LOT Network

The LOT (License on Transfer) Network is a nonprofit organization that was formed to combat patent assertion entities (PAEs), also known as patent trolls, by cross-licensing patents that fall into the hands of PAEs. Background LOT started as a Canon, Google and Red Hat-led initiative in 2014, and its founding members were mostly technology companies. Companies from other industries such as finance and automotive have joined the network to protect themselves from the growing threat of PAEs. As of July 2020, LOT Network had more than 750 members and close to 2.5 million patent assets. Notable members of LOT include Google, Red Hat, Uber, Ford, Dropbox, Mazda, General Motors, Honda, CBS, Netflix, JPMorgan Chase, SAP, Microsoft, Tesla, Alibaba, the Wikimedia Foundation, and IBM. The number of patent disputes in the U.S. peaked in 2015, reaching 7,500 cases. According to Unified Patents, two-thirds of these cases were filed by patent trolls. A study out of Boston University found that patent litigation results in direct losses of about $60 billion every year in the U.S. Underlying agreement LOT members agree to mutual non-aggression pact in which they pledge that none of their patents will ever be used by a patent troll to sue another member; however, members can still sell patents and sue other members. Cross-licensing of LOT member patents is subject to certain "triggering" events. A triggering event takes place when a patent passes to a PAE, including scenarios in which a LOT company becomes a PAE or is absorbed by a PAE. After the triggering event, the specific patents involved in the event are automatically cross-licensed to all LOT companies, blocking any potential legal action by a PAE. By pooling their patents, member companies provide immunity to one another and deter potential lawsuits from patent trolls. The group also benefits from a network effect: the more members that join, the more attractive membership becomes for other companies.