Despite its high profile in the tech world, patent trolling — in which companies sue for damages over patents they don't intend to use — has been difficult to address. Reform efforts in Congress stalled earlier this year, when Sen. Patrick Leahy (D-VT) failed to broker an agreement that would have raised the bar for sending patent infringement warnings and increased the risks for bringing a frivolous lawsuit. In the wake of this defeat, Google, DropBox, Canon, and others are forging a truce that they hope will stop trolls from building a patent arsenal.
Google calls it 'arms control' for patents
The License on Transfer (LOT) Network is a coalition of seven companies that, according to the site, hold 50,000 issued US patents and 300,000 total patent assets between them. It's intended specifically to combat patent assertion entities, the nebulous companies that buy large numbers of patents and use them to reach settlements. Even if the patent doesn't exactly fit the case, settling is often cheaper than fighting a suit, and unlike companies that manufacture their own products, they can't be countersued in defense. The LOT Network can't help with patents these businesses already own, but they could defuse new ones. Any time a member sells one of its patents to a non-member, all other member companies are granted a license to use it. If a member is outright acquired by a patent assertion entity — as opposed to another hardware or software company — other members will be granted a perpetual license to its entire portfolio.
For an example of how this might work, imagine that member company Google sells a patent to a non-member. The sale will automatically grant a license to DropBox, Asana, Newegg, and anyone else in LOT. If the buyer plans to use it for trolling, they'll suddenly find themselves unable to sue a whole swath of companies. If a member is failing, a troll can't buy up its portfolio with an acquisition. LOT supplements existing licenses and agreements like Google's Open Patent Non-Assertion Pledge, in which companies themselves pledge not to sue over certain patents. One LOT participant can sue another, but it could lose any licenses from that company as a result.
The obvious issue is that the LOT Network depends heavily on widespread adoption. If a company isn't doing anything that could infringe the patents, it doesn't matter whether it gets a license, though LOT notes that some trolls claim ownership over almost ubiquitous technologies. Members will have to be willing to lose the potential revenue they'd get from selling to patent assertion entities, while paying an annual fee of between $1,500 and $20,000. And even legitimate non-members could balk at getting a patent that's automatically licensed to their competitors. LOT, however, thinks the benefits are meaningful enough that most companies will ultimately want to join. "The LOT Network is a sort of arms control for the patent world," says Google patent counsel Allen Lo. "By working together, we can cut down on patent litigation."