A coalition of tech companies formed by Google, Canon, Dropbox, Newegg, SAP and Asana, was formed to fight patent trolls.
The coalition is known as the License on Transfer (LOT) Network, an agreement for cooperative patent licensing between the member companies. The companies collectively own over 50,000 U.S. patents, almost 300,000 patent assets, generate revenues of over $117 billion and have employee counts of over 310,000 people.
"The LOT Network is a sort of arms control for the patent world," said Google Deputy General Counsel for Patents Allen Lo. "By working together, we can cut down on patent litigation, allowing us to focus instead on building great products."
Litigation for patent infringements reached an all-time high in 2013, with over 6,000 lawsuits filed. Most of these lawsuits came from patent assertion entities, or more known as patent trolls, which are companies that only exist to license patents and then file litigations over them.
As per RPX Research, over 70 percent of the patents that are used by patent trolls come from operating companies who sell the patents to them, who then use the patents to file lawsuit against other companies. This practice is called privateering, and it has become a growing trend. In some cases, the operating company that sells the patents also arranges to receive a portion of the generated revenue by the patent troll's lawsuit.
The LOT Network looks to put a stop to these growing issues, as the agreement forms a new type of royalty-free cross-license. In the agreement, the members of the network receive licenses when patents are moved out of the LOT network, allowing companies to retain their rights on patents. When the patent in question is sold, presumably to patent trolls, the licenses become effective, which will protect the companies from litigation attacks by the patent trolls.
There are several other provisions included between the companies in the coalition to preserve the value of a patent portfolio.
Any company is allowed to join the LOT Network, with sign-up forms available on the official website. As the network grows, patent trolls will undoubtedly find it harder to carry out their business.
"This is a step in the direction of saying, patents should be used in a certain way," said Newegg chief legal officer Lee Cheng. "They should be used to develop commercial products. This sends a message, and the companies are putting their money where their mouths are."
While the LOT Network may not completely eliminate the practice of patent trolling, it will put a huge dent on their actions, as companies continue to clamor for changes in the legislation for patent systems to further alleviate the problem.