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Companies form new cooperative patent licensing agreement

By Jessica M. Karmasek | Jul 15, 2014

SAN FRANCISCO (Legal Newsline) - A group of companies last week announced the formation of a cooperative patent licensing agreement, saying it would cut down on patent troll litigation and the "growing practice" of patent privateering.

Asana, Dropbox and SAP joined Canon, Google and Newegg in forming the License on Transfer, or LOT, Network.

"The LOT Network is a sort of arms control for the patent world," explained 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."

The six companies cited statistics showing patent litigation reached all-time peak in 2013, with more than 6,000 lawsuits filed and most of which came from so-called patent "trolls" -- those patent assertion entities or non-practicing entities that purchase groups of patents without an intent to market or develop a product and then target other businesses with lawsuits.

The companies also pointed to research showing that more than 70 percent of the patents used by trolls come from operating companies.

In the growing trend called "privateering," they said 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' lawsuits.

"Startups need to overcome many risks before they can become mature, thriving companies," said Dustin Moskovitz, co-founder of teamwork software provider Asana. "The LOT Network is a powerful and creative new idea that will help ensure that patent abuse need not be one of them."

The agreement is a new kind of royalty-free cross-license meant to address such problems.

Basically, 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. But 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 merger and acquisition transactions and change of control.

Brett Alten, IP counsel at Dropbox, called the network a "creative solution" to fight patent abuse.

"The more participants there are, the better off we'll all be," he said.

Anthony DiBartolomeo, senior vice president and chief IP counsel at SAP, said its structure helps protective innovative patent owners from unwarranted litigation but also doesn't stifle valid, beneficial uses of patents, such as cross-licensing.

"As long as a company owns their patent they retain all their rights to it," he said.

Network members range from early-stage startups to established technology companies. Pure Storage Inc. just recently joined.

Together, they own almost 300,000 patent assets, generate more than $117 billion in revenue and employ more than 310,000 people.

From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

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