Patents for Startups

Google’s cross-licensing program “LOT” continues to grow and apparently now includes more than 300,000 patent properties.

LOT Network operates as a poison pill for patent rights. In particular, members agree to license their entire portfolio of patents to all other members. However, the license only becomes effective if the patent is transferred to a non-LOT member, such as a patent assertion entity.

For many major operating companies, the most dangerous new patents will likely come from the start-up world and so Google (and others) have been considering how get start-ups to join the network. The company’s most recent proposal is its “Patent Starter Program” where Google will give away patent two families to start-up companies who agree to join the LOT Network. http://www.google.com/patents/licensing/.

It will be interesting to watch as this development moves forward.

36 thoughts on “Patents for Startups

  1. If I understand the agreement, the participants’ patents are licensed to all other participants right before an event, such as a sale of the patent or a change of control of the patent-owning company. But wouldn’t this make the patents or participants undesirable to potential buyers, as all of the LOT members are going to have free use of the target’s patents as soon as (or “immediately prior to”) the purchase by the buyer? … It’s like I’m buying land, but right before I sign, the whole street gets the rights to use that land too…? Am I missing something? I’m confused…

    1. TC,

      If the purchaser of the patents joins the LOT cooperative first, then the “poison pill” (free licenses for other LOT members) does not get invoked.

      The LOT members are basically joining forces to protect themselves from assertion entities, by mandating free licensing if a member tries to sell patents outside the cooperative. I would expect it also works as a way to increase LOT membership.

      I suspect there is some mechanism in place to prevent assertion entities from bypassing the poison pill by joining LOT and then asserting it’s patents against fellow members.

      1. Thanks. Interesting. So the enticement for a startup to join is use of Google’s “2” patent family and in return Google and other LOT members get reduced risk that that startup’s own patents will be asserted against the LOT members?

        Your last point is interesting. I would think there might be legit infringement disputes that could come up among LOT members. Allowing for such legit rights to be enforced, while also preventing a PAE from joining and “bypassing” the poison pill, seems to be a delicate balancing act. I wonder how the agreement deals with that issue…

        1. ..a LOT like the other “deals” tht Google has offered…

          There is a different two letter name that comes to mind here: PT

          Thank you but no thank you Mr. Barnum.

          1. Yeah, that’s kind of a problem with LOT. Startup companies have a lot of reasons to not join. For startup companies, patents provide a degree of “downside protection” to investors; the investors know that if the startup goes belly up gets into trouble, it may be able to recoup at least some of the investment or raise capital by selling the patent assets to the highest bidder–and that may well be an NPE.

            But by joining LOT, the startup makes it exceedingly difficult to sell those patent assets down the road, because it has tossed away an entire market of potential NPE buyers, whose purchase would immediately trigger an LOT license. Bottom line, for a startup company, LOT is a somewhat irrational economic decision. I suppose that’s why Google is offering to give away patents from its own portfolio to try to counter the compelling reasons for those companies to forego membership.

  2. Meh, patent pools … been around since at least Motion Picture Patents Corp, the RCA cartel, etc. Come to think of it – when you combine a patent pool with market power – isn’t that a per se anti-trust violation? All the start-up patents in the world are like bubble wrap under the Google steam roller. Don’t kid yourself this is anything other than google spin from the K street office.

  3. Thanks for the article Dennis. I didn’t know about LOT. I like it – very ingenious!

    Paul – re: DOJ clearance. I don’t understand why LOT would be anti-competitive (I’m assuming that is why you asked if a clearance letter had been obtained from the DOJ). If Google infringes on a startup’s patent, then the startup is free to sue Google. That doesn’t sound anti-competitive to me.

    I think what is more interesting is how LOT would fare under bankruptcy law. I’ve been told that weird things can happen in bankruptcy court because the rights of creditors are given very high importance. So, if a patent assertion entity buys a patent during a bankruptcy sale then would LOT still apply to it?

  4. Beware of wooden horses…

    …and of those who once proclaimed to “first, do no evi1,” but who have through their actions demonstrated a desire to wreck the patent system as a competitive strategy.

    1. If bullies keep coming after you with sticks, is it evil to try to protect yourself by limiting their access to unreasonably large sticks?

