A mutual defense alliance to protect companies against so-called "patent trolls," known as the LOT Network, announced the addition of four more members on Wednesday, including the car maker Daimler and the online learning service Udemy.
The network, which began in 2014 as a Google initiative, works as a non-aggression pact that involves members putting conditions on their patents that limit their use by trolls, which are shell companies whose only business is using patents to sue or demand licensing fees from productive companies.
While LOT began as a small cluster of tech companies, it has since grown significantly, adding auto giants like GM and Honda, and financial firms like J.P. Morgan. On Wednesday, LOT also announced the addition of Cisco and work-collaboration service Slack, adding the total number of patents in the network is over 650,000 and counting.
Ken Seddon, the CEO of LOT, says there has been a new sense of urgency to join the network given a recent uptick in troll activity, and a lack of attention to the problem in Washington, D.C.
“The new government administration has shown so far that it isn’t viewing patent reform as a priority, and the stock market has responded: publicly traded patent trolls have seen more growth than the NASDAQ in the past 6 months,” says Seddon. “Patent trolls are capitalizing on this opportunities, and companies that are delaying activities like joining LOT for patent protection are at a competitive disadvantage.”
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The LOT network itself works by creating a form of legal immunity from patent lawsuits. Specifically, it requires members to pledge that, if they sell patents to a troll, those patents can never be used against another member in the network. According to Alexandra Sepulveda, vice president of legal at Udemy, the arrangement reduces risk.
“Companies face serious financial and operational risk when it comes to their patents and have to think about innovative ways to protect their assets. We see great value in being part of the LOT Network considering their reputation and the patent portfolios of their existing members," Sepulveda says.
The growth of the LOT network comes as patent mutual-defense pacts are popping in other areas, including a new arrangement by top Android phone makers announced this week.
In the long-term, such networks could lead to a significant reduction in the time and resources companies must devote to fending off patent trolls. LOT's Seddon is also encouraged by the fact that more Chinese firms are joining the network.
But for now, widespread patent litigation is not going away anytime soon, especially as large companies like Intellectual Ventures and Nokia continue to aggressively enforce their patents. Setton, in the meantime, calls for patience.
"It’s an immunization strategy. They didn’t just get rid of Polio overnight," he says. "Eventually, Intellectual Ventures's and Nokia's patents will go away. We’re eliminating the next generation of Intellectual Ventures and Nokias."