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Invest in Growth How LOT Network Addresses the PAE Problem
Ken SeddonCEO, LOT Network
January 11, 20171
▪ Introduction of Ken Seddon▪ 25 Years of Engineering and IP experience
▪ 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
LOT CEO
2
LOT 1.0▪ Very robust agreement
- 27 pages▪ License triggered
upon transfer to non-member
▪ Impacted sales to other companies
LOT Membership unanimously approves new agreementNovember 23, 2015
4
LOT 2.0▪ Scope narrowed to address
PAEs - 10 pages▪ License upon transfer to
PAE▪ No impact on traditional
uses of IP▪ Free to assert, sell, or
license to anyone
New LOT Agreement is scaling
5
0"
10"
20"
30"
40"
50"
60"
70"
80"
90"
100"
110"
6/1/14"
10/1/14"
2/1/15"
6/1/15"
10/1/15"
2/1/16"
6/1/16"
10/1/16"
LOT$Membership$over$0me$
LOT 2.0
PAEs - hurting innovation
8
Patent lawsuits have jumped 500% between 2005-2014
PAEs drain ~$80B from the US economy per year, or $1.5B a week
Number of PAE initiated lawsuits per year
0
1000
2000
3000
4000
2004 2007 2010 2013 2016
1
7PAEs are responsible for 84% of high-tech
patent litigation in the US!
10
PAEsOperating Companies
Where are the PAEs getting their patents?
9Companies provide PAEs with most of the patents
Operating CompanyInventor/University
81% of patents acquired from PAEs come from
companies 7
Source of Patents
What is LOT Network?
14
Community
Non-Profit
ProtectingInnovation
LOT - community providing PAE immunization
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
15
No effect on traditional uses of patents
16
Free toCross License
Free toAssert
Free toDo Nothing
Free toSell
No Burden to being a member
17
Don’t have togive notice
Don’t have tolist patents
Don’t have toreport
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?
18
Illustration of the LOT Agreement's Operation
20
21Today: Companies 1 and 2 join the LOT Network.
21LOT
Future: LOT membership immune from patent, regardless of the owner. 21
LOT
PAE
X
Over 606,000 WW assets
Over 162,000 US assets
Tomorrow: Company 2 sells a patent to a Patent Assertion Entity. 21
LOT
PAE
$License to LOT
membership automatically
becomes effective.
Legend- Transferred patent(s)
X
X
Illustration of the LOT Agreement's Operation
21
21Today: Companies 1 and 2 join the LOT Network.
21LOT
Op Co B
License to LOT membership automatically
becomes effective when transferred to
PAE.
PAE
X21
LOT
Tomorrow: Company 1 sells a patent to an Operating Company
Legend- Transferred patent(s)
Op Co A
$
Over 606,000 WW assets
Over 162,000 US assets
Illustration of the LOT Agreement's Operation
22
21Today: Companies 1 and 2 join the LOT Network.
21LOT
21LOT
Tomorrow: Company 2 becomes an assertion entity
Over 606,000 WW assets
Over 162,000 US assets
Illustration of the LOT Agreement's Operation
23
21Today: Companies 1 and 2 join the LOT Network.
21LOT
License to LOT membership automatically
becomes effective. PAE1LOT
Tomorrow: Company 2 becomes an assertion entity
X
Over 606,000 WW assets
Over 162,000 US assets
LOT Network is non-profit: Annual Fee
24
LOT Member’s Annual Revenue Annual Membership FeeLess than $5 million Free (through March 1, 2017)
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)
What types of patents did trolls use to sue in the US in 2015?(3,608 litigations)
27
# of paten
t assets
0
40
80
120
160
G06F H04L H04W G06Q H04M H04N G11C G11B B60R G06K
15161718
4646
72
83
150155
CPC codes of patents asserted by PAEs in the US in 2015 G06F - Digital Data ProcessingH04L - Transmission of Digital InformationH04W - Wireless Communication NetworksG06Q - Data processingH04M - Telephonic CommunicationH04N - Pictorial CommunicationG11C - Optical elementsH04B - TransmissionG11B - Radio ReceiversB60R - MirrorsG06K - Data Recognition
LOT has thousands of patents in the same areas as those PAEs are asserting in the US
28
# of paten
t assets
0
12,500
25,000
37,500
50,000
G06F H04L H04W G06Q H04M H04N G11C G11B B60R G06K
60676422
2221397
40751
396252348908
11604
41208
1516171846467283150155
LOT has over 486,000 assets in the exact areas that
PAEs are asserting in the US. (606,000+ Overall)
G06F - Digital Data ProcessingH04L - Transmission of Digital InformationH04W - Wireless Communication NetworksG06Q - Data processingH04M - Telephonic CommunicationH04N - Pictorial CommunicationG11C - Optical elementsH04B - TransmissionG11B - Radio ReceiversB60R - MirrorsG06K - Data Recognition
2015 Patent sales: Forecast of future litigation
30
# of
ww
pat
ent a
sset
s
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
Top 15 patent categories for 16,634 assets sold in 2015 Data from:
2015 Patent sales: Forecast of future litigation
31
# of
ww
pat
ent a
sset
s
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
Top 15 patent categories for 16,634 assets sold in 2015 Data from:
LOT has over 556,000 assets in the exact areas as the patents
bought in 2015 (606,000+ Overall)
▪ 42 different LOT Members have divested over 42,000 assets since LOT was founded
▪ 35 of those assets have landed in the hands of 8 different PAEs▪ One of those PAEs is Intellectual Ventures▪ At least 97% of those assets were divested AFTER the member
joined LOT
NO LOT MEMBER HAS EVER BEEN SUED BY AN ASSET FROM LOT
Since LOT was formed in 2014
33
Data from:
Significant value in adding some SuppliersBoth Suppliers and Customers get protection
from patents outside their bilateral ecosystems
Significant Value in adding suppliers to Membership
34LOT NETWORK
Company A Company B Company C
Supplier Supplier Supplier Supplier
Supplier Supplier Supplier Supplier
Supplier Supplier Supplier Supplier
Supplier SupplierSupplier Supplier Supplier
Supplier Supplier Supplier Supplier
Supplier Supplier Supplier Supplier
Supplier Supplier Supplier
Supplier Supplier Supplier Supplier
Supplier Supplier Supplier Supplier
Value
Why LOT is good for SUPPLIERS
36
Gain access to IP
Reduce indemnification
costs
Become “preferred”
supplier
Program voluntary
Legitimate:1. Your company prioritizes selling patents to PAEs2. Your company does not have exposure to PAEs in US, Germany, or
China market3. You can’t afford the fee
….and one not so legitimate:“It is good for my company to get sued by trolls because then I can justify budget to hire more lawyers to defend the company.”
Reasons Not to Join LOT
37
1. 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.pdf4. US Patent and Trademark Office
▪ http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm5. ROL Group
▪ http://www.richardsonoliver.com/news/2014/12/1/buyers-and-sellers-in-the-2014-brokered-patent-market6. 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)
References
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