Asana, Canon Inc., Dropbox, Google, Newegg and SAP have formed the License on Transfer (LOT) Network,
a cooperative patent-licensing agreement that will cut down on patent
troll litigation and the growing practice of patent privateering.
Patent litigation reached an all-time peak last year, with more than 6,000 lawsuits filed. Most of those suits came from non-practicing entities, also known as patent trolls—companies that don’t have a business outside of licensing and litigating patents.
More than 70 percent of the patents used by trolls come from still-operating companies. Indeed, in a growing trend called privateering, companies are selling patents to trolls that then use those patents to attack other companies. In some cases, those companies arrange to get a cut of revenue generated from the trolls’ suits.
The LOT agreement is a new kind of royalty-free cross-license meant to address these growing systemic problems. Member companies receive a license when the patents are transferred out of the LOT group. That means that companies retain their right to enforce a patent so long as they retain ownership of it. However, as soon as it is sold, a license to the other members becomes effective, protecting them from attacks by the troll to which the patent was sold.
The agreement includes several other provisions that preserve a patent portfolio’s value, including carve-outs for certain M&A transactions and change of control.
The initial members of the LOT Network range from early-stage startups to established technology companies. Together they own almost 300,000 patent assets, generate more than $117 billion in revenue and employ more than 310,000 people.
"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 litigation reached an all-time peak last year, with more than 6,000 lawsuits filed. Most of those suits came from non-practicing entities, also known as patent trolls—companies that don’t have a business outside of licensing and litigating patents.
More than 70 percent of the patents used by trolls come from still-operating companies. Indeed, in a growing trend called privateering, companies are selling patents to trolls that then use those patents to attack other companies. In some cases, those companies arrange to get a cut of revenue generated from the trolls’ suits.
The LOT agreement is a new kind of royalty-free cross-license meant to address these growing systemic problems. Member companies receive a license when the patents are transferred out of the LOT group. That means that companies retain their right to enforce a patent so long as they retain ownership of it. However, as soon as it is sold, a license to the other members becomes effective, protecting them from attacks by the troll to which the patent was sold.
The agreement includes several other provisions that preserve a patent portfolio’s value, including carve-outs for certain M&A transactions and change of control.
The initial members of the LOT Network range from early-stage startups to established technology companies. Together they own almost 300,000 patent assets, generate more than $117 billion in revenue and employ more than 310,000 people.
"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."