In a previous blog post, we briefly discussed the LOT
Network's initiative in in the fight against patent assertion
entities (PAEs), more commonly known as patent trolls. Since the
publication of that post, the LOT Network has overhauled its member
agreement and published new information and statistics on how the
program is working to protect companies from PAEs We have provided
below a brief summary of some of the key changes.
The LOT Network is a non-profit organization that was
established to protect companies from the thousands of potential
PAE lawsuits that, according to LOT Network, use patents to hurt
innovation. In the words of Ken Seddon, LOT Network's CEO,
"[w]hile tech companies strive to innovate, patent trolls see
opportunities to monetize the patents they've acquired by suing
operating tech companies." According to a LOT Network publication, patent lawsuits
jumped 500% between 2005 and 2014, and PAEs are responsible for 84%
of patent litigation in the United States. Because 81% of patents
acquired by PAEs come from companies (as opposed to inventors or
universities), the LOT Network's aim is to unite operating
companies in the fight against exploitation by PAEs.
Before diving in to the specifics of the new and improved LOT
Network, a review of how the program works is warranted. To become
a LOT member, a company must agree to the LOT Agreement. The
Agreement operates as a mutual non-aggression pact between members.
Members pledge that none of their patents will ever be used by a
PAE to sue another member. This pledge is actualized in the form of
a conditional cross-licenses between all parties. The goal of the
Agreement would be that, upon becoming a member of the LOT network,
when another member sells or transfers a patent to a PAE, due to
the conditional license in the LOT Agreement, you are automatically
granted immunity, via license, against lawsuits brought by
As of December 2016, the LOT network had 100 members, roughly
double the size of its membership in January 2016.
The Updated LOT Network
The new LOT Agreement (available for download here)has narrowed its scope to focus
specifically on the issues caused by PAEs. For example, under the
original agreement the conditional license was triggered upon
transfer of the patent to any non-member organization. Under the
new LOT Agreement, the license is triggered upon the transfer of
the patent to a PAE. An entity is considered a PAE if: "The
entity (including its parent and any subsidiaries) generates more
than half of its total revenue from patent assertion in a 12-month
period, or if the entity has a plan approved by senior management
to do so." While the original agreement would have impacted a
company's ability to sell its patents to other companies, the
new LOT Agreement attempts to carve out space for a company to
assert, sell, or license its patents to anyone.
Has the LOT Network Achieved its Promise?
In order to gauge the success of the LOT network, one would need
to know exactly how many patents were divested by member companies.
Only then could members know how many patents they had received
cross-licenses for, and therefore how many patents they cannot have
asserted against them. In December 2016, LOT Network was, for the
first time, able to share how many assets had left the network.
Through a partnership with IP analytics firm Innography,
LOT Network was able to track sales and other assignments of
patents made by member companies. The results? 42 different LOT
members had divested a total of over 42,000 assets world-wide. At
the time these results were published, the LOT Network included
more than 585,000 assets.
Of the more than 42,000 divested patent assets, 35 were found to
be owned by eight different PAEs. While this is only a drop in the
bucket, it does indicate that the program is moving towards
achieving its goal. The fact that so few patents are being acquired
by PAEs shows that the patents belonging to LOT members are
becoming unattractive. Unless a PAE knows of another target,
outside the LOT Network's membership, to assert the patent
against, the patents are worth less to a PAE and become even less
valuable with every new LOT member.
In considering whether the LOT Network is right for your
company, you should be assessing your products and/or services for
whether they may be subject to a claim that a third party's
patent is being used. In particular, companies in high-tech
industries should consider whether they may benefit from the
protection of being granted a license to the patents of other
member companies, most of which operate in the high-tech area. You
can see a complete list of member companies here.
Materials from a recent "refresher training" for examiners at the Canadian Intellectual Property Office (CIPO) highlight inconsistencies between CIPO's examination practices and Supreme Court precedent.
In this recently reported decision, the Court granted Apotex leave to deliver Fresh as Amended Responding Statement of Issues for the reference into AstraZeneca's damages or Apotex's profits, following the Court's decision that the ‘693 Patent is valid and infringed by Apotex.
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