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Ken Seddon CEO, LOT Network September 8, 2017
Invest in Growth How LOT Network Addresses the PAE Problem
Introduction of Ken Seddon
25 Years of Engineering and IP experience
LOT Network CEO Ken Seddon
• BS. EE Georgia Tech, Master’s Device Physics from ASU, JD from ASU • Motorola: engineer and patent prosecution • Intel: Asst. Director of Patents - patent prosecution and licensing • Numonyx: Chief IP Counsel • Micron: Asst. General Counsel • Apple: Strategic patent licensing, patent purchasing, NPE defense • ARM: VP of IP
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Why you should join LOT Network
$29 Billion
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PAEs - hurting innovation
PAEs are responsible for 84% of high-tech patent litigation
in the US!7
PAEs drain ~$80B from the US economy per
year, or $1.5B a week10
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PAE
84.1%
Operating Companies
15.9%
Patent lawsuits have jumped 500%
between 2005-2014
Defendants added to NPE Campaigns Quarterly
AIA
New pleading requirements
Dan McCurdy 2017 SAS NPE Forum and RPX Average
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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500
1000
1500
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Where are the PAEs getting their patents?
Companies provide PAEs with the most of the patents
Operating Company
81%
Inventor/University
19% 81% of patents acquired from PAEs come from
companies7
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LOT Agreement is scaling
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LOT Begins
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LOTMembershipovertime
LOT 2.0
HyundaiLenovoNissanHonda
Cisco
AmazonAlibaba
eBayNetAppElectronic ArtsTeslaVolkswagenSalesforceOracle
Who is joining and why?
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Some of LOT’s 165 members
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Some of LOT’s 164 members
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● Startups and small companies are softest targets for trolls − 50% of all companies sued by trolls
make less than $10 million/year − Over 50% of all patent lawsuits
concern software patents†
What about small companies?
† GAO report on IP: http://www.gao.gov/products/GAO-13-46513
"Thank you for protecting companies and individuals from this common threat. I came across the LOT Network while reading through ways of protecting as much as possible our company when releasing open-source code.
Thank you,
Have a great day.”
Raphael Varonos - General Manager, Agneta Network Applications, LLC. July 19, 2017
What about small companies?
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2/3rds of LOT Members are start-ups
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What is LOT Network?
LOT - community providing PAE immunization
Community Non-Profit Protecting Innovation
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A license to the other members of LOT Network that applies ONLY on and after transfer of the particular
patent to a patent assertion entity (License on Transfer - LOT)
How LOT Protects Members
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No effect on traditional uses of patents
LOT - community providing PAE immunization
Free to Cross License
Free to Assert
Free to Do Nothing
Free to Sell
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No effect on traditional uses of patents
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No Burden to being a member
Don’t have to give notice
Don’t have to list patents
Don’t have to report
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A patent holder, in combination with its affiliates, that generates more than 50% of its
gross revenue from patent assertion.
What is an assertion entity?
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How LOT works
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1 2
Illustration of the LOT Agreement's Operation
Today: Companies 1 and 2 join the LOT Network.
Over 782,000 WW assets Over 225,000 US assets
1 2
PAEPAE
Future: LOT membership immune from patent, regardless of the owner.
Legend: = Transferred patent(s)
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Tomorrow: Company 2 sells a patent to a Patent Assertion Entity.
License to LOT membership automatically becomes effective.
1 2
PAE
$
PAEX
Illustration of the LOT Agreement's Operation
1 2
$
Tomorrow: Company 1 sells a patent to an Operating Company
Legend: = Transferred patent(s)
1 2
Today: Companies 1 and 2 join the LOT Network.
Over 782,000 WW assets Over 225,000 US assets
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OP CO C
OP CO D
OP CO G
OP CO H
OP CO E OP CO
F
License to LOT membership automatically becomes effective
when transferred to PAE.
PAE
1 2
Illustration of the LOT Agreement's Operation
Today: Companies 1 and 2 join the LOT Network.
Over 782,000 WW assets Over 225,000 US assets
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Tomorrow: Company 2 becomes an assertion entity
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PAE
License to LOT membership automatically becomes effective.
