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<SEC-DOCUMENT>0001104659-08-046685.txt : 20080915
<SEC-HEADER>0001104659-08-046685.hdr.sgml : 20080915
<ACCEPTANCE-DATETIME>20080721154049
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001104659-08-046685
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20080721

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FORGENT NETWORKS  INC
		CENTRAL INDEX KEY:			0000884144
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373]
		IRS NUMBER:				742415696
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0731

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		108 WILD BASIN RD
		CITY:			AUSTIN
		STATE:			TX
		ZIP:			78746
		BUSINESS PHONE:		5124372700

	MAIL ADDRESS:	
		STREET 1:		108 WILD BASIN RD
		CITY:			AUSTIN
		STATE:			TX
		ZIP:			78746

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	VTEL CORP
		DATE OF NAME CHANGE:	19960401

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	VIDEO TELECOM CORP
		DATE OF NAME CHANGE:	19960401
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>

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<head>







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<body lang="EN-US">

<div>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Mr.&nbsp;Mark Kronforst</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accounting Branch Chief</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Division of Corporation
Finance</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Securities&nbsp;&amp;
Exchange Commission</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">100 F Street, N.E.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Washington, DC&#160; 20549</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="12%" valign="top" style="padding:0in 0in 0in 0in;width:12.26%;">
  <p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Re:</font></p>
  </td>
  <td width="87%" valign="bottom" style="padding:0in 0in 0in 0in;width:87.74%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Forgent
  Networks,&nbsp;Inc. (the &#147;Company&#148;)</font></p>
  </td>
 </tr>
 <tr>
  <td width="12%" valign="top" style="padding:0in 0in 0in 0in;width:12.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="87%" valign="bottom" style="padding:0in 0in 0in 0in;width:87.74%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Form&nbsp;10-K
  for the Fiscal Year Ended July&nbsp;31, 2007</font></p>
  </td>
 </tr>
 <tr>
  <td width="12%" valign="top" style="padding:0in 0in 0in 0in;width:12.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="87%" valign="bottom" style="padding:0in 0in 0in 0in;width:87.74%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Filed October&nbsp;29,
  2007</font></p>
  </td>
 </tr>
 <tr>
  <td width="12%" valign="top" style="padding:0in 0in 0in 0in;width:12.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="87%" valign="bottom" style="padding:0in 0in 0in 0in;width:87.74%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Form&nbsp;10-Q
  for the Fiscal Quarter Ended April&nbsp;30, 2007</font></p>
  </td>
 </tr>
 <tr>
  <td width="12%" valign="top" style="padding:0in 0in 0in 0in;width:12.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="87%" valign="bottom" style="padding:0in 0in 0in 0in;width:87.74%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Filed
  June&nbsp;14, 2007</font></p>
  </td>
 </tr>
 <tr>
  <td width="12%" valign="top" style="padding:0in 0in 0in 0in;width:12.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="87%" valign="bottom" style="padding:0in 0in 0in 0in;width:87.74%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">File
  No.&nbsp;000-20008</font></p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dear Mr.&nbsp;Kronforst:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The following additional
information is provided in response to your letter dated February&nbsp;6, 2008
containing your comments to Note 3 to our financial statements filed with Form&nbsp;10-K
for our fiscal year ended July&nbsp;31, 2007, and our telephonic conversation
on May&nbsp;6, 2008.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Background</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As we have previously
discussed with the Staff, during fiscal 2000 and 2001, our Board of Directors
directed us to initiate a licensing program to monetize the value of certain
image compression technology and computer controlled video system playback
during recording patents held by the Company. Such discussions included the
evaluation of which patents possessed the most opportunity for monetization,
what process the Company should follow to achieve monetization and what royalty
rates the Company should expect to receive as part of its monetization.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Board became aware
that there were numerous companies who were using our patented technologies
and, accordingly, the Board directed management to pursue a strategy for
licensing such patented technologies in a manner that would maximize the net
amounts received for such licensing. Therefore, management decided to focus its
licensing pursuits on larger companies that were currently using its patented
technologies, and not to seek licensing arrangements with entities that were
