Companies lose billions each year defending themselves against patent trolls, and the problem is only getting worse. Pure Storage is one of a growing number of organizations that are working to do something about it.
“These litigations drain a lot of money out of the innovation economy,” said Joe FitzGerald, vice president and general counsel for the vendor of enterprise flash storage. “When you’re spending on litigation, you’re not spending on innovation,” FitzGerald said in a recent interview.
Aiming to combat the problem, Pure and dozens of other companies have joined together through the LOT Network.
Patent trolls, known more formally as patent assertion entities, are companies that acquire patents for the sole purpose of filing lawsuits against other companies. A whopping 84 percent of all high-tech patent lawsuits filed each year are the work of patent trolls, according to the LOT Network.
More than 10,000 companies have been the victim at least once, with an average cost of $3.2 million. Many of them can little afford it: Roughly half the victim companies earn less than $10 million in annual revenue.
When FitzGerald joined Pure Storage from Symantec back in 2013, he was struck by the scope of the problem. The U.S. patent system dates back to “the days of horse and buggy,” he said. “It was clear something had to be done.”
Plenty of efforts are currently under way to modernize the system on a government level, but LOT members aren’t holding their breath. Instead, they’ve signed an agreement that offers some immunity against lawsuits filed by patent trolls.
Whenever a member of the nonprofit network sells a patent to a patent troll, all other members are given automatic protection from litigation for the life of that patent.
Any company, university or inventor can join the LOT Network, whether or not they own any patents. Members also pay a yearly fee based on their company’s annual revenue, with no cost for startups with annual revenue of less than $5 million.
LOT members can still use their patents as they choose — the network is by no means anti-patent, FitzGerald stressed.
“At my company, we believe in strong IP protection — we now have over 500 patents or patent applications,” he said. “But we wanted to find a way to address the systemic issues.”
LOT was originally formed back in 2014, and Pure Storage was involved early. Today, the network offers protection on almost 600,000 patents. Google, Uber, Ford, Dropbox, CBS, Netflix, Red Hat and SAP are also members.
“We’re at the point now where it’s starting to have an impact,” FitzGerald said. “This should be a no-brainer for any company that’s optimizing for innovation and growth.”