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The LOT (License on Transfer) Network is a nonprofit organization that was formed to combat patent assertion entities (PAEs), also known as
patent troll In international law and business, patent trolling or patent hoarding is a categorical or pejorative term applied to a person or company that attempts to enforce patent rights against accused infringers far beyond the patent's actual value or ...
s, by cross-licensing patents that fall into the hands of PAEs.


Background

LOT started as a Canon, Google and Red Hat-led initiative in 2014, and its founding members were mostly technology companies. Companies from other industries such as finance and automotive have joined the network to protect themselves from the growing threat of PAEs. As of July 2020, LOT Network had more than 750 members and close to 2.5 million patent assets. Notable members of LOT include Google, Red Hat,
Uber Uber Technologies, Inc. (Uber), based in San Francisco, provides mobility as a service, ride-hailing (allowing users to book a car and driver to transport them in a way similar to a taxi), food delivery (Uber Eats and Postmates), pack ...
,
Ford Ford commonly refers to: * Ford Motor Company, an automobile manufacturer founded by Henry Ford * Ford (crossing), a shallow crossing on a river Ford may also refer to: Ford Motor Company * Henry Ford, founder of the Ford Motor Company * Ford F ...
, Dropbox,
Mazda , commonly referred to as simply Mazda, is a Japanese multinational automotive manufacturer headquartered in Fuchū, Hiroshima, Japan. In 2015, Mazda produced 1.5 million vehicles for global sales, the majority of which (nearly one mi ...
, General Motors, Honda,
CBS CBS Broadcasting Inc., commonly shortened to CBS, the abbreviation of its former legal name Columbia Broadcasting System, is an American commercial broadcast television and radio network serving as the flagship property of the CBS Entertainme ...
, Netflix,
JPMorgan Chase JPMorgan Chase & Co. is an American multinational investment bank and financial services holding company headquartered in New York City and incorporated in Delaware. As of 2022, JPMorgan Chase is the largest bank in the United States, the w ...
,
SAP Sap is a fluid transported in xylem cells (vessel elements or tracheids) or phloem sieve tube elements of a plant. These cells transport water and nutrients throughout the plant. Sap is distinct from latex, resin, or cell sap; it is a separ ...
, Microsoft, Tesla, Alibaba, the
Wikimedia Foundation The Wikimedia Foundation, Inc., or Wikimedia for short and abbreviated as WMF, is an American 501(c)(3) nonprofit organization headquartered in San Francisco, California and registered as a charitable foundation under local laws. Best know ...
, and IBM. The number of patent disputes in the U.S. peaked in 2015, reaching 7,500 cases. According to Unified Patents, two-thirds of these cases were filed by patent trolls. A study out of
Boston University Boston University (BU) is a Private university, private research university in Boston, Massachusetts. The university is nonsectarian, but has a historical affiliation with the United Methodist Church. It was founded in 1839 by Methodists with ...
found that patent litigation results in direct losses of about $60 billion every year in the U.S.


Underlying agreement

LOT members agree to mutual non-aggression pact in which they pledge that none of their patents will ever be used by a patent troll to sue another member; however, members can still sell patents and sue other members. Cross-licensing of LOT member patents is subject to certain "triggering" events. A triggering event takes place when a patent passes to a PAE, including scenarios in which a LOT company becomes a PAE or is absorbed by a PAE. After the triggering event, the specific patents involved in the event are automatically cross-licensed to all LOT companies, blocking any potential legal action by a PAE. By pooling their patents, member companies provide immunity to one another and deter potential lawsuits from patent trolls. The group also benefits from a network effect: the more members that join, the more attractive membership becomes for other companies. LOT members pay an annual fee for network membership. The annual fee depends on company revenues, but ranges from $1,500 to $20,000 per year (about the price of a single patent application). On September 1, 2016 LOT announced that it would waive annual membership fees until March 1, 2017 for companies with less than $5 million in annual revenues. This fee structure facilitates membership for startups and smaller companies, which are also targeted by PAEs. Over half of companies sued by PAEs make less than $10 million in revenue. In the event that a larger LOT member acquires a smaller member, the acquired company can pass on its patent license rights to its acquirer.


Reception

While LOT helps prevent
patent troll In international law and business, patent trolling or patent hoarding is a categorical or pejorative term applied to a person or company that attempts to enforce patent rights against accused infringers far beyond the patent's actual value or ...
ing, it does not address low patent quality or hinder companies that attack competitors to stall progress and gain a competitive advantage. Daniel Nazer, a staff attorney at the Electronic Frontier Foundation praised LOT but added a note of caution: “It’s a targeted program that’s good for limiting the supply of patents to the very worst actors who use litigation to shake down people for settlements, but it doesn’t stop problems with patent quality and with operating companies attacking each other.” The Electronic Frontier Foundation alleges that, ultimately, the patent system must be reformed to ensure that the
U.S. Patent Office The United States Patent and Trademark Office (USPTO) is an agency in the U.S. Department of Commerce that serves as the national patent office and trademark registration authority for the United States. The USPTO's headquarters are in Alexa ...
only grants patents for genuine inventions. Intellectual Ventures, a well known PAE, alleges that by buying patents they create a market for invention, thereby helping to revitalize inefficient companies and make innovation profitable. Others, including Ira Blumberg – a former
Rambus Rambus Incorporated, founded in 1990, is an American technology company that designs, develops and licenses chip interface technologies and architectures that are used in digital electronics products. The company is well known for inventing ...
(a well-known PAE) employee – have countered that any value created by patent trolls is outweighed by settlement costs.


See also

*
Open Invention Network Open Invention Network (OIN) is a company that acquires patents and licenses them royalty-free to its community members who, in turn, agree not to assert their own patents against Linux and Linux-related systems and applications. History The co ...


References


External links

* {{official, http://lotnet.com/ Intellectual property organizations