India: "Royalty Free Patent Licensing" An Antidote for Patent Trolls

Last Updated: 18 July 2017
Article by Monika Shailesh

Most Read Contributor in India, December 2018

Patent Assertion Entities (PAEs) are business that take hold of the patents from third parties and use them to generate revenue by asserting the acquired patents against alleged patent infringers. It is also sometimes referred to as Patent Trolls. Both the legal system as well as the IPR industry suffers a lot of revenue loss and wastage of time due to these fake patent infringement lawsuits. In a recent report "Patent Assertion Entity Activity: An FTC Study "from Federal Trade Commission, examines non-public information and data for a period from 2009 to 2014. The data and information is based on about 22 PAE and 327 of respective PAE associates and approx. 2100 holding entities. The report states that about 96 percent of all patent infringements lawsuits were filed by litigation PAE's and have generated about 20 percent revenue of these PAE's. As per the report about 93 percent of the patent licensing agreements held by the PAE's resulted from litigations1.

The study found that the payments usually yielded by Litigation PAE licenses were less than the lower limits of early stage litigation costs. This data is consistent with nuisance litigation, in which defendant companies decide to settle based on the cost of litigation rather than the likelihood of their infringement. The report identifies that while fair infringement litigations plays a vital role in protecting the IP Rights and a healthy legal system promotes respect for the patent laws, nuisance infringement litigations causes a very tax on the resources and distract focus from productive business behavior. It is estimated that PAE's file somewhere around 3500 to 4000 lawsuits in US alone and are responsible for about 84% of high tech patent litigation in USA. The number of nuisance patent lawsuits in USA alone has jumped 500% in a period from 2005 to 2014. This has caused the country a loss of around $80 billion per year. These PAE's gather most of these patents from operating companies then from the Inventor or the Universities. In order to protect the IPR industry from these devious trolls many organizations have joined hands through Royalty Free Licensing.

The LOTNETWORK or LOT Agreement is an industry-led networked, royalty-free patent cross licensing agreement for transferred patents launched by business members, including Canon, Dropbox, Google and SAP with assistances by many others. According to the LOT Contract, every business that takes part bequest a license to the other members where the license becomes operative only when patents are transferred to non-participants. Transfers as part of certain spin outs or a Change of Control to a Non-Assertion Entity are carved out. This program protects LOT participants from patent attacks by the PAE's to which the patent is sold, while preserving participant's full use of their portfolio2. PAE's depend mainly on operating companies to take hold of patents, it is estimated that about 80% of the patents asserted by PAE's come from operating companies. Now if in case a PAE manages to purchase patent from an operating company that is a member of the LOTNETWORK then it cannot drag other participating members in nuisance patent litigation. Due to this the members of LOT are protected in two ways firstly the direct risk of fraudulent litigation is eradicated and secondly it disrupts the PAE cycle that costs consumers, shareholders and tax payers a fortune. LOT is a Non Profit community that works to protect the interest of innovators by protecting patents. LOT identifies the PAE's with the fact that if more than half of the total revenue of the entity and its affiliates come from patent assertion in a period of one year or if the higher management approves the plan to do so by using patent litigations those entities are classified as PAE's. LOT is highly beneficial for the Startups as the entities which do not have any patents can also join the LOTNETWORK and get protected from patent trolls.


  1. Participants are free to cross license their patents.
  2. Participants are free to assert their patent for any alleged patent infringement by a non LOTNETWORK company.
  3. Participants are free to sell an owned patent to anyone.
  4. There is no burden to give notice before leaving the network.
  5. No need to list the patents owned at the time of entry
  6. Don't have to report.

Since 2014 when the LOTNETWORK was formed 42 different LOT members have divested over 42000 assets. 35 of those assets have been held by 8 different PAE's and atleast 97% of those assets were divested after the member joined LOT. Still no LOT member has ever been sued by an asset from LOT. LOTNETWORK has helped business to trust the suppliers and affiliates more. It has also helped business entities to stabilize the supply chain and its management while saving a net worth of 29 billion.3 LOT has also helped suppliers to gain access to IP. It has reduced the indemnification costs and has helped the suppliers to become preferred supplier.


The defensive patent license is a non-negotiated network which is portfolio wide, royalty free, patent cross license without the right to sublicense. Patents in this system are readily available with no royalty to pay. This is applicable to members that abide by the same rules to similarly license patents owned by them. The earlier version of DPL was also known as STICKY DPL as in this system the license is irrevocable, so once a company joins the DPL the patents that the participant holds at the time of joining are immediately and irrevocably licensed and the license continues even if the participant moves out of the DPL. However since these terms were a bit hard another version of DPL was introduced and it is known as NON STICKY DPL. In this system the license is automatically granted and terminated when a participant moves in the group or moves out of the group. This is an attempt to make DPL more enticing with little to no risk while maintaining all other facilities.


