Frequently Asked Questions

Frequently Asked Questions 2017-10-18T21:12:13+00:00

These FAQS attempt to summarize key details of the LOT Agreement. To the extent there is inconsistency between these FAQs and the LOT Agreement, the LOT Agreement takes precedence.


What is LOT Network? 2017-11-27T19:13:04+00:00
LOT Network is a non-profit community of companies that was formed to preserve the traditional uses of patents while providing immunization to the patent troll problem.
LOT has over 170+ members across all industry verticals, including category leaders like Oracle, Amazon, Alibaba, Red Hat, Canon, Tesla, Cisco, Slack, Fidelity and GM, as well as over 75 innovative startups. If any of the close to a million patent assets owned by our members should ever fall into the hands of a patent assertion entity (PAE), then the other members receive an automatic free license to that asset.  Thus, trolls can’t assert the assets against network members.
At the same time, LOT members are free to use their patents for all traditional uses such as asserting their patents against members (or non-members), cross-licensing, cross-licensing for revenue, selling their patents, and so on. You can read more about LOT here.
Will joining LOT Network devalue my patent portfolio? 2017-10-18T21:06:33+00:00
In a word, no. Some of the world’s largest patent holders are in LOT. These are companies who have spent hundreds of millions developing their patent portfolios. Clearly they did not feel that joining LOT devalues their portfolio.  

LOT does not affect the use or value of patents in the hands of operating companies. LOT Members, or companies that have bought patents from LOT members, are free to assert their patents against anyone.   

Over the past decade, we’ve seen patent valuations steadily decline, due in large part to some Supreme Court rulings and changes to the patent system. According to the latest market data, patent portfolios are worth less than in previous years, and the only possible impact on valuation may be if you intend to sell your patents to a patent troll who wants to assert those patents against the other members of  LOT.

The decline is also due to the fact that the two largest buyers of patents (Intellectual Ventures and WiLan) have announced they are no longer buying patents. Below are two recent blog postings from the IAM Market website:

While patent values have gone down, what hasn’t changed is the underlying opportunity for PAEs to monetize them. And now it is cheaper than ever for trolls to buy patents. More and more, we’re seeing a trend of trolls suing larger numbers of companies for smaller per-company settlements – meaning more and more companies will be sued.
How does the LOT Network reduce the risks its members face from PAEs? 2017-10-18T21:06:42+00:00
PAEs increasingly rely on patents purchased from operating companies to sue other operating companies. Over 80% of patents asserted by PAEs come from operating companies. If a PAE purchases a patent from a LOT Network member, that PAE will not be able to sue any LOT Network member (that overlapped with the patent) for alleged infringement of that patent.

This is beneficial to LOT Network members in two ways. First, LOT Network members are directly protected from that specific patent through a license. So that threat is removed.

Second, LOT Network disrupts the PAE cycle that costs consumers and shareholders tens of billions of dollars annually. Even better, this longer-term reduction of risk increases as more and more operating companies and their patent assets join LOT Network.

How does LOT Network determine who is a PAE? 2017-10-18T21:06:49+00:00

PAE refers to a “Patent Assertion Entity.” The LOT Agreement refers to PAEs as “Assertion Entities” which is defined as an entity and its affiliates if more than half of their total revenue is derived from patent assertion in a twelve month period, or if it has a plan approved by senior management to do so. https://www.plainsite.org/tags/intellectual-ventures-shell-companies/ has a list of known PAE names and with a little investigation most become clear. An inquiry to http://www.symmetryip.com/ can also help shed some light on the entity in question. If it is still unclear, one may engage in litigation and put the burden of proof on the plaintiff. Fortunately, most PAEs are well aware of the LOT Network and can easily check the membership on the LOT network website before initiating a frivolous suit.

When is a patent considered to have been transferred to a PAE? 2017-10-18T21:06:54+00:00

A “transfer” to a PAE includes any circumstance in which the patent becomes owned or controlled by a PAE, including assignment, sale, exclusive licenses or other transfer to a PAE. The definition also includes situations where an existing LOT Member morphs into a patent troll.  In this last situation, legal transfer is not required for our members to enjoy the protection (i.e. immunization) of LOT Network.

