Defense Against Patent Trolls? Worth A LOT (Network)

Innovation makes the world go round. Patents protect innovation. Patent trolls suck energy and time and money from companies that spawn innovation — so much so, that some companies die in the effort.

Welcome to the world of the patent troll, where the legal system can be gamed to garner patents and licenses without making a single good, or providing a single (good) service. The key here is simply to get firms to pay up for the privilege of continuing business as usual.  

Speaking to PYMNTS at the IP 2017 confab, LOT Network CEO Ken Seddon stated that patent trolls are “lawyers who have taken advantage of the patent system. We all believe in patents. We want a strong patent system that protects innovation, but what patent trolls do is that they buy patents on the open market.” They then go around suing companies “purely for shakedown value.”

The key questions involve whether companies fight the troll in court, refusing to pay up on their demands, or settle. This is a hard decision for companies to make, and one that has significant costs no matter which way the company leans.

Said Seddon, “trolls know exactly how much it is going to cost to defend you, and they will come in at a dollar less.” 

That gave Seddon an idea — why not set up a network to help companies band together to fight back?

LOT Network traces its genesis to Google, Canon and RedHat, among the founding companies of the network approached with regularity, perhaps “once a week,” by trolls, said Seddon. Those firms had desired a company-based solution, where Congress and other avenues of redress were not adequate. Since companies were the ones selling to trolls, Seddon thought that companies should be the ones to solve the issues.

Thus the agreement among LOT’s member companies, as stated by Seddon: “If our stuff does fall into the hands of the trolls, we are going to license each other.” There are 127 companies in the LOT Network at present, said the executive, who added that just a year ago that tally stood at 17. The growth has come because, as Seddon said, “if you are a company that is not in the network, you are the one that is going to get sued.” In other words, for the trolls, it is all about the path of least resistance.

LOT Network effectively, says Seddon, “immunizes those companies” from those patents before the patents end up in the hands of a troll, by granting a free license to the patents. The more companies that are part of the network, the more patents the “herd is immunized against,” he said.

Such “herd” mentality can be especially urgent in a legislative world such as exists today, where patent protection is not a priority, said Seddon. And the legal system, in terms of individual judges, he continued, might not understand all the nuances of patent protection and patent worth. And indeed, patent trolls have the singular ability to wipe out smaller firms who rely on innovation to get off the ground and running before they can ever realize profits.

Said Seddon, “some small companies do not have the legal and financial resources to fight back” against patent trolls. In fact, half the lawsuits that come amid patent disputes target companies with less than $10 million in revenues, which is akin to intentional bullying of smaller firms — and, Seddon noted, “two thirds of our members are startups.”