Reduced patent risk and true competition- If a significantly large number of companies in an industry join the DPL it significantly reduces the risk of patent assertion on these companies. Since in DPL the participants mandatorily license their patents the competition is purely based on the quality of product and services.

  1. Power of Networking- The more the number of companies join DPL more is the power each participant share towards protecting itself from patent trolls, it further enhances its attractiveness to entice more companies to join and in turn changes the patent landscape.
  2. Moral high ground/greater participation in patenting efforts/improved recruiting- The DPL might make available a chance for a corporation to express a specific interpretation about competition and patent litigation. If a recognized business (or a set of companies) were to be the earliest to join the DPL, it would make a influential announcement to the marketplace. Many engineers/inventors may be more willing or eager to assist in seeking patents on behalf of a company that participate in the DPL. It may also help in hiring sought-after recruits, e.g., software engineers, who believe the current patent system needs improvement.


Field of use is the restrictions that are placed on a license granted for the use of a patent. Field of use restrictions prevents the over and reckless use of patent by restricting the use of patent to a certain industry or to a certain product. Field of use agreement is royalty free cross license and is available to members of the community or the network. Field of use licensing help the patent owner's control how the patent and inventions are used so the members in the community are free to use the patents or the inventions of other members without any fear of any nuisance litigations from PAE's. The only condition here is that the way and the extent to which the patent or invention is used are set forward by the patent owner.

Open invention network

Open source software has been one of the greatest sources of invention. It has enabled developers to invent software solution for almost all the purposes be it for the business houses for schools for universities or even for the non-commercial personal use. Free software gives a platform to the end users like government business houses educational institutes and the personal users more and more choices and customization to get technology as required best suited to the needs. It has provided a platform where one can unleash its full potential of innovation. However this platform is also not free from the harsh effect of PAE's, Unfortunately Open source software have also seen a rise in patent assertions in the previous decade. It was thought that the very basic fabric of open source is based on the culture of innovation modality which is collective in nature and it is based on engagement and sharing and thus will be immune to PAE's assertions. The Open invention network work to further strengthen the protection of open source from attacks. The Open Invention Network is a shared defensive Patent pool with the mission to protect Linux. Launched in 2005, OIN has strong industry support with backing from Google, IBM, NEC, Philips, Red Hat, Sony, SUSE, and Toyota. Any company, project or developer that is working on Linux, GNU, Android or any other Linux-related software is welcome to join OIN, free of charge or royalties.5

Comparison Table6

Short Description Non-Sticky Multi-Party Defensive Patent Cross License Sticky Multi-Party Defensive Patent Cross License License on Transfer of Patents Field-of-Use Multi-Party Patent Cross License
License Grant royalty-free, all statutory rights, no sublicense rights royalty-free, all statutory rights, no sublicense rights royalty-free, all statutory rights, no sublicense rights royalty-free, all statutory rights, no sublicense rights
Licensed Patents Portfolio-Wide Portfolio-Wide Transferred Patents Only Portfolio-Wide (but practically speaking only those patents that are swept in by the field of use are licensed)
Licensed Products All All All Field-of-Use
Term Member can announce withdrawal at any time – inbound and outbound license to withdrawn member is automatically terminated upon expiration of withdrawal notice period (e.g., 6 months) Outbound license for withdrawing member perpetual regardless of withdrawal. Inbound can be terminated upon withdrawal. perpetual if member stays in LOT agreement perpetual for licensed patents
Patents are Licensed on Transfer Yes Yes Yes Yes
Withdrawal Provision Member can announce withdrawal at any time – inbound and outbound license to withdrawn member is automatically terminated upon expiration of withdrawal notice period (e.g., 6 months) Upon withdrawal, for withdrawing member, existing licenses to other members remain in effect. Non-withdrawing members can terminate license to withdrawing member. Member can announce withdrawal at any time and withdrawal becomes effective upon expiration of withdrawal notice period (e.g., 6 months) Upon a change in the field of use, a member has option to withdraw. For withdrawing member, licensed patents remain licensed inbound and outbound under old FOU


In order to promote a healthy atmosphere and technology ecosystem to entice innovators we need to protect the interest of genuine patent owners and the business houses from nuisance patent assertions. In spirit of fostering innovations we need to embrace the innovation community with the protection in form of collective defensive sharing of intellectual property across variety of technical areas. Open sources and royalty free sharing of patents and innovation has helped to mitigate the nuisance created by the PAE's or the Trolls. A number of networks and community like LOT, OIN etc. has been successfully able to prevent the members from unscrupulous litigations. In 2015 Toyota announced to release 5680 patents pertaining to hydrogen cell technology for cars on royalty free basis. This collective sharing will definitely encourage the innovators, while the business houses can focus more on product quality safety and services rather than to worry about the nuisance patent litigation saving a lot of resources and time.








The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Khurana and Khurana
Singh & Associates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Khurana and Khurana
Singh & Associates
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions