LOT ("License on Transfer") Network was established by leading technology companies to reduce the number of patent infringement claims received from non-practicing entities that purchase patents for the sole purpose of enforcing them (called Patent Assertion Entities, or PAEs). Companies participating in LOT Network obtain licenses effective upon the transfer of patents by other participants to non-participants, e.g., PAEs.
As of the launch of the organization in July 2014, the LOT Network had already contained nearly 300,000 patent assets, including over 50,000 US issued patents. Two of the LOT Network Users can be found on the 2013 Top 10 US patent recipients list.
By reducing the number of patents potentially available to PAEs, it mitigates the risk of costly litigation and allows such companies instead to focus on making and selling innovative products and services. For more information on how to join the LOT Network, click here.
In the event that patents held by a LOT Network participant are transferred through a triggering event (e.g., a transfer to an entity other than another LOT Network participant), every active LOT Network participant as of the date of transfer will have its license to the transferred patents become effective. This arrangement immediately reduces the risk of PAE litigation to participants.
Should a LOT Network participant be acquired outright by a PAE, or become a PAE itself, other participants active at the time of such a transfer will obtain licenses to its entire patent portfolio.
There are two principal exceptions where the transfer of patents will not trigger a license under the LOT Agreement. The first is a transfer of patents to another current LOT Network participant. The second is a transfer that is part of a legitimate M&A or spin-out activity. In addition, licenses granted to LOT Network participants are subject to defensive termination in the event the LOT Network licensee files offensive patent litigation against the transferee (a so-called defensive termination).
These exceptions allow companies sufficient room to utilize and dispose of their intellectual property in ways that maintain value to support the growth and performance of their business, while giving active participants a royalty-free license to protect them from patent sales to non-participants, e.g., PAEs.
Companies join LOT Network by signing the LOT Agreement and paying a nominal annual fee to help cover administrative costs. It’s that simple.
Any company may join LOT Network, whether large or small, from any industry, and with any business model. The more companies that join LOT Network, the greater the benefit that each derives.
We believe in innovation. We believe in the patent system. But we also believe the transfer of patents to PAEs perpetuates a vicious cycle that is detrimental to innovation and costly to consumers and shareholders.
If you share our belief that companies owe it to their customers and to one another to stop this vicious cycle that is costing tens of billions of dollars annually, we invite you to join us.
Click here to download the LOT Agreement and begin protecting your company today.