Can LOT Network participants sell their patents to other companies? 2017-10-18T21:07:00+00:00

LOT Members are not restricted in any way as to whom they can sell their patents. In fact, LOT Members never have to give any notice or reporting if they do sell a patent. LOT members are free to sell to other LOT Members, non-LOT Members, operating companies, and even to PAEs. In fact, many LOT members are actively selling large portions of their portfolio and don’t care if their assets fall into the hands of a PAE. Reason being, by being part of LOT those companies have given all other companies in the world an opportunity to get a free license to their assets if they fall into the hands of a PAE. If a non-member gets sued by a troll, the seller needn’t feel guilty because that company could have simply joined LOT to avoid that issue. The LOT Agreement protection applies to all members of LOT who overlap with an asset before the asset leaves the network.

How much does it cost to join LOT Network? 2017-10-18T21:07:06+00:00

LOT Network is a non-profit organization. Membership cost in LOT Network is tiered, based on the member’s annual revenue, to ensure that LOT Network is affordable for companies of every size. The first year’s membership fee for new LOT Network members is prorated based on the date of membership.

We know start-ups drive innovation, and because 50% of companies sued by PAEs have less than $10 million in annual revenue, LOT is doing all we can to protect start-ups. That is why the Board of Directors have decided that start-ups can be part of LOT for free indefinitely as long as their annual revenue is below $5 million. Once their annual revenue exceeds $5 million, they simply pay in accordance with the rate card below. There is a board resolution that caps the fee for large companies, and as LOT continues to grow the fees are likely to be reduced further in order to maintain the non-profit status of LOT. Regardless of where a company falls on this rate card, the fee for LOT should be a non-brainer. For the cost of one robust patent application, the largest companies in the world can be immunized against close to a million assets should they fall into the hands of a PAE.

Participant’s Annual Revenue LOT Network Annual Membership Fee
<$5M $0 with two referrals to prospective members
<$10M $1,500
$10M to $25M $2,500
$25M to $50M $5,000
$50M to $100M $10,000
$100M to $1B $15,000
>$1B $20,000

Do I need to have patents in order to join LOT Network? 2017-10-18T21:07:12+00:00

No, you do not have to own patents to join our community.  Several companies have joined purely for the defensive value of LOT. Even if you don’t own patents, you can still be approached by PAEs and accused of infringing patents. By joining LOT you would be protected against PAE litigation involving any of the assets that are in our members’ portfolios.

What happens to my patents, licenses and releases if I withdraw from LOT Network? What happens to my ability to receive a license if another member withdraws from the LOT Network? 2017-11-27T19:11:52+00:00

To be clear, no company has ever withdrawn from LOT.  Every day new assets are being added to the community, and thus, the value of LOT Network membership grows each day.  

The immunization offered by LOT Network is analogous to your flu shot. Every year you have to get the new flu shot. Otherwise you are at a high risk of catching the flu.  Similarly with LOT, companies need to pay their renewal fee to maintain their immunization.

But if a company were to decide they want to withdraw, they can. The withdrawing company keeps any licenses and releases to LOT Network assets they overlapped with that were transferred, directly or indirectly, to a PAE while that company was a member.

However, the withdrawing member loses its immunization protection to the assets that have not been transferred to a PAE. The current members of LOT will remain immunized to the withdrawing company’s patents and applications that were filed up to 6 months after withdrawal. Thus, you many not withdraw to sell your assets to a PAE and expect that PAE can assert those against the current LOT members that overlapped with you.  

If a new company joins LOT Network after another company leaves, that new company will not receive a license to any patents the withdrawing company subsequently sells to a PAE. Thus, it is beneficial for companies to join earlier to maximize their coverage opportunity under the LOT Agreement.

Patents acquired more than 6 months after a company withdraws from LOT Network are not subject to the LOT Agreement.

What is the duration of the licenses for patents transferred to PAEs? 2017-10-18T21:07:24+00:00
The license granted by the LOT Agreement upon transfer to a PAE  is perpetual, for the life of the subject patent. As a LOT member you are fully and permanently protected against any asset that you overlapped with and that falls into the hands of a PAE (as long as you maintain your membership). This includes any assets that claim priority to the assets transferred to the PAE (e.g. continuations, divisionals, re-exams, etc.)
There is nothing that the PAE can do to remove the restriction. The troll can’t exclusively license the assets, put it in a trust, or sell it to an operating company. Once a LOT assets is touched by a patent troll, the overlapping members of LOT are fully protected.
I want to sell patents to an operating company that is buying patents for defensive purposes. Should I still join LOT Network? 2017-10-18T21:07:31+00:00
Yes. The LOT Agreement is designed to preserve all the traditional uses of patents including asserting and selling patents. The transfer of patents to an operating company does not trigger the conditions of the LOT license. LOT Members can divest their assets to a JV, sell to a start-up, have that start-up go through an IPO, have the start-up go through a bankruptcy, etc. and none of those transactions will trigger the LOT Agreement.  A patent can go through 1,000 transactions and not trigger the LOT Agreement. This is how we preserve the liquidity of the assets. Since the LOT Agreement is not triggered, everyone in the chain of title is getting full value for the assets. However, the protection offered by the LOT Agreement continues to apply if the buyer or any subsequent transferee of the patent is, or becomes, a PAE.
Is it better to be first or last in your industry to join LOT? 2017-10-18T21:07:36+00:00

