired and associated net deferred tax assets and liabilities.

Management is primarily responsible for determining the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as of the Acquisition Date. Management considered a number of factors, including reference to a preliminary independent analysis of estimated fair values solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The analysis included a preliminary discounted cash flow analysis which estimated the future net cash flows expected to result from the licensing and enforcement of the patent portfolio as of the date of acquisition, considering assumptions and estimates related to potential infringers of the patents, applicable industries, usage of the underlying patented technologies, estimated license fee revenues, contingent legal fee arrangements, other estimated costs, tax implications and other factors. A discount rate consistent with the risks associated with achieving the estimated net cash flows was used to estimate the present value of future estimated net cash flows. The Company is in the process of finalizing the estimates and assumptions developed in connection with the independent analysis of estimated fair values solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. Any adjustments to the fair values of intangibles assets acquired, or estimates of economic useful lives of the intangible assets acquired, could impact the carrying value of those assets and related goodwill, as well as the estimates of periodic amortization of intangible assets acquired to be reflected in the statement of operations. In addition, the Company is in the process of finalizing its estimate and analysis of the fair values of certain tax attributes acquired. Any adjustments to the preliminary estimates of tax attributes acquired will increase or decrease the estimated net deferred tax liability recorded in connection with the acquisition method of accounting, with an offsetting adjustment to goodwill.

The Merger is being treated for tax purposes as a nontaxable transaction and as such, the historical tax bases of the acquired assets and assumed liabilities, net operating losses, and other tax attributes of ADAPTIX will carryover. As a result, no new tax goodwill will be created in connection with the Merger as there is no step-up to fair value of the underlying tax bases of the acquired net assets. Acquisition accounting includes the establishment of a net deferred tax asset or liability resulting from book tax basis differences related to assets acquired and liabilities assumed on the date of acquisition. Acquisition date deferred tax assets primarily relate to certain net operating loss carryforwards of ADAPTIX. Acquisition date deferred tax liabilities relate to specifically identified non-goodwill intangibles acquired. The estimated net deferred tax liability was determined as follows ($ amounts in thousands):

	Book Basis		Tax Basis		Difference
Intangible assets acquired - patents	$	150,000	$	—	$	(150,000	)
Estimated net operating loss carryforwards - ADAPTIX	—		46,565		46,565
Net deferred tax liability - pretax					(103,435		)
Estimated tax rate					35		%
Estimated net deferred tax liability					$	(36,202	)

The following unaudited pro forma combined results of operations for the interim period presented are provided for illustrative purposes only and assume the acquisition occurred as of January 1, 2011. The unaudited pro forma combined financial results do not purport to be indicative of the results of operations for future periods or the results that actually would have been realized had the entities been a single entity during these periods. The unaudited pro forma combined results are presented in thousands, except share and per share information.

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenues	$	50,484		$	39,746		$	149,524		$	100,876
Total operating costs and expenses	40,711			41,893			76,045			86,870
Operating income (loss)	9,773			(2,147		)	73,479			14,006
Interest and investment income	102			24			158			53
Income (loss) from operations before provision for income taxes	9,875			(2,123		)	73,637			14,059
Provision for income taxes	(3,494		)	(306		)	(18,241		)	(7,454		)
Net income (loss) including noncontrolling interests in operating subsidiaries	6,381			(2,429		)	55,396			6,605
Net (income) loss attributable to noncontrolling interests in operating subsidiaries	(60		)	300			215			(903		)
Net income (loss) attributable to Acacia Research Corporation	$	6,321		$	(2,129	)	$	55,611		$	5,702

	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
Pro forma income (loss) per common share attributable to Acacia Research Corporation:
Basic earnings (loss) per share	$	0.13	$	(0.05	)	$	1.20	$	0.15
Diluted earnings (loss) per share	$	0.13	$	(0.05	)	$	1.18	$	0.14
Weighted average number of shares outstanding, basic	47,944,193		40,994,082			46,155,846		38,104,500
Weighted average number of shares outstanding, diluted	48,938,766		42,453,782			47,208,105		39,477,616

Pro forma adjustments primarily relate to the amortization of identifiable intangible assets acquired over an estimated economic useful life of ten years, historical operating expenses of ADAPTIX for the three and six months ended June 30, 2011, and the expensing of acquisition costs incurred by ARG in connection with the Merger.

