By Jennifer LeClaire / CIO Today. Updated July 10, 2014.
Patent trolls are a nuisance to the technology industry -- and the judicial system. Now, industrial titans and technology startups alike are joining forces under the License of Transfer (LOT) Network banner in hopes of slashing patent troll litigation and stalling the growing practice of patent privateering.
Asana, Canon, Dropbox, Google, Newegg and SAP founded LOT to deal with patent trolls and patent privateering. Also known as patent assertion entities, patent trolls are people or companies that enforce patent rights and try to collect licensing fees -- though they don’t actually manufacture products with the patents they hold. A patent privateer is an entity that uses a patent troll’s intellectual property to attack other companies.
“The LOT Network is a sort of arms control for the patent world,” said Allen Lo, Deputy General Counsel for Patents at Google. “By working together, we can cut down on patent litigation, allowing us to focus instead on building great products.”
Patent trolls have long been a problem, so why is LOT forming now? One reason is because patent litigation reached an all-time high in 2013. The LOT reports over 6,000 lawsuits were filed -- and patent trolls filed most of them. RPX research reveals over 70 percent of the patents that trolls use come from patent privateers, who sell patents to trolls and then file lawsuits against target companies.
"We believe that patents should never be used to stifle innovation," said Brett Alten, IP Counsel at Dropbox. “The LOT network is a creative solution to fight patent abuse that becomes more effective with each company that joins. The more participants there are, the better off we'll all be.”
Here’s how it works: LOT member companies receive licenses when the patents are transferred out of the LOT group. Companies, then, preserve their right to enforce patents so long as they retain ownership of them. When a patent is sold, however, the license to the other members goes into effect to protect them from troll attacks.
“The structure of the LOT Network helps protect innovative patent owners from unwarranted litigation, without stifling valid, beneficial uses of patents, such as cross-licensing,” said Anthony DiBartolomeo, Senior Vice President and Chief IP Counsel at SAP. “As long as a company owns their patent they retain all their rights to it.”
Will it Work?
The LOT is launching with substantial power. Initial members own almost 300,000 patent assets, generate more than $117 billion in revenue and employ more than 310,000 people.
We caught up with Rob Enderle, principal analyst at the Enderle Group, to get his take on the new network. He told us patent trolls are a plague on technology companies. What’s more, he said, trolls are connected to flaws in the U.S. patent system that companies exploit to prey on firms.
“Given the inability of the U.S. Congress to act, well on pretty much anything, firms like Google, Microsoft, and Apple are all looking for creative ways to mitigate the problem. This one potentially increases the number of patents that are rendered useless to patent trolls. But getting something like this done is difficult because it also lowers the value of patent portfolios, which some short-sighted investors might object to,” Enderle said. “Moves like this should help make the market safer for companies that actually want to make products and worse for firms that just want to prey on those companies.”