There is clearly a strategic advantage to being first in your industry to join LOT, and the worst position is to be last in your industry to join LOT. We understand that some legal departments are very conservative and would prefer to wait to be a follower rather than a leader in their industry when it comes to industry initiatives. With LOT, however, companies who choose to wait to join are at a competitive disadvantage.

Being first in an industry to join has no downside and offers a distinct competitive advantage. That is why you see industry leaders like Google, Red Hat, Canon, JP Morgan Chase, Ford, and Alibaba in LOT (all leaders in their respective industry).  

By being first in an industry to join, you are able to maximize the number of assets that you are immunized against. Over 42,000 assets have already left the network, so by waiting to join even now prospective members have incurred a lost opportunity cost by not being in the network. But by joining now, a company can still be immunized to over 788,000 assets should they fall into the hands of a PAE. Several members are actively selling or divesting patents (e.g.  Google, Lenovo, Daimler/Mercedes, SAP, etc.). By delaying when a company joins, they take on the risk of missing out on being immunized against the assets that are sold before a company joins.

At the same time, a company that is the first in their industry to join has not affected their IP Strategy vis a vis the other members of its industry. That company is still able to sell to a PAE who intends to assert those assets against the others in their industry. Since the others in the industry have not joined LOT, they would not be immunized against them.

As those other members did join LOT, the early adopter would continue to get upside value as now the early adopter is protected should any of those late comers try to privateer (i.e. assert their patents through PAEs). As they join LOT, the early adopter is protected.

On the flip side, the last in the industry is the worse position to be for two reasons. First, they will be immunized against fewer assets than the others in their industry that joined before them. By being immunized to fewer patents, they have greater risk/cost that they will still have to defend themselves against more assets and be at a competitive disadvantage compared to its peers.  

Second, the others in the industry (along with the rest of LOT), may sell their assets which then fall into the hands of a PAE. But being last to join means the late comer may have to defend itself from those assets alone and without assistance from their peers who are in LOT. The others in the industry will already be licensed for free and not be named as co-defendants in those future PAE lawsuits. There will be no joint defense groups or need for information and cost sharing. The late comer will have to bear the full cost/risk of the assertion.

Those that are nervous about joining should also consider this. Most of the PAE suits companies are hit with are NOT based on patents that came from that company’s industry peers. PAEs prefer to assert patents that have broad applicability across several industries (e.g. patents on wifi, websites, mobile apps, cloud computing, networking, security, etc.). The patents on these technologies typically do not come from your peers in the industry.

There is NOTHING to be gained by waiting for the others in your industry to join first. As in life, the early bird gets the worm.  

Which patents are LOT Network members required to license? Are all patents covered? 2017-10-18T21:07:43+00:00

Each LOT Network member has signed the exact same version of the LOT Agreement and agrees to license all patents that it owns or has the right to license during its participation period. Only those patents that are “LICENSABLE” are captured by the LOT Agreement. Thus, there is no need to do an inventory to understand which patents are part of a JV, co-owned, exclusively licensed, etc. There is no need to give notice to any co-owners. If you are free to license those patents without the permission or consent of any co-owner, then they are already automatically licensed under the LOT Agreement.

Why should a small company join LOT Network? 2017-10-18T21:07:49+00:00

PAEs have been estimated to cost companies tens of billions of dollars a year, with small or medium sized companies incurring a significant portion of these costs. While small companies may have smaller revenues to target, the high costs of litigation may have a disproportionate impact.

Over half of companies sued by PAEs last year had less than $10 million in annual revenue, and 62% of companies targeted by PAEs have revenues of less than $100M. PAEs prefer to sue small companies because they often lack the legal and financial resources to defend themselves.  They are easy targets for quick settlements.

By participating in LOT Network, a small company can obtain protection against patents owned by other LOT Network members that may be transferred to PAEs, effectively eliminating litigation risk and cost associated with any PAE assertion of these patents.