The unaudited pro forma combined statements of operations for the periods presented herein have been adjusted to give effect to pro forma events that are expected to have a continuing impact on the combined results. As such, the income tax benefit related to the release of valuation allowance reflected in the statement of income for the six months ended June 30, 2012, as described at Note 2, is not reflected in the accompanying unaudited pro forma combined statements of income for the periods presented.

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Acquisitions (Details) (ADAPTIX, Inc. [Member], USD $)	0 Months Ended	6 Months Ended
	Jan. 12, 2012 Number	Jun. 30, 2012
ADAPTIX, Inc. [Member]
Business Acquisition [Line Items]
Purchase price allocation, cash and cash equivalents	$ 10,000,000
Number of patents acquired	230
Number of countries which have patents	13
Cash payments to acquire businesses	160,000,000	160,000,000
Intangible assets acquired - patents - amortization period	10 years
Intangible assets acquired - patents, book basis	150,000,000
Intangible assets acquired - patents, tax basis	0
Intangible assets acquired - patents - difference	(150,000,000)
Estimated net operating loss carryforwards - ADAPTIX, book basis	0
Estimated net operating loss carryforwards - ADAPTIX, tax basis	46,565,000
Estimated net operating loss carryforwards - ADAPTIX, difference	46,565,000
Net deferred tax liability - pretax	(103,435,000)
Estimated tax rate	35.00%
Estimated net deferred tax liability	$ (36,202,000)

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Goodwill and Other Identifiable Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2012

Goodwill and Other Identifiable Intangible Assets [Abstract]

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The following table presents the scheduled annual aggregate amortization expense as of June 30, 2012 (in thousands):

Remainder of 2012	$	13,934
2013	27,589
2014	27,336
2015	26,874
2016	25,761
Thereafter	92,710
Total	$	214,204

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Summary of Significant Accounting Policies Concentration Risk (Details)			3 Months Ended		6 Months Ended				3 Months Ended	6 Months Ended			3 Months Ended	6 Months Ended			6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2012 Licensee 1 [Member]	Dec. 31, 2011 Licensee 1 [Member]	Jun. 30, 2012 Licensee 1 [Member] License Revenues [Member]	Jun. 30, 2011 Licensee 1 [Member] License Revenues [Member]	Jun. 30, 2012 Licensee 1 [Member] License Revenues [Member]	Jun. 30, 2011 Licensee 1 [Member] License Revenues [Member]	Jun. 30, 2012 Licensee 2 [Member]	Dec. 31, 2011 Licensee 2 [Member]	Jun. 30, 2011 Licensee 2 [Member] License Revenues [Member]	Jun. 30, 2012 Licensee 2 [Member] License Revenues [Member]	Jun. 30, 2011 Licensee 2 [Member] License Revenues [Member]	Dec. 31, 2011 Licensee 3 [Member]	Jun. 30, 2011 Licensee 3 [Member] License Revenues [Member]	Jun. 30, 2012 Licensee 3 [Member] License Revenues [Member]	Jun. 30, 2011 Licensee 3 [Member] License Revenues [Member]	Dec. 31, 2011 Licensee 4 [Member]	Jun. 30, 2012 Licensee 4 [Member] License Revenues [Member]	Dec. 31, 2011 Licensee 5 [Member]	Jun. 30, 2012 Licensees in foreign jurisdictions [Member] License Revenues [Member]	Jun. 30, 2011 Licensees in foreign jurisdictions [Member] License Revenues [Member]	Jun. 30, 2012 Licensees in foreign jurisdictions [Member] License Revenues [Member]	Jun. 30, 2011 Licensees in foreign jurisdictions [Member] License Revenues [Member]
Concentrations
Concentration Risk, Percentage - Revenues			72.00%	30.00%	36.00%	45.00%			28.00%	24.00%	12.00%		12.00%	13.00%	11.00%		12.00%		10.00%	20.00%	53.00%	54.00%
Concentration Risk, Percentage - Accounts Receivable	65.00%	18.00%					23.00%	15.00%				14.00%				13.00%		10.00%

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Consolidated Statements of Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Non-cash stock compensation	$ 6,000	$ 3,422	$ 11,090	$ 6,323

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition.  Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectibility of amounts is reasonably assured.

