LOT formed in July of 2014 as a non-profit designed to help companies prevent their patents from being abused if they fall into the wrong hands. LOT is formed of many companies interested in stopping patent lawsuits.
“Although these companies have little in common, they believe companies should be good corporate citizens, and companies should use the patents they have for traditional reasons,” said Seddon. “Patents have been around for 200 years. They support traditional business models. All those are fair play. What they don’t believe in is this new business model of patent trolls, who buy patents, get venture capital money, initiate lawsuits, and shake down companies.”
Seddon said patent trolls cost the U.S. economy more than US$80 billion a year. And Spangenberg has certainly gotten his fair share of that money in his pursuits. But the LOT Network could put a stop to that over time.
“We learned that 81% of patents that trolls use in their litigation all come from original operating companies,” said Seddon. “So at the end of the day, the problem isn’t the patent office; the problem is caused by companies who sell patents to trolls, and those trolls move around suing and buying more patents.”
To this end, members of the LOT Network sign agreements to allow their patents to be freely licensed to all Network members if they ever fall into the hands of a patent troll. While it might sound far-fetched for an IBM or Intuit patent to end up in the hands of a troll, many of these assets are transferred as a result of mergers and acquisitions activity.
“We have a simple license agreement; companies of all shapes and sizes are allowed to join the community,” said Seddon. “The agreement says you’re free to do whatever you want with your patents: You can sue other members, generate revenue, etc. All we are asking is if any of your patents are ever transferred to a patent assertion entity, the other members get licensed automatically.”
The LOT Network lists more than 30 companies and more than 325,000 patents, currently. But even that many patents can’t protect every company from trolls.
Seddon is familiar with Spangenberg’s work. “I have run across him many times. He is one of the all-star patent troll entities that were out there. If you were going to pick four or five trolls for the hall of fame, he’d be one of them,” he said.
“This particular patent, since it was originally issued, it has been assigned to 14 other companies. It has changed hands 14 different times. It was owned by Orion IP, Clearwood Computers, which is owned by TechDev Holdings, which is owned by Acclaim Financial Group, which is owned by the wife and son of Erich Spangenberg. This Pherah is just a shell company, and it acquired the patent from Manufacturing Systems Technology, another shell entity of Acclaim Financial Group.”
Seddon has advice for Atlassian and the other companies sued by Pherah: “I would invite all these companies to join our network. What they’re experiencing is straight out of the traditional patent troll playbook. Pherah is not a real company with real people. It’s like a Russian doll,” he said.