not already using it patented technologies.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To minimize the amount of
fixed costs that we would incur in the execution of our strategy to execute
license agreements with existing unauthorized users of our patented
technologies, we entered into agreements with external legal counsel, where
they assisted us in pursuing license agreements with unauthorized users. Our
fee arrangements with</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
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<div>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Mr.&nbsp;Mark Kronforst</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">July&nbsp;18, 2008</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">legal counsel were
contingent in nature. Legal fees ultimately owed to external legal counsel was
contingent on the Company actually receiving proceeds from licensing its
patented technologies &#150; whether such fees were received through the successful
negotiation of a license arrangement without the use of litigation, or due to a
settlement arising from litigation.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our initial efforts
consisted of contacting identified unauthorized users to set up negotiations
for licensing the technology. As part of the process of negotiating with the
users, we estimated the amount of revenue that they had derived and would
derive from the use of our patented technologies from sources such as publicly
filed information (e.g., Form&nbsp;10-K&#146;s), data provided by the unauthorized
user and data obtained from other research. In excess of 80% of the identified
unauthorized users were public registrants and, accordingly, financial statement
information was publicly available to assist our process for estimating the
amount of revenue that the unauthorized users had derived and would derive from
the use of our patented technology. In addition, we obtained industry research
data from sources such as Gartner, Forseyth MacCarther, Forrester Research,
iMerge, and Morphism which provided additional information on unit shipment
activity and other financial data of the identified unauthorized users. During
these discussions, we would present a model that indicated the applicable
revenue, royalty rate applied and a discount for early settlement. The
potential licensee would then have the opportunity to review our analysis.&#160; In most cases they would review the analysis
and offer feedback or attempt to disabuse our assumptions based on their
knowledge of the particular products in question.&#160; We would then review their responses closely
to be sure their assertions were consistent with our knowledge of the business
and industry.&#160; If necessary, we would revise
our model to determine a new royalty due based upon the revised
assumptions.&#160; This process could go
through several iterations as issues were discussed and agreed upon between the
parties.&#160; We believe this approach
yielded the best response from a potential licensee since it offered a
disciplined forum to determine an agreed upon royalty due.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We also researched
royalty arrangements for the use of similar patents in this industry, noting
royalty rates ranging from .25% to 1.25%. This research was performed by a
noted expert in the field, Gordon Matthews. We arrived at a particular rate in
this range by applying the&#160; reasonable
royalty factors consistent with those cited in the well known patent case <b><i style="font-weight:bold;">Georgia-Pacific vs. United States
Plywood Corp</i></b>. As such, the royalty rate would vary based upon
the proportional value that the underlying technologies contributed to the
overall product value. For example, if the underlying technology represented
only a small component of the overall product, the royalty rate based upon the
total sales price of the product would be lower. We expected similar results in
our licensing efforts with the identified users of our patented technologies.
For example, we expected the royalty rate for license settlements with camera
manufacturers who were using our patented technologies to be lower than other
users. However, as we had not yet entered into any licensing arrangements for
our patented technologies, we did not initially know what royalty rates we
would actually be successful in negotiating.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Note that although we
hold patents relating to the licensed technology, we did not and do not intend
to provide technical support, maintenance or upgrades for such technology (and
have not agreed to do so in any licensing arrangement). We have not undertaken
research and development efforts relating to the patented technology, nor have
we employed personnel to provide consulting or other services related to the
use of our patented technologies. Our business plan was to pursue licensing arrangements,
including through the use of litigation as needed, with existing users of our
technologies. We viewed this business plan as a central part of our ongoing
operations and disclosed</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>

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</div>
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<div style="font-family:Times New Roman;">

