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.
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.
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.
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.
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.
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 to $25M||$2,500|
|$25M to $50M||$5,000|
|$50M to $100M||$10,000|
|$100M to $1B||$15,000|
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.
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.
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.
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.
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.
They are actively selling their assets to trolls (e.g. Nokia, Philips, Micron).
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.
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.
PAE’s (“patents trolls”) have begun moving to Europe and China. (http://techrights.org/2017/04/06/epo-and-patent-trolls/ )
The LOT Agreement is an international agreement, and applies to all patents not just US patents.
US companies are selling their international assets
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/ )
Joining LOT provides access to other companies across many industries which may provide great networking opportunities for both legal or business issues.
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.