On January 14, IBM announced it was joining the LOT Network, a non-profit group of companies creating protective measures for its members against patent assertion entities (PAEs), sometimes referred to as “patent trolls.” According to the FTC, PAEs are “businesses that acquire patents from third parties and seek to generate revenue by asserting them against them against alleged infringers.” At least 50 percent of a PAE’s gross revenue comes from patent litigation. These suits can become expensive and hurt innovation. IBM has stated that becoming a member in LOT Network means, “joining a group of like-minded organizations, including Red Hat, that see strong value in protecting the traditional uses of patents, while fostering open innovation for today and the future.”
The LOT Network, or “License on Transfer Network” was founded in 2014 and has more than 2 million patents among its 600 members’ portfolios. The premise is that network members agree that if a PAE acquires a LOT member’s patents, other members will receive a free license to said patent to prevent litigation. Other members include startups and well-known brands, such as Microsoft, Google, Cisco, Uber, Amazon, Tesla, Facebook, Etsy, and Ford. LOT estimates that 81 percent of patents obtained by PAEs come from companies, as opposed to a university or an investor directly. Additionally, “PAEs are responsible for 84% of high-tech patent litigation in the US.”
According to the press release, “IBM’s membership in LOT Network supports the protection of innovations for IBM and its ecosystem of customers, developers and like-minded companies across the industry. With today’s news, IBM is adding over 80,000 patents and patent applications under the protection of LOT Network, shielding those patents from PAEs and encouraging industry-wide open innovation.” This will help protect IBM and other members, as well as encourage innovation for members.
LOT Network stated that, “companies lose $80 billion each year on patent troll litigation. Companies on average spend more than $3.3 million to fight just one PAE-generated software company lawsuit.”
In 2019, IBM acquired Red Hat, LOT Network founding member and a leading provider of enterprise open-source software solutions. In a blog post, Red Hat applauded IBM for joining LOT as a way to help and encourage open-source innovation.
In 2019 alone, IBM was issued 9,262 patents, a record, and the 27th consecutive year for IBM’s U.S. patent leadership. “As the largest recipient of patents in the U.S. each year for more than a quarter-century, IBM has continued to push the boundaries of innovation, improving the way we live and work, through some of the most disruptive technologies,” Arvind Krishna, senior vice president, Cloud and Cognitive Software, at IBM said.
“IBM is a welcome addition to the LOT Network’s community of 600-plus companies,” Ken Seddon, CEO of LOT Network, said. “IBM has a strong track record of patenting innovation, and a sophisticated IP business. By joining LOT network, they are providing a way for companies to mitigate risk from PAEs, in direct alignment with the mission of LOT, strengthening our collective ability to mitigate patent abuse.”