In general, revenue arrangements provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by Acacia’s operating subsidiaries.  These rights typically include some combination of the following:  (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by Acacia’s operating subsidiaries, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation.  The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an additional minimum upfront payment.  Pursuant to the terms of these agreements, Acacia’s operating subsidiaries have no further obligation with respect to the grant of the non-exclusive retroactive and future licenses, covenants-not-to-sue, releases, and other deliverables, including no express or implied obligation on Acacia’s operating subsidiaries’ part to maintain or upgrade the technology, or provide future support or services.  Generally, the agreements provide for the grant of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the agreement, or upon receipt of the minimum upfront payment for term agreement renewals.  As such, the earnings process is complete and revenue is recognized upon the execution of the agreement, when collectibility is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition criteria have been met.

Cost of Revenues.  Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third parties and the amortization of patent-related acquisition costs.  These costs are included under the caption “Cost of revenues” in the accompanying consolidated statements of income.  

Inventor Royalties and Contingent Legal Expenses. Inventor royalties are expensed in the consolidated statements of income in the period that the related revenues are recognized.  In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by Acacia’s operating subsidiaries to acquire patents are recoverable from future net revenues.  Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the consolidated statements of income.  Any unamortized patent acquisition costs recovered from net revenues are expensed in the period recovered, and included in amortization expense in the consolidated statements of income.

Contingent legal fees are expensed in the consolidated statements of income in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement.  Legal fees advanced by contingent law firms that are required to be paid in the event that no license recoveries are obtained are expensed as incurred and included in liabilities in the consolidated balance sheets.

During the six months ended June 30, 2012 and 2011, Acacia entered into agreements with unrelated third parties resolving pending patent matters that resulted in the grant of certain intellectual property rights and recognition of revenues, a portion of which were not subject to inventor royalty and contingent legal fee arrangements, as well as the grant of certain intellectual property rights from certain of Acacia’s operating subsidiaries and recognition of revenues that were subject to inventor royalties and contingent legal fee arrangements.  Revenues recognized subject to inventor royalties and contingent legal fees are based on a determination by the respective operating subsidiaries.

Use of Estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Acacia believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, stock-based compensation expense, impairment of marketable securities, the determination of the economic useful life of amortizable intangible assets, income taxes and valuation allowances against net deferred tax assets and the application of the acquisition method of accounting for business combinations, require its most difficult, subjective or complex judgments.

Concentrations. One licensee individually accounted for 72% of revenues recognized during the three months ended June 30, 2012, and four licensees individually accounted for 36%, 24%, 13%, and 12% of revenues recognized during the six months ended June 30, 2012. Three licensees individually accounted for 30%, 28% and 12% of revenues recognized during the three months ended June 30, 2011, and three licensees individually accounted for 45%, 12% and 11% of revenues recognized during the six months ended June 30, 2011. Two licensees individually represented approximately 65% and 23% of accounts receivable at June 30, 2012. Five other licensees individually represented approximately 18%, 15%, 14%, 13% and 10% of accounts receivable at December 31, 2011. For the three and six months ended June 30, 2012, 10% and 53%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. For the three and six months ended June 30, 2011, 20% and 54%, respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions.

Stock-Based Compensation. The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense, on a straight-line basis, over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. Stock-based compensation expense is recorded only for those awards expected to vest using an estimated forfeiture rate.

Fair Value Measurements. U.S. generally accepted accounting principles define fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows:

● Level 1 - Observable Inputs:  Quoted prices in active markets for identical investments;

● Level 2 - Pricing Models with Significant Observable Inputs:  Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.; and

● Level 3 - Unobservable Inputs:  Significant unobservable inputs, including the entity’s own assumptions in determining the fair value of investments.

Whenever possible, the Company is required to use observable market inputs (Level 1 - quoted market prices) when measuring fair value.