LOT Network is non-profit: Annual Fee
LOT Member’s Annual Revenue Annual Membership FeeLess than $5 million Free
Between $5 and $10 million $1,500
Between $10 and $25 million $2,500
Between $25 and $50 million $5,000
Between $50 and $100 million $10,000
Between $100 million and $1 billion $15,000
Greater than $1 billion $20,000 (cap)
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LOT provides value to its members
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Analysis of assets litigated by PAEs
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What types of patents did trolls use to sue in the US in 2015? (3,608 litigations)
# of
pat
ent
asse
ts
0
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120
160
G06F H04L H04W G06Q H04M H04N G11C G11B B60R G06K
15161718
4646
72
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150155 G06F - Digital Data Processing
H04L - Transmission of Digital Information
H04W - Wireless Communication Networks
G06Q - Data processingH04M - Telephonic Communication
H04N - Pictorial Communication
G11C - Optical elementsH04B - Transmission
G11B - Radio Receivers
B60R - MirrorsG06K - Data Recognition
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# of
pat
ent
asse
ts
0
12,500
25,000
37,500
50,000
G06F H04L H04W G06Q H04M H04N G11C G11B B60R G06K
606764222221
397
40751
396252348908
11604
41208
1516171846467283150155
LOT has thousands of patents in the same areas as those PAEs are asserting in the US
G06F - Digital Data ProcessingH04L - Transmission of Digital Information
H04W - Wireless Communication Networks
G06Q - Data processingH04M - Telephonic Communication
H04N - Pictorial Communication
G11C - Optical elementsH04B - Transmission
G11B - Radio Receivers
B60R - MirrorsG06K - Data Recognition
LOT has over 496,000 assets in the exact areas that
PAEs are asserting in the US. (750,000+ Overall)
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Analysis of assets bought
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2015 Patent sales: Forecast of future litigation#
of w
w p
aten
t as
sets
0
750
1,500
2,250
3,000
G06F H01L H04L G11C H04W H04N H01M H04M G06Q H04B G11B G03F G06K H03K H04Q
205210219221230264
465466491535708
1657
210122442305
Data from:
Top 15 patent categories for 16,634 assets sold in 2015
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2015 Patent sales: Forecast of future litigation
Data from:
# of
ww
pat
ent
asse
ts
0
12,500
25,000
37,500
50,000
G06F H01L H04L G11C H04W H04N H01M H04M G06Q H04B G11B G03F G06K H03K H04Q
217378
60674346
2221240552343962
263
40751
8908
397
116048632
41208
2052102192212302644654664915357081657210122442305
LOT has over 566,000 assets in the exact areas as the patents
bought in 2015 (750,000+ Overall)
Top 15 patent categories for 16,634 assets sold in 2015
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Yeah, but does LOT REALLY work?
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Since LOT was formed in 2014
No LOT Member has ever been sued by an asset that has
left the Network
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Significant Value in adding suppliers to Membership
Significant value in adding some
Suppliers
Both Suppliers and Customers get protection from patents outside their bilateral ecosystems
Company A Company B Company C
Suppliers Suppliers Suppliers
Value
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Why LOT is good for BUYERS
Help save $29 billion
Can trust suppliers
Stabilize supply chain
$
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Why LOT is good for SUPPLIERS
Data from:
Reduce indemnification costs
Become “preferred” supplier
Gain access to IP
Program voluntary
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Are you an Optimist?
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Are you an Optimist? LOTimist?
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LOT Members are Optimists
The “LOT Member Index” = all publicly traded members of LOT• includes those that have struggled recently (e.g. retailers)
LOT members have out performed the S&P 500® by 90% in last year
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Monetizers
The “Monetizers index” = Most active monetizers in recent years• IBM, Philips, Yahoo, Qualcomm, Ericsson, Nokia, Technicolor, Sony, Tivo, Dolby
Monetizers lag S&P 500® by 87% in the last year
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Are you a LOTimist?
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Backup
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References1. Patent Freedom
• https://www.patentfreedom.com/about-npes/litigations/ 2. James Bessen & Michael Meurer, The Direct Costs from NPE Disputes, 99 Cornell L. Rev. 387 (2014). 3. RPX 2014 Litigation Report.
• http://www.rpxcorp.com/wp-content/uploads/sites/2/2015/03/RPX_Litigation-Report-2014_FNL_040615.pdf 4. US Patent and Trademark Office
• http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm 5. ROL Group
• http://www.richardsonoliver.com/news/2014/12/1/buyers-and-sellers-in-the-2014-brokered-patent-market 6. Linda Biel, AST 7. Dan McCurdy, RPX presentation at 2015 IP Counsel Cafe spring meeting, Palo Alto, CA. 8. Kevin Jakel, Unified Patents presentation at 2015 IP Counsel Cafe spring meeting, Palo Alto, CA. 9. Mark Lemely & Douglas Melamed, Missing the forest for the Trolls, Cornell Law Rev. 2013. 10. Robert Gebelhoff. (2015, November 23). ‘Patent trolls': Reading the comments. The Washington Post. Retrieved from
https://www.washingtonpost.com/news/in-theory/wp/2015/11/23/patent-trolls-reading-the-comments/ (© 2015)
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