Silicon Valley hopes to succeed where Capitol Hill has failed.
Rather than wait for lawmakers to put an end to patent trolling, a handful of tech companies—including Google, Canon, Dropbox, and Newegg—have formed a patent troll-slaying club to deal with the problem themselves.
Patent trolls—companies that snatch up patents solely to profit off other companies, without actually making products themselves—are a drain on innovation and business. They buy vague or widely used patents, then use them to sue companies who use them. They prey on coffee shops for offering wifi, on small app developers, and on major companies alike. Google, for instance, recently lost in court to a patent troll enforcing a patent on online advertising.
The tech sector is in a tight corner, but government reform to protect companies from patent trolls has remained elusive. New bills are dying in Congress as often as they're introduced.
As they say, if you can't go through, go around. Enter the License on Transfer Network, or LOTNet. It works sort of like a non-aggression pact for patent-owning companies. When a member of the network sells a patent to a non participating company, the company selling the patent will automatically extend a royalty-free license to all members.
Basically, it's creating a legal force field for all the businesses in the group. If a LOTNet company sells a patent to a company that ends up being a patent troll, the troll can't sue any of the LOTNet members, because of the way the terms of the deal would be written.
Companies sued by patent trolls each year, according to LOTNet. Image: LOTNet
In other words, any company that joins the network is protected from any other company in the network—presuming the patent is actually sold. Canon can't go about making Google Glass, for instance, because Google isn't going to be selling the patents that make the technology work to anyone anytime soon.
The group says it wishes it had thought of the idea sooner:
“Had we formed LOT Network in 2005, and if every operating company had joined that year, approximately 10,500 defendants in [patent troll] litigations using acquired patents may have collectively avoided more than $100 billion in costs.”
It’s true that patent trolls make a lot of money. After prowling the scene and tracking down properly broad patents, they issue vague patent infringement letters and demand a fee in exchange for not formally suing a company. Settling the suit tends to be the economical option for companies hit with a patent troll threat, because the alternative is an expensive, time-consuming lawsuit. But these settlements encourage trolls to keep doing what they’re doing.
Patent reform through political means has failed at every turn. Legislative action stalled earlier this year, when a comprehensive patent reform bill written by Sen. Patrick Leahy wasn't voted on. Some blamed Senate Majority Leader Harry Reid, others blamed the clout of interest groups opposed to reform.
But maybe less sinister forces killed the bill. More than a few pundits and business owners worried that if the bill passed, startups and inventors would be trampled alongside patent trolls. They suggested that, when a patent is sold, a large company could easily outpace a startup in scale, killing the smaller companies.
Joining LOTNet is completely voluntary, so that fear should be put to bed. But the non-aggression pact approach isn’t perfect. It will only be effective—on a large scale—if swarms of companies enlist. But at least it offers one route around messy politics.
Patent reform efforts have come from all corners: The Supreme Court has heard cases, other bills are pending in Senate and House (though the major ones have been dropped, for now), and many states have independently dealt with the problem. Now, a club of prominent tech companies can be added to the list. Maybe Silicon Valley can succeed where Capitol Hill has failed.