Investments in Marketable Securities. Investments in securities with original maturities of greater than three months and less than one year and other investments representing amounts that are available for current operations are classified as short-term investments, unless there are indications that such investments may not be readily sold in the short term. The fair values of these investments approximate their carrying values. At June 30, 2012, all of Acacia’s short term investments were classified as available-for-sale, which are reported at fair value on a recurring basis using significant observable inputs (Level 1), with related unrealized gains and losses in the value of such securities recorded as a separate component of comprehensive income (loss) in stockholders’ equity until realized. Realized and unrealized gains and losses are recorded based on the specific identification method. Interest on all securities is included in interest income. At June 30, 2012, short term investments were comprised of equity investments in the common stock of certain technology companies and investments in highly liquid, AAA, U.S. government fixed income securities with maturity dates ranging from 2012 to 2013.

The following table presents marketable securities’ cost, gross unrealized gains, gross unrealized losses, and fair value by major security type recorded as short-term investments as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government fixed income securities	$	124,957	$	22	$	(206	)	$	124,773
Equity securities of certain technology companies	6,410		1,489		(176		)	7,723
Total short-term investments	$	131,367	$	1,511	$	(382	)	$	132,496

	December 31, 2011
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government fixed income securities	$	—	$	—	$	—		$	—
Equity securities of certain technology companies	8,427		169		(1,999		)	6,597
Total short-term investments	$	8,427	$	169	$	(1,999	)	$	6,597

Impairment of Marketable Securities. Acacia evaluates its investments in marketable securities for potential impairment, employing a methodology on a quarterly basis that considers available quantitative and qualitative evidence. If the cost or carrying value of an investment exceeds its estimated fair value, the Company evaluates, among other factors, general market conditions, credit quality of instrument issuers, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold, or plans or ability to sell. Fair value is estimated based on publicly available market information or other estimates determined by management. Investments are considered to be impaired when a decline in fair value is estimated to be other-than-temporary. Acacia reviews impairments associated with its investments in marketable securities and determines the classification of any impairment as temporary or other-than-temporary.   An impairment is deemed other-than-temporary unless (a) Acacia has the ability and intent to hold an investment for a period of time sufficient for recovery of its carrying amount and (b) positive evidence indicating that the investment’s carrying amount is recoverable within a reasonable period of time outweighs any evidence to the contrary. All available evidence, both positive and negative, is considered to determine whether, based on the weight of such evidence, the carrying amount of the investment is recoverable within a reasonable period of time. For investments classified as available-for-sale, unrealized losses that are other-than-temporary are recognized in the consolidated statements of income.  

Patents.  Patents includes the cost of patents or patent rights (hereinafter, collectively “patents”), acquired from third-parties or acquired in connection with business combinations. Patent acquisition costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to ten years.

Goodwill. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31 for Acacia) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Acacia considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then applies a two-step impairment test. The two-step impairment test first compares the fair value of the Company's reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the reporting unit exceeds its fair value, the Company determines the implied fair value of the reporting unit's goodwill and if the carrying value of the reporting unit's goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded in the consolidated statement of income.

Acacia uses the management approach, which designates the internal organization that is used by management for making operating decisions and assessing performance as the basis of Acacia’s reportable segments.  Acacia’s intellectual property licensing and enforcement business constitutes its single reportable segment.

Income Taxes.  Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s consolidated financial statements or consolidated tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized.

The provision for income taxes for interim periods is determined using an estimate of Acacia’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, Acacia updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is made.  

As of June 30, 2012, Acacia’s estimated annual effective tax rate is approximately 38%, mainly comprised of U.S. federal and state incomes taxes, foreign withholding taxes and nondeductible permanent expenses. Acacia’s effective tax rate for the six months ended June 30, 2012 was 25%. The difference between the effective tax rate and the estimated annual effective tax rate is mainly due to the benefit associated with the release of valuation allowance in the first quarter of 2012 in connection with the acquisition of ADAPTIX, as described below.

Tax expense for the three and six months ended June 30, 2012 included foreign withholding taxes totaling $28,000 and $11,890,000, respectively, withheld by the applicable foreign tax authority on revenue agreements executed with third party licensees domiciled in certain foreign jurisdictions. The tax provision for the six months ended June 30, 2012 provides for the utilization (subject to certain limitations, if any) of the foreign taxes withheld as a credit against income tax expense calculated for financial statement purposes.

