We interviewed Ken Seddon of LOT Network, an international community of high-tech companies protecting against litigation brought by patent assertion entities.
What is the LOT Network, who is its target and what services does it offer?
LOT Network Inc., is an international community of high-tech companies protecting against costly litigation brought by patent assertion entities (PAEs, also known as “patent trolls”). PAEs are entities that buy patents for the sole purpose of monetizing them by suing other companies. They are not in the business of making products. 50%+ of companies that have been a defendant in PAE litigation had less than $10 million in annual revenue[1] and 75% of the companies sued by trolls are privately held.[2] We believe this money would be better spent on innovation, R+D, new products, or the filing of patents.
Ironically, companies only have themselves to blame for this problem. About 80% of the patents that PAEs use to sue other companies originated with an operating company.[3] Thus, companies sell patents to PAEs, PAEs sue companies, and in the end, the PAEs end up making the money. To end this vicious cycle, LOT Network members agree if, and only if, a member’s patent asset falls into the hands of a PAE, that asset is licensed to all other network members — thereby permanently immunizing the community from PAE litigation involving that asset.
LOT Network currently counts as members the owners of the second, third, and fourth largest patent portfolios in the world. These companies have invested millions in their patents and expect to use their patents to enable their business. Therefore, with LOT, all of the traditional uses of patents, such as selling them or even suing other member companies, are unaffected. Today, LOT Network members include market leaders such as IBM, Toyota, Visa, Canon, Google, Tesla, Cisco, Amazon, Microsoft, Alibaba and Salesforce, as well as innovative companies across industries.
Why is it useful to join LOT? What are the benefits of joining the network?
Historically, PAE litigation goes up following a recession — in 2008 the number of PAE lawsuits was 2,230 — but following the recession it went up steadily every year — up to 4,970 per year in 2011.[4] LOT Network members send a strong message to investors/VCs that they are a safer investment for their money because they are immunized against 2.6 million assets. LOT members 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 a member. 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.
Additionally, 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.
What is the procedure to enter the network? What are the steps to take?
All members sign the exact same document. Just visit lotnet.com, and press Join Now. You can sign the agreement online. LOT Network is currently offering free memberships for companies whose revenue is under $25M.
Let’s talk about numbers: how many companies have joined the network so far? What are the “most popular” sectors?
More than 750 companies from 36 countries joined LOT Network since it was founded in 2014. The members of LOT Network now include thirteen of the world’s largest holders of AI patents, eleven of the largest holders of Blockchain IP, along with some of the largest patent holders in key industries like cloud computing, software, and autonomous vehicles. LOT also includes all seven of the world’s largest car manufacturers. These companies immunize the community from more than 2.6 million worldwide patent assets that could be a threat in the hands of a PAE. Our members come from a broad-range of industries, but the tech sector is among one of the hardest-hit when it comes to patent troll litigation (PAEs are responsible for over 84% of U.S. high-tech patent litigation). More Numbers to consider:
- Average cost to defend a PAE lawsuit is $3.2 million[5]
- Over 10,000 companies have been sued at least once by a patent troll[6]
Coronavirus: have you implemented special measures or organized solidarity initiatives?
Our member companies have been among the most important front-line innovators during this pandemic. Many of our members, including some in the auto, manufacturing, and bottling companies, have pivoted their product lines to generate necessary equipment and supplies to fight this virus. In April, several of our Japanese member companies came together to craft the Open Covid-19 Declaration, whereby they pledge not to enforce IP rights against activities aimed at stopping the spread of COVID-19. Here is a link to the press release for more information. Our organization is here to support our member companies and ensure that they can provide the necessary tools to fight COVID-19 without worrying about a financial hit from a patent troll lawsuit.
Will the Coronavirus emergency also affect the patent sector? What can we expect in the coming months?
What the coronavirus has done is created a recession in our country. Companies that are facing economic challenges look at additional revenue sources which, for some, include monetizing their patent portfolio. PAEs are still seeking monetary gains when companies are trying to be strategic with their expenses. Historically with each recession, companies sell or abandon their patents to save on operating costs. This means that when the economy turns down, PAE activity sharply increases.
Does the platform provide facilities or help for young inventors?
We encourage innovation. While most PAEs aren’t coming after young inventors, it’s important for the new generation of inventors to understand some of the nuances of patents and how IP strategies are important for startups — and ways to ensure that their innovation is contributing to society — not ammunition for money-making lawsuits. We do make a great effort as a nonprofit organization to educate and inform startups and entrepreneurs in the same manner. Our goal is to help them defend themselves and their intellectual property from egregious legal battles.
Are there companies and/or patents in the network that have been particularly successful? Can you give us some examples?
A good example of how members have benefitted from LOT Network is with IBM. IBM joined LOT Network in early 2020. IBM has one of the largest patent portfolios in the world and is also among the world’s largest monetizers of patents. The company is known to offload many patents to PAEs. When this happens, as it has since they joined, the companies who are already members of LOT Network are protected from any future litigation for the life of those sold-off patents.[7]
What prompted you to contact “The Patent Magazine” for the realization and publication of this interview? Do you think there is an affinity between the spirit of our magazine and the one of your organization?
Both The Patent Magazine and LOT Network share a commitment to innovation. Our organization protects our community from lawsuits so that they can spend more time and money on R&D and producing better ideas and products. That’s why we spend time on educating innovators about the risks, and provide free protection for small entities.
Ken Seddon joined LOT in April of 2015, bringing over 20 years of experience managing all areas of intellectual property. Previously, Ken was with some of the largest patent holders the world including Apple, Micron, Motorola, Intel and most recently as the Vice President of IP at ARM. Ken drafted over 300 patent applications while at Motorola and Intel, and managed all US patent prosecution at Intel. As Chief IP Counsel of Numonyx which was later acquired by Micron, Ken led strategic IP Licensing for two years before moving to Apple. At Apple, Ken developed the IP strategy for future products and acquired and defended patents from PAE assertions. Ken then went on to be the VP of IP at ARM before being selected by the Board of Directors to be the first CEO of LOT Network. Ken has a BS in Computer Engineering from the Georgia Institute of Technology, a master’s degree in Solid State Device Physics and a Juris Doctorate from Arizona State University.
[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2233041&rec=1&srcabs=2146251&alg=1&pos=5
[2] Dan McCurdy, RPX, SAS anti-NPE Form. March 3, 2016.
[3] McCurdy, Dan, Patent Litigation and Market Trends, IP Counsel Café Conference, Palo Alto, CA April 2015.
[4] https://www.unifiedpatents.com/insights/2020/great-recession-explosion-of-npe-assertions
[5] Kevin Jakel, Unified Patents presentation at 2015 IP Counsel Cafe spring meeting, Palo Alto, CA
[6] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2091210
[7] https://www.iam-media.com/litigation/ibm-touts-lot-membership-it-targets-airbnb-in-new-lawsuit
