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Why GM and Honda Just Joined a Google-Led Patent Alliance

Aug 08, 2016

In another sign of the growing ties between Detroit and Silicon Valley, more automakers are joining a network of primarily tech companies that use licenses to ward off so-called "patent trolls." The trolls, also known as patent assertion entities, don't produce any products but have long plagued the tech industry with lawsuits—or the threat of them.

In early August, Honda became the latest car company to join the License on Transfer (LOT) Network, following General Motors, which joined in July. Other auto brands—including Hyundai, Ford, and even Uber—have joined LOT over the last year.

The nonprofit LOT Network, which launched in 2014, began as a Google initiative. It amounts to a mutual non-aggression pact in which members pledge that none of their patents will ever be used by a patent troll to sue another member. (But they can still sell the patents or even sue a competitor within the network directly.)

Beginning with a handful of tech companies, including Red Hat and Dropbox, the network today counts over 70 members, including some from the financial sector like JP Morgan (jpm).

According to LOT Networks CEO Ken Seddon, the participation of industry sectors such as automotives and finance reflects the fact that almost every big firm is a tech company these days, making them increasingly vulnerable to threats from trolls, which frequently use patents related to Internet services as the basis of their lawsuit campaigns.

Carlos Herrera, the chief intellectual property counsel for GM, said the automaker has long been used patents to protect its innovations, but that the troll problem impelled it to join LOT.

“GM’s involvement in LOT demonstrates a proactive commitment against becoming vulnerable to patent assertion entities that may detract from our ability to push innovation and better products forward," Herrera told Fortune via email.

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Ford, meanwhile, was the first car company to join the network in 2015. In a statement this month, Bill Coughlin, president and CEO at Ford Global Technologies, took aim at abuses by patent troll.

“As a leader in innovation, Ford takes the protection and licensing of patents very seriously and joining the LOT Network was one prong of Ford’s multi-prong defensive strategy against unreasonable patent assertion entities,” Coughlin wrote. “We are proud to have paved the way for other automotive OEMs and suppliers to join the network and help keep auto-related patents out of the hands of those driven primarily by greed.”

As for Google, the tech giant continues to pursue a quiet strategy, allowing it to exert growing influence in the intellectual property space. In addition to the LOT Network, Google is running a periodic patent purchase program, and is distributing patents to startups. Google also was number five on the list of new patent recipients for 2015.

So far, though, Google continues to use its patent clout primarily for defensive purposes rather than aggressively seeking licenses from other firms. A person familiar with the company said there no plans for the company to become a patent broker like RPX, which sells licenses as a form of patent troll insurance.

The move by auto companies to join LOT comes amid an ongoing debate over whether Congress needs to take new steps to rein in patent trolls.

On one hand, recent Supreme Court rulings and new procedures at the Patent Office make it easier to challenge bad patents.

But on the other hand, troll cases still count for a large majority of patent cases in the country, and remain a major nuisance for tech companies. One such case saw a jury this year order Apple to pay $625 million over patents related to its FaceTime and messaging services. The case has since been set down for a new trial.

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