The License on Transfer Network is a LOT of Good

A coalition of tech companies (Google, Canon, SAP, Newegg, Dropbox and Asana) recently announced a new private initiative to disarm patent trolls: the License on Transfer Network (LOT). This is essentially an extension of Google’s Open Patent Non-Assertion Pledge (OPN) that I wrote about in my very first Patent Progress post last year.

In the OPN, every included patent carried a non-assertion pledge that traveled with it. Selling off the patent doesn’t remove the pledge. Once a patent is in the OPN, it’s in for good, meaning it can’t be used by patent trolls.

The LOT Network is a coalition of companies who have all agreed to one basic idea: if a company in the coalition sells a patent, all the other companies are automatically licensed to the patent.

This still allows any coalition member to sue another member directly for patent infringement. But they won’t privateer against each other, and even if their patents end up in trolls’ hands, every coalition member is protected.

LOTlogoBecause we’re talking about thousands of patents, the coalition members have made a dent in the patents available for patent trolling.

Is there a downside? Well, it’s true that the members of the coalition may not get as a good a price if they try to sell some of their patents. But, as I’ve said before, the point of a patent is not to create a saleable asset (i.e., the patent itself). The point is to encourage investment in a new product.

As a society, we don’t particularly want a lot of patents on the market. If a patent is more valuable as a weapon for extracting money than it is as a way to spur research and development, that’s bad.

If the PTO were issuing only high-quality patents, most of those patents would be worth holding on to. The recent increase in the market for patents is, I think, a sign that patent quality has suffered substantially in recent years. That is, patents are now more valuable as tools to make money through threats and lawsuits than as protectors of innovation, which implies that the patents aren’t all that good. If they were, people would be using them to innovate (by protecting investment in product development), not sue.

But I digress. You’ll be seeing more about patent quality on Patent Progress in the near future.

In short, the License on Transfer Network is an attempt to take thousands of potential patent weapons off the market. And that is absolutely a good thing.