By being in LOT you send a strong message to your investors/VCs that you are a safer investment for their money because you are immunized against nearly a million assets. More importantly, being in LOT is NOT A POISON PILL! LOT member are allowed to transfer their LOT membership to an acquirer, and the buyer has the choice of assuming your LOT membership. Thus, your company becomes more valuable to a buyer each day you are in LOT. While you are a member of LOT you are accruing license rights to assets that leave the network.  Some companies may want to buy you simply for your LOT membership or pay extra for you because you are able to assign your license rights to a buyer.  

Why should a large company join LOT Network? 2017-10-18T21:07:55+00:00
Companies spend over $29 billion each year litigating/defending/licensing PAEs.  This is money you are not spending on R+D, improved manufacturing, or returning to shareholders. We believe that every penny spent on PAEs harms innovation, and the single focus of LOT is to preserve the traditional uses and value of patents, while at the same time, immunizing companies from the cost of PAEs.
1) Over 81% of the patents used by PAEs in their campaigns come from other operating companies.  LOT was formed to break this vicious cycle of feeding the trolls. By joining LOT, a company can permanently immunize itself from assets that fall into the hands of a PAE.
2) Over 1/3rd of LOT members are start-up companies. Companies that you, the large company, probably don’t have any legal or business relationship with. If any of these companies were ever to fail, you would be fully protected from their assets. Therefore, LOT is the most transactionally efficient way to establish patent peace with a community of start-ups.
3) Successful, large companies have one thing in common – they are optimizing their business for cost and risk reduction, not for patent monetization.  
See below:
4) LOT is a great way for a large company to stabilize it supply chain and/or reduce its indemnification costs. As a buyer, many LOT members are requiring their supply to join LOT.  If your suppliers are in LOT, you are more likely to have a deeper technical relationship with that supplier (i.e. share more information) because you don’t have to worry about that supplier going bankrupt or selling to a troll.
If you are a supplier, LOT is a great way to reduce your indemnification costs. By joining LOT, you instantly become immunized to close to a million assets many of which are outside your industry, yet pose risk to your customers if a PAE were to assert them. By joining LOT, you reduce your indemnification risks/costs and can use LOT to distinguish yourself from your competition. Some suppliers join LOT because their customers (or prospective customers) are in LOT. They then brag about their LOT membership as a way of showing they are a “good corporate citizen” and are a trusted supplier.
When should a company not join LOT Network? 2017-10-18T21:08:00+00:00
There are really only two reasons companies decide not to join LOT:
  1. They are actively selling their assets to trolls (e.g. Nokia, Philips, Micron).
  2. The company is certain it will never be sued by a troll because it does not conduct any business in the US, Germany, or China.
What happens if a LOT Network member is acquired by another company? 2017-10-18T21:08:05+00:00

It depends:

  • If the acquirer is an active LOT Network member, then both the acquirer and the acquired LOT Network member will continue to enjoy the benefits of the LOT Agreement – status quo for both companies.
  • If the acquirer is not an active LOT Network member but chooses to join LOT Network within six months, the acquired LOT Network member’s participation in LOT Network continues without interruption.
  • If the acquirer chooses not to join within the six-month period following the closing of the acquisition, the acquirer’s patents do not become subject to the LOT Agreement merely by virtue of having acquired control of a LOT Network participant, and the acquired LOT Network member will be deemed to have withdrawn from LOT Network. Thus, LOT Network is not a poison pill for companies.
Our presence in the United States is not that strong just yet, so we are are not concerned about the US PAE problem. Why should we join? 2017-10-18T21:08:12+00:00
There are few things to consider:
  1. PAE’s (“patents trolls”) have begun moving to Europe and China. (http://techrights.org/2017/04/06/epo-and-patent-trolls/ )
  2. The LOT Agreement is an international agreement, and applies to all patents not just US patents.
  3. US companies are selling their international assets
  4. Patent trolls now pick on small companies because small companies can’t afford to defend themselves. (https://www.google.com/amp/s/techcrunch.com/2013/01/19/patent-troll-effects-on-startups-and-small-businesses/amp/ )
  5. Joining LOT provides access to other companies across many industries which may provide great networking opportunities for both legal or business issues.
These are a few reasons are why companies from Europe ,Asia, Korea, Canada, and China have joined. For example, VW (Germany), BBVA bank (Argentina), Canon (Japan),  Hyundai (Korea),  Alibaba (China). As well as over 70 small companies have joined.
What is is the process for joining? 2017-10-18T21:08:20+00:00

The procedure is simple. At lotnet.com/join you can get an execution copy of the LOT Agreement. Simply execute the agreement and send us a scanned signed copy. We will then send you a welcome packet, and an invoice for the prorated membership fee. That’s it.