For the six months ended June 30, 2011, the provision for income taxes included foreign withholding taxes totaling $7,425,000. Excluding the impact of foreign withholding taxes, the 2011 annual effective tax rate was estimated to be lower than the 35% U.S. federal statutory rate due primarily to the anticipated utilization of available net operating loss (“NOL”) carryforwards to reduce U.S. taxable income.  

Tax expense for the periods presented reflects the impact of the calculation of tax expense for financial reporting purposes without the excess tax benefit related to the exercise and vesting of equity-based incentive awards. Under U.S. generally accepted accounting principles, if a deduction reported on a tax return for an equity-based incentive award exceeds the cumulative compensation cost for such instruments recognized for financial reporting purposes, any resulting realized tax benefit that exceeds the previously calculated and recognized compensation expense for such instruments is considered an excess tax benefit, and is recognized as a credit to additional paid-in capital, not taxes payable. The deduction related to the exercise and vesting of equity-based incentive awards is available to offset taxable income, if any, on Acacia’s future consolidated tax returns. Accordingly, the noncash tax expense calculated without the benefit related to the exercise and vesting of equity-based incentive awards totaling $3,239,000 and $10,850,000 for the three and six months ended June 30, 2012 was credited to additional paid-in capital, not taxes payable, and therefore does not reflect cash taxes payable. As of and for the six months ended June 30, 2012, taxes paid or payable totaled approximately $12,400,000, primarily comprised of foreign withholding taxes, as described above, and other state related taxes payable.

At December 31, 2011, Acacia had U.S. federal and state income tax net operating losses (“NOLs”) totaling approximately $69,062,000 and $61,493,000, expiring between 2020 and 2030, and 2015 and 2030, respectively. Utilization of NOLs and credit carryforwards can be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. 

Release of Valuation Allowance. As of December 31, 2011, the Company maintained a full valuation allowance against its net deferred tax assets. The net deferred tax liability resulting from the acquisition of ADAPTIX created an additional source of income to utilize against Acacia’s existing consolidated net deferred tax assets. Under the acquisition method of accounting, the impact on the acquiring company’s deferred tax assets is recorded outside of acquisition accounting. In addition, the Company estimated that certain other deferred tax assets related to foreign tax credits and other state related deferreds, totaling approximately $1,900,000, were more likely than not realizable in future periods. Accordingly, the valuation allowance on the majority of Acacia’s net deferred tax assets was released, resulting in an income tax benefit of approximately $10,237,000, recorded as a credit to income tax expense for the six months ended June 30, 2012. The offsetting amounts reduced net deferred tax liabilities, $8.3 million of which reduced the net deferred tax liability established in connection with the application of the acquisition method of accounting for the ADAPTIX acquisition. Refer to Note 8 to these consolidated financial statements.

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Summary of Significant Accounting Policies Investments in Marketable Securities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Amortized Cost Basis	$ 131,367	$ 8,427
Available-for-sale Securities, Gross Unrealized Gains	1,511	169
Available-for-sale Securities, Gross Unrealized Losses	(382)	(1,999)
Available-for-sale Securities, Fair Value Disclosure	132,496	6,597
US Government Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Amortized Cost Basis	124,957	0
Available-for-sale Securities, Gross Unrealized Gains	22	0
Available-for-sale Securities, Gross Unrealized Losses	(206)	0
Available-for-sale Securities, Fair Value Disclosure	124,773	0
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Amortized Cost Basis	6,410	8,427
Available-for-sale Securities, Gross Unrealized Gains	1,489	169
Available-for-sale Securities, Gross Unrealized Losses	(176)	(1,999)
Available-for-sale Securities, Fair Value Disclosure	$ 7,723	$ 6,597

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table presents the weighted-average number of common shares outstanding used in the calculation of basic and diluted income per share:

	Three Months Ended June 30,		Six Months Ended June 30,
	2012	2011	2012	2011
Weighted-average common shares outstanding - basic	47,944,193	40,994,082	46,155,846	38,104,500
Dilutive effect of Equity-based Incentive Awards	994,573	1,459,700	1,052,259	1,373,116
Weighted-average common shares outstanding - diluted	48,938,766	42,453,782	47,208,105	39,477,616
Anti-dilutive Equity-based Incentive Awards excluded from the computation of diluted income per share	54,260	37,760	34,260	69,960