      The company you’re on about was dragged unwillingly into the battle by litigation-abusing patent aggressors. They’ve learned how the game is played by observing their attackers. And, apparently, learned well.

      1. Because those with their own innovations that are not yours are now “bullies”….

        Oh wait – you have drunk the “Tr011s” kool-aid….

        1. Because the PTO never grants patents in the absence of an actual “innovation”, and recipients of such wouldn’t think of abusing their entitlements to force settlements out of non-infringers.

          Enjoy your own kool-aid, Anon.

          1. You forgot about the law there my friend.

            As it often happens with members of the Infringers Rights Club, there is the presumption of validity, and every bit of capability to prove invalidity for which I do allow for.

            On the other hand, your kool-aid induced haze makes mere enforcement of a right into some type of crime.

            One of us is in accord with the law – and it’s not you.

              1. If only there was some way to challenge the validity of a patent in a cost-effective manner…

                …then the same whining crybabies who recite lame scripts about “mere enforcement of rights” will do everything in their power to make those challenges as difficult as possible.

            1. “anon” You forgot about the law there my friend.

              Nobody forgot about the law, “anon.” Nice try, though. This used to be your favorite lame response in defense of patent trolling. Then you stopped recycling it every day. I wonder why?

              your kool-aid induced haze makes mere enforcement of a right into some type of crime.

              LOL.

              Remember folks: this is the same guy who whines and cries whenever his favorite junk patent gets tanked. But he’s all about “mere enforcement of a right.”

              Too funny.

                1. There’s no “ad hominem”, “anon.”

                  You spewed out a bunch of insults and b.s. in response to a perfectly reasonable comment (2.1) challenging your ridiculous conspiracy theory. All I’m doing is pointing out what an incredible hypocrite you are.

                  We can all read the thread, “anon.” Maybe you should give it a try before flapping your gums again. Oh wait, that’s never going to happen.

                2. It was all ad hominem from you Malcolm – and you are the one that is the biggest hypocrite.

                  Your catchline is Accuse Others Of That Which Malcolm Does for a very good reason: you earned it.

                3. …and by the way, that so-called “insults and bs” is reflected in the fact that the Executive branch STILL has not replied to the Katznelson filing to clear away the “Tr011” myth it is propagating as propaganda.

                  There was nothing “perfectly reasonable” about 2.1 when put into the spotlight of the Infringer’s Rights movement.

                  There was nothing “ridiculous conspiracy” about the facts as I put forth either. Your attempt to dissemble and denigrate the facts with such a label is just you being you.

                  Go figure.

      1. Yes, EG, you caught the nuance.

        Shall we point out again that Google was involved in the Office “anti-Tr011” software set introduced January last, or were the party involved in the off-the-record-and-behind-closed-doors “constituency” meetings with Miss Lee in the February-March timeframe before that?

        For an administration that ran on a platform of “openness” – and has set the dubious record as being the least open administration, such large wooden items should not so gladly be wheeled within the city gates.

        That is, if you respect those city gates. If your aim is to wreck those things, well, why stop at one horse?

        1. All this should not be surprising. Google is a company that is getting 90 percent of their revenue from something that they have said may be improved and replaced. So, you are sitting on a dragon horde and want to keep it. What do you do? Burn down the patent system.

          Google is so lame.

          1. you are sitting on a dragon horde and want to keep it. What do you do? Burn down the patent system.

            The system seems to functioning better. At least, some folks are trying to bring some sanity back to the system.

            But you smell something burning. Gee, I wonder what it could be.

        2. When Google is sure that anything that can compete with their search engine is not patentable then they will be happy. They can sit on their monopoly indefinitely.

            1. Really is that why MM? Why don’t you tell us more about it rather than a snarky comment. Put yourself out there boy. You tell us something for once and put your reputation on the line.

              Tell us about Google boy.

              Paid troll.

    2. through their actions demonstrated a desire to wreck the patent system

      ROTFLMAO

      Seems like an incredibly roundabout way of doing that but, hey, “anon” could never figure out what subject matter eligibility was all about either. The entitled, paranoid mind works in mysterious ways …

      LOL

  5. I would think that this big “cross-license” [only with an activation contingency trigger as a de facto participation restriction] obtained a DOJ clearance letter? That might be interesting to post, because this is not really a cross-license?

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