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">activities relating to it
as a separate operating segment beginning in fiscal 2002 (the date of our first
licensing arrangement).</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Additionally, note that
we did not receive any amounts from arrangements to license our patented
technologies (either involving or not involving litigation) during our fiscal
year 2008, nor do we anticipate that we will receive any future amounts from
such arrangements. We have made explicit disclosure of this in our filings,
including our most recently filed Form&nbsp;10-K for fiscal 2007.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Licensing
Arrangements Not Involving Litigation</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">During approximately the
first three years of our pursuit of unauthorized users of our technologies, we
entered into negotiated licensing arrangements with 47 companies totaling
approximately $97 million in cumulative license fees over the period April&nbsp;2002
to July&nbsp;2006 that did not involve any litigation. Because we do not
provide support, upgrades, etc. to our licensees as discussed above, we believe
these initial settlements are sold-separately events for our patented
technology (i.e., these licensing arrangements constitute single element
transactions for the license of our technologies). We have used these initial
settlements to determine the average royalty rate that we were being paid based
upon the estimated amount of revenues realized or to be realized by the
unauthorized user of our patented technology. We determined that the weighted
average royalty rate associated with these settlements was 0.193% of estimated
revenues.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Once we began pursuing
companies that we had determined were using our patented technologies on an
unauthorized basis, other companies we contacted voluntarily reported to us
that they were using our technologies, and sought to enter into agreements to
license our patent technologies. Such arrangements totaled approximately $241
thousand in cumulative licensing fees over the period June&nbsp;2005 to July&nbsp;2006.
We also evaluated the royalty rate paid by these self-reporting companies. These
entities made cash payments to us for the use of our patented technologies,
based on their estimate of revenues derived from the use of our patented
technologies multiplied by a royalty rate of 1%. The royalty rate of 1% was
deemed to be appropriate by us and the self-reporting entity. Please note that
no companies voluntarily self-reported their use of our patented technologies
until after we initialized our program to pursue unauthorized users. Also
please note that the dollar amount of settlements received from self-reporting
companies was less than 1% of the total amount of settlements that we received.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Amounts received pursuant to the above-described
licensing arrangements have been recorded as revenue in the period in which the
agreements were executed. </font>We
believe that this classification is appropriate based on FASB Concepts
Statement No.&nbsp;6, <i>Elements of Financial
Statements </i>(CON 6), paragraphs 78 and 79 (<i>Revenues </i>and<i>
Characteristics of Revenue</i>, respectively), as follows:</p>

<p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .25in;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Paragraph
78 defines revenue as follows (emphasis added):</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

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</div>
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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .25in;text-autospace:none;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">&#147;Revenue are inflows or other enhancements of assets of an
entity or settlements of its liabilities (or a combination of both) from
delivering or production of goods, rendering services, or other activities that
constitute the entity&#146;s <b>ongoing major or
central operations</b>&#148;</font></i></p>

<p style="margin:0in 0in .0001pt .25in;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .25in;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Paragraph
79 further clarifies the characteristics of revenue as follows (emphasis
added):</font></p>

<p style="margin:0in 0in .0001pt .25in;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .25in;text-autospace:none;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">&#147;<b>Revenues represent actual
or expected cash inflows that have occurred or will eventuate as a result of
the entity&#146;s ongoing major or central operations</b>. <font color="black" style="color:black;">&#133;&#133;&#133;&#133;</font> Similarly, the transactions and events
from which revenues arise and the revenues themselves are in many forms and are
called by various names &#150; for example, outputs, deliveries, sales, fees,
interest, dividends, royalties, and rent &#150; depending on the kinds of operations
involved and the way revenues are recognized.&#148;</font></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We believe that the
licensing agreements discussed above were the result of the execution of one of
our central business strategies during the time frame discussed, and therefore
meet the criteria in CON 6 for classification as revenue as part of our &#147;ongoing
major or central operations&#148;.</font></p>

