Patent pools are agreements among businesses generally in the same industry (quite often tech companies) to cross-license patents among other companies in the pool. In these arrangements, pool members share access to their patents in a kind of mutual nonaggression pact that immunizes them from concerns about infringing other pool members’ patents.
But why would large firms simply donate patents to other firms? That’s exactly what companies like Canon, Red Hat, and Lenovo have been doing, giving away patents to startups that join a patent protection community. Writing for Corporate Counsel at Law.com, CEO Ken Seddon of the License on Transfer (LOT) Network explains the logic of these agreements in the context of the tech industry:
The patent donation program is in part an incentive to get startups to join a community that is about protecting and promoting innovation. Today, the community is immunized against over 1.1 million patent assets in the hands of a patent troll. The herd gets stronger with each new member, regardless of the size of the new member.
More than half of companies sued by trolls make less than $10 million in revenue. We also appreciate that cash is king with startups, and we did not want cost to be a barrier to protecting the next generation of innovators. That is why membership is free for any startup with less than $25 million in revenue. Even if the startup doesn’t have any patents…
Disruptive startups are the big tech companies of tomorrow. They will eventually have substantial patent portfolios—patents for which our community members want reciprocal immunity from patent troll lawsuits. Thus, the community is providing immunity from troll suits today to startups, in exchange for the startup protecting the membership from troll suits in the future. At the same time, LOT members are free to use their patents in all the traditional ways: sell them, license them and assert them against competitors in and outside the network.
The LOT Network, founded in 2014, (whose homepage prominently places the phrase “eliminate the patent troll threat”) is focused on doing just that. By allowing new firms to have access to patents owned by established ones, firms of varying size and age in the pool can protect themselves from infringement suits.
While members of the patent pool may sell their patents to groups not participating in LOT, any other firms in the pool are protected from legal action by this third party. And, of course, while LOT’s members include heavy-hitters like Google, Amazon, and Ebay, it is primarily designed to help startups who are new to the patent “game.”
For a more detailed explanation of LOT’s functioning, see this guide for non-lawyers.