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Intellectual Property

Patent-licensing network may not be best option for startups

While the technology industry's recent move to create a network aimed at fighting patent trolls is a positive development for large, established tech firms, it may pose challenges for startups, says Toronto patent lawyer Aaron Edgar.

Google, Dropbox, and four other tech firms announced earlier this month that they have formed the License on Transfer Network (LOT), a “co-operative patent-licensing agreement” that they expect will cut down on patent troll litigation.

Thousands of patent litigation lawsuits, say the companies, are brought by non-practising entities, or patent trolls, whose only business is to license and litigate patents. Another trend – privateering – involves companies selling patents to trolls who use those patents to attack other companies, according to the release.

With the new network, say the companies, members “receive a license when the patents are transferred out of the LOT group. That means that companies retain their right to enforce a patent so long as they retain ownership of it. However, as soon as it is sold, a license to the other members becomes effective, protecting them from attacks by the troll to which the patent was sold.”

Edgar says, “The LOT Network's goal is to reduce the number of patents that are available to patent assertion entities by providing a license to use the patent to the other network members upon a patent being sold by a network member to a patent assertion entity."

However, while the LOT Network may be attractive to established technology companies that are already facing litigation from patent trolls, Edgar says for smaller companies and startups, “belonging to the LOT Network could negatively affect the value of the company's patents and their ability to sell their patents or the company itself to what may be considered a patent assertion entity.”

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