<p style="margin:0in 0in .0001pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Licensing
Arrangements Involving Litigation</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Since not all identified
unauthorized users of our patented technologies voluntarily self-reported to us
or were willing to negotiate with us without litigation being filed, we filed
litigation for patent infringement against some of the identified unauthorized
users. In calendar 2004, we proceeded with legal action against those companies
that we identified as using our patented technologies but which had not agreed
to execute licensing arrangements for such use. From April&nbsp;2004 through July&nbsp;2007,
we reached a settlement with approximately 42 companies that we initiated litigation
against. Most of these settlements conveyed a license to the patented
technologies to the counterparty and included the dismissal of prior legal
actions initiated by us for patent infringement and, in some cases, dismissal
of countersuits filed by the counterparty. Only one lawsuit actually went to
trial. We received an unfavorable verdict in that trial.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As previously
communicated to the Staff, we originally did not consider the settlements that
involved litigation to be multiple-element arrangements. However, in light of
the Staff&#146;s comments, we have reevaluated the accounting for these settlements
as described below to consider settlement arrangements that involve litigation
as multiple-element arrangements, and to determine if any material amounts classified
as revenue should have instead been classified as other operating income. We
believe that the below-described analysis is consistent with the provisions of
EITF 00-21 (which we do not believe is directly applicable but does provide
analogous guidance). Additionally, we believe that our analysis is consistent
with the comments made by Mr.&nbsp;Eric West on December&nbsp;10, 2007 at the
2007 AICPA National Conference on Current SEC and PCAOB</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Developments relating to
accounting for litigation settlements, as follows (footnote references
omitted):</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">An additional challenge that may arise when
accounting for a litigation settlement is determining the proper allocation of
consideration among the recognizable elements. While EITF 00-21 was written for
multiple element revenue arrangements, we believe that its allocation guidance
is also useful to determine how to allocate consideration paid in a multiple
element legal settlement. In this regard, we believe that it would be
acceptable to value each element of the arrangement and allocate the
consideration paid to each element using relative fair values. To the extent
that one of the elements of the arrangement just can&#146;t be valued, we believe
that a residual approach may be a reasonable solution. In fact, we have found
that many companies are not able to reliably estimate the fair value of the
litigation component of any settlement and have not objected to judgments made
when registrants have measured this component as a residual. In a few
circumstances companies have directly measured the value of the litigation
settlement component. In the fact pattern that I just described, the company
may be able to calculate the value of the settlement by applying a royalty rate
to the revenues derived from the products sold using the patented technology
during the infringement period. Admittedly, this approach requires judgment and
we are willing to consider reasonable judgments.</font></p>

