Helping Patenters In A Sea Of PAEs: Interview With LOT Network’s Ken Seddon

Patent assertion entity (PAE) activity has skyrocketed in the past decade and much discussion has occurred around what to do in response to patent holders whose strategy is more focused on legal battles than innovating. One notable group has risen up to bring together global companies to address the PAE issue with a novel sharing approach. In an interview with Intellectual Property Watch, Ken Seddon, CEO and President of LOT Network, talks about the group’s rapid growth, what’s coming next, and how not to bring a squirt gun to a nuclear fight. 

Ken Seddon’s full bio is here.

Q: What is the LOT Network and why was it established?

KEN SEDDON: LOT Network is a non-profit community of companies across all industry verticals that was founded to protect its members from costly lawsuits from patent assertion entities (PAEs). Our members include category leaders like Amazon, GM, SAP, Intuit and Dropbox as well as innovative venture-funded startups.

Between 2005 to 2014, there was a notable jump in PAE lawsuits of 500 percent. This was a real wakeup call to our founding companies, which included SAP, Google, Canon and Red Hat among others, who saw the dangers to innovation of the high expense of managing these lawsuits that proved to be a distraction to business.

What’s notable about LOT is that because each of our members agree to provide licenses to one another once a patent asset falls into the hands of a PAE, we’ve established a way to essentially immunize our community against PAE suits involving those assets. It’s a really proactive, low-cost way to protect your company while still enabling you to use patents in the ways in which they were intended: you can still assert your patents against other companies for defensive purposes, for instance.

What’s notable about LOT is that because each of our members agree to provide licenses to one another once a patent asset falls into the hands of a PAE, we’ve established a way to essentially immunize our community against PAE suits involving those assets.

Members come from companies around the globe because of LOT’s relevance in the US market, and due to growing concerns about PAE litigation internationally.

Q: Now that the network has been operating for more than a year, what does membership look like, and what has been the impact so far? How do you measure success of the initiative?

SEDDON: As of this writing, we have 98 members and expect to surpass 100 by year’s end. This means that we protect our community against nearly 600,000 patent assets worldwide. The more companies that join, the safer our community is, so that’s the real metric we look at – total membership, because even if some companies don’t have patents right now, they’re likely to have them in the future – as well as assets under protection, since those are actual assets that cannot then be used against our members in a PAE lawsuit.

We feel that LOT is going viral. We’ve seen companies that have joined directly through our website, without any outreach on our part – so more and more I believe it’s becoming a no-brainer for companies to consider membership as a basic part of conducting smart business.

Q: What are the plans/goals for the network going forward?

SEDDON: We plan to continue to grow, of course – both our membership and asset count. We also want to strengthen the community, by providing value-added benefits like networking, education and knowledge-sharing between our members. There’s been a lot of interest from our members in doing that.

Q: What has driven the recent decline of patent values?

SEDDON: The frequency of litigation between companies, like in an Apple versus Samsung situation, has been declining, in part because in the last couple of years the legal system has chipped away at the value of patents. Five years ago people viewed patents as nuclear weapons, but now that we’ve seen that Apple wasn’t able to get an injunction against Samsung and vice versa, people are starting to view patents more like squirt guns. If you don’t think you’re going to win, you’re probably not going to spend the time and energy to initiate a lawsuit.

Five years ago people viewed patents as nuclear weapons, but now that we’ve seen that Apple wasn’t able to get an injunction against Samsung and vice versa, people are starting to view patents more like squirt guns.

So a lot of companies are actively selling patents, because patents are expensive to maintain, and some are wondering what the ROI really is on keeping them on board. Other companies may be financially distressed and sell patents for income; others are trading out their surplus of patents in order to obtain more technology patents.

Because of the convergence of technology with other industries, we’re seeing that across industries, people are joining LOT Network because they’re finding they need to diversify their protections. For instance, JP Morgan Chase found that 75% of the patents used by PAEs against them were actually outside of the banking industry.

Q: With patent values declining, what is the argument for joining a patent protection network like LOT Network? What does the declining value of patents mean for PAE litigation going forward?

SEDDON: Because there’s now an oversupply of patents on the market, patents have been devalued, so it’s a buyer’s market. There are so many patents out in the wild that it becomes really inexpensive for PAEs to make a land grab for patents.

The convergence of technology and other industries mean that PAEs can then sue more companies – with smaller companies having a higher likelihood of being sued. Over 50% of companies sued by patent trolls make less than $10 million in revenue – because the PAEs know that smaller companies will often settle, not having the financial and IP-specific resources in-house to defend themselves.

Over 50% of companies sued by patent trolls make less than $10 million in revenue – because the PAEs know that smaller companies will often settle, not having the financial and IP-specific resources in-house to defend themselves.

So now the argument for joining LOT becomes obvious: with minimal investment, you get protection against nearly 600,000 assets and growing. The risk of PAE litigation is only getting higher, with the number of companies divesting their assets.

Q: Do programs like LOT Network encumber patent portfolio assets?

SEDDON: LOT Network in particular was specifically designed not to interfere with the traditional uses of patents. Members are free to buy, sell and assert patents as they see fit; we really don’t place any restrictions at all on activity. Members have no requirements to report their activity to us either.

Meanwhile, while I can’t share details just yet, there is some analysis being done that shows that there is a significant opportunity cost to not joining LOT – that the ROI on our nominal fees is significant.

LOT is just a smart, easy line of defense that companies should have in their arsenal.