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“Royalty alliance” created to stop patent trolls

July 10, 2014

Patent  DefinedCanon and Google create alliance allowing members to get a royalty-free license to patents sold by participating companies in a bid to prevent infringement suits from patent trolls.

Businessweek reported on the formation by Canon and Google of the License on Transfer (LOT) Network, with the aim of limiting licensing firms who license the patents with the main objective of demanding royalties and filing infringement suits against companies using the related technology.

Companies participating in the alliance will pledge that, should they sell some of their patents, “all members of the group automatically get a royalty-free license to them”; with six companies so far committing to join the network, including Canon, Google, business-software maker Sap AG, internet retailer Newegg Inc., data storage company Dropbox Inc. and software maker Asana Inc., which was started by Facebook Inc. co-founder Dustin Moskovitz. These companies together reportedly own almost 300,000 patents and applications.

Moscovitz commented that the LOT Network “will be a no-brainer for start-ups”, as they will want to limit their exposure to lawsuits. Eric Schulman, Legal Director of Google’s patent team Mountain View, added: “The hope is people will see the benefits of the network effect here and the cycle of selling patents to licensing companies will end.”

Meanwhile Brett Alten, Head of intellectual property at Dropbox, said: “Patents are great for innovation and when used properly they foster innovation. If a LOT member owns the patents, they can do whatever they want, but if they transfer the patent outside the network, then the folks inside the network get a license. It really leads people to reach out and find ways to work with each other.”

The Recycler has reported on numerous cases in the past where OEMs have spoken out against patent trolls, with HP launching a petition last year against 40 shell companies that had been acting on behalf of MPHJ Technology Investments demanding royalty payments from SMBs.

Ricoh and Xerox had also challenged the same shell companies, filing an “inter partes” review request at the patent office in an attempt to prove that the scanning patent MPHJ was trying to enforce was not in fact patentable.

However, a more recent case saw MPHJ file four lawsuits against four different companies, including Coca Cola, claiming that they had infringed patents relating to scan-to-email functions used by employees.

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