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You may have heard that patent-rich tech companies like Canon, Red Hat and Lenovo are giving away free patents to startups that join a patent protection community. It’s part of a program through the nonprofit of which I’m a part, LOT Network, which is a group of companies ranging from startups to well-known names like Tesla, Facebook Inc., Lyft Inc. and Amazon.com Inc. that protect one another from litigation from patent assertion entities (PAE, or “patent trolls”).

Though we live in a world where we’re trained to suspect anything that’s given away for free, there are valid and self-preserving reasons for tech companies to give away patents for free that concurrently benefit startups as well.

Supporting Innovation

Many of the companies donating patents were early pioneers in their industries, and continue to have a culture that values innovation.

While each has its own reason for donating patents—Red Hat, for instance, is participating in part to build bridges with software engineers who are leery of software patents, while Lenovo has decided to shed its patent portfolio of patents in areas where the business is no longer involved as a cost-saving measure—all share a desire to do something positive with them. At a minimum, these companies decided in the interest of promoting innovation to donate thousands of free patents to member startups.

By donating patents—and allowing startups to kick-start their patent portfolios for free—the big tech companies are providing startups with a huge benefit. These companies have spent decades investing in research and development, and developing IP capabilities, which allow them to create high quality patents with real value. These companies are pro-innovation and want to help support the technology leaders of tomorrow by giving them a quick leg up on the IP side.

Having a patent portfolio can increase the value of a startup, and make it more attractive to potential investors by showing that there is real substance to its IP strategy. A patent is also an asset that can be asserted or sold. As proof of the authenticity of this program, it is worth noting there are no strings attached. Startups are not required to give up equity or money to obtain the patents, they are not required to stay in LOT for any minimum period of time, and can sell or abandon the patents anytime.

It can take 12-72 months before a patent application is granted, and between $10,000-$50,000 in legal costs and fees to obtain a patent. Thus, the donation program allows startups to save two of its most precious resources: time and money.

We recognize that startups are likely new to the patent “game.” That is why we wanted to assist companies in selecting which assets are best for them. Legal counsel and advisers are available to help startups select from which patents are the best fits for a startup’s business, and can serve as a resource to answer questions later as each startup builds its IP program.

Self-Preservation

The patent donation program is in part an incentive to get startups to join a community that is about protecting and promoting innovation. Today, the community is immunized against over 1