<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In order to evaluate
whether the accounting we have provided to settlements reached when litigation
was involved is materially correct, we determined the estimated fair value of
the technology licenses conveyed to the counterparty and applied the residual
method to determine the amount of the total settlement consideration which
should be allocated to the resolution of the litigation. We are not able to
reliably estimate the fair value of the litigation element as we had no
instances where such litigation element has been &#147;sold separately&#148; and,
therefore, we have applied the residual method, consistent with Mr.&nbsp;West&#146;s
comments.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Consistent with the
discussion above relating to the classification of amounts received pursuant to
licensing arrangements that did not involve litigation, we believe that
classification as revenue of the estimated fair value of the amounts
attributable the technology license is appropriate.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To determine amounts
attributable to the value of the litigation settlement element, we first
determined the value of the license element of the settlement by multiplying
the weighted-average royalty rate of 0.193% from our standalone licensing
arrangements against the estimated amount of revenues generated by the
unauthorized user from the use of our patented technologies.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The royalty rate applied
was determined from our experience with license settlements that did not
involve litigation (see above). We used the rate of 0.193% rather than the rate
of 1.0% used by the self-reporting companies since such rate was the result of</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">negotiations with larger
companies (that did not involve litigation) and involved more material amounts
of consideration. As such, we believe those licensing arrangements are more
indicative of fair value than the licensing arrangements executed with
self-reporting entities. We also note that this rate is consistent with the low
end of the range we determined was typical for royalty arrangements for use of
similar patents in this industry (as discussed above, our research indicated
that common royalty rates range from .25% to 1.25%).</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We then compared the
estimate of the fair value of the technology license element to the total
settlement amount of the arrangement to determine what, if any, residual amount
remained to allocate to the litigation settlement element. In each instance we
determined that there was no residual amount of the total settlement amount
left to allocate to the litigation settlement element. Accordingly, we believe
that our historical accounting, which allocated all of the consideration
received to the license element and reported such amounts as revenue, is
materially correct.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We have also evaluated
the results of this analysis qualitatively and believe that the outcome of the
analysis is consistent with our business strategy and operations. We view the
licensing arrangements which resulted from the settlement of litigation
initiated by us as the logical extension of the negotiation process. From the
beginning of our business strategy, we desired to execute licensing agreements
with those companies we identified as unauthorized users of our patented
technologies. We were able to successfully negotiate and execute licensing
arrangements with a number of companies without being required to litigate the
issue. Our decision to file lawsuits against the remainder of the unauthorized
users was driven by our inability to negotiate a reasonable settlement through
other means, and was only used as an instrument to pursue a successful
negotiation and execution of a licensing arrangement. The use of litigation was
primarily determined by how the identified company chose to respond to our
request to negotiate and execute a license for our technologies. We found that
some companies as a matter of policy would not entertain any sort of discussion
or negotiation without legal action first having been taken.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We did not receive any
consideration, other than cash, from the counterparties to the settlement
agreements (more specifically, we did not seek nor receive any consideration
such as licenses to technology or patents held by the counterparties). We did
not incur any liabilities or obligations as a result of these agreements, other
than our agreement to dismiss the pending lawsuits and to not pursue any new
claims or lawsuits.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Additionally, the legal
fees that we incurred in relation to the pursuit of the litigation and ultimate
settlement were consistent with those incurred in connection with licensing
arrangements arising from agreements successfully negotiated without litigation
being involved. Accordingly, it seems reasonable to us that there would not be
a material amount of consideration received from the counterparties that would
be in contemplation of the reimbursement of &#147;incremental&#148; legal fees incurred
in pursuing the litigation (and that would likely be classified as other
income) &#150; the attorneys presumably would have</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">received comparable
amounts of fees regardless of whether the technology license arrangements were
executed as the result of successful negotiations not involving litigation or
because litigation was initiated in an attempt to force the other party to come
to terms with us.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In our analysis above, we
obtained the amount of estimated revenues from publicly filed financial
statements, research reports, consultants and other sources. During our
discussions with companies that were trying to license, we would also compare
our estimate of revenues to revenues amounts provided by such companies. We
considered all of the revenue information that we were able to obtain and
evaluated which amount represented the best estimate of such revenues.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Based upon our analysis
summarized above, we continue to believe that the amount of our license
settlements classified and recorded as revenue is materially correct.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Disclosure</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In prospective filings,
we will include the revised revenue recognition policy which addresses the
settlement amounts involving litigation as multiple elements. We have marked
those disclosures that differ from our historical disclosures for ease of
reference.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h4 style="font-weight:normal;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">REVENUE RECOGNITION</font></u></h4>

<h4 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></h4>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company recognizes revenue when persuasive
evidence of an arrangement exists, delivery has occurred, the fee is fixed or
determinable and collectibility is probable.&nbsp;&nbsp; The Company recognizes
software revenue in accordance with Statement of Position (&#147;SOP&#148;) 97-2, <i>&#147;Software Revenue Recognition,&#148; </i>as amended
by SOP 98-4, &#147;<i>Deferral of the Effective Date
of a Provision of SOP 97-2,&#148;</i> and SOP 98-9, &#147;<i>Modification of SOP 97-2 With Respect to Certain
Transactions,&#148;</i> Securities and Exchange Commission Staff Accounting
Bulletin 104, <i>&#147;Revenue Recognition,&#148; </i>and
Emerging Issues Task Force Issue No.&nbsp;00-21, <i>&#147;Revenue Arrangements with Multiple Deliverables.&#148;</i></font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Intellectual property licensing revenue is derived
from the Company&#146;s Patent Licensing Program, which has generated licensing
revenues relating to the Company&#146;s technologies embodied in the &#145;672 patent and
the &#145;746 patent.&nbsp; Intellectual property licensing does not include
elements such as technical support, upgrade protection, bug fixes or other
services and, acoordingly, gross intellectual property licensing revenue is
recognized at the time a license agreement has been executed and collection has
been deemed probable.&nbsp; Related costs are recorded as cost of sales.&nbsp;
The cost of sales on the intellectual property licensing business relates to
contingent legal fees incurred on successfully achieving signed agreements, as
well as legal fees incurred based upon legal counsel&#146;s time. For settlement
arrangements that involved litigation, the Company considered such arrangements
to have both an intellectual property licensing element and a litigation
element. For these multiple element arrangements, the Company allocated a
portion of the total settlement amount to the intellectual property licensing
element based upon the estimated fair value of the intellectual property
licensing element using its historical sold-separately experience. Using the
residual method, the Company then allocated the remaining unallocated total
settlement amount of the arrangement to litigation element which is recorded as
Other Income. Through July&nbsp;31, 2007, no significant amounts have been
allocated to the litigation element.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Software and service revenue consists of software
license and service fees.&nbsp; Revenue from the software element is earned
through the licensing or right to use the Company&#146;s software and from the sale
of specific software products.&nbsp; Service fee income is earned through the
sale of maintenance and technical</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">support, training and installation. Revenue from the sale of hardware
devices is recognized upon shipment of the hardware.&nbsp; Forgent sells
multiple elements within a single sale.&nbsp; The Company allocates the total
fee to the various elements based on the relative fair values of the elements
specific to the Company.&nbsp; The Company determines the fair value of each
element in the arrangement based on vendor-specific objective evidence (&#147;VSOE&#148;)
of fair value.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">During fiscal years 2007 and 2006, VSOE of fair value
for the software, maintenance, and training and installation services are based
on the prices charged for the software, maintenance and services when sold
separately.&nbsp;&nbsp; During fiscal year fiscal year 2005, VSOE of fair value
for maintenance was based upon the renewal rate specified in each contract;
VSOE of fair value for training and installation services was based on the
prices charged for these services when sold separately; and VSOE of fair value
for the software element was not available and thus, software revenue was
recognized under the residual method.&nbsp; Under the residual method, the
contract value is first allocated to the undelivered elements (maintenance and
service elements) based upon their VSOE of fair value; the remaining contract
value, including any discount, is allocated to the delivered element.&nbsp; The
establishment of VSOE of fair value for the software element during the year
ended July&nbsp;31, 2006 did not have a material impact on the Company&#146;s
consolidated financial statements.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Revenue allocated to maintenance and technical support
is recognized ratably over the maintenance term (typically one year).&nbsp;
Revenue allocated to installation and training is recognized upon completion of
these services.&nbsp; The Company&#146;s training and installation services are not
essential to the functionality of its products as such services can be provided
by a third party or the customers themselves.&nbsp; For instances in which VSOE
cannot be determined for undelivered elements, and these undelivered elements
do not provide significant customization or modification of its software
product, Forgent recognizes the entire contract amount ratably over the period
during which the services are expected to be performed.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company does not recognize revenue for agreements
with rights of return, refundable fees, cancellation rights or acceptance
clauses until such rights of return, refund or cancellation have expired or
acceptance has occurred.&nbsp; The Company&#146;s arrangements with resellers do not
allow for any rights of return.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Deferred revenue includes amounts received from
customers in excess of revenue recognized, and is comprised of deferred
maintenance, service and other revenue.&nbsp; Deferred revenues are recognized
in the Consolidated Statements of Operations when the service is completed and
over the terms of the arrangements, primarily ranging from one to three years.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Sincerely,</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="39%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:39.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Jay C. Peterson</font></p>
  </td>
  <td width="60%" valign="top" style="padding:0in .7pt 0in .7pt;width:60.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Jay C. Peterson</font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial Officer</font></p>
  </td>
 </tr>
 <tr>
  <td width="100%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:100.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Forgent Networks, Inc.</font></p>
  </td>
 </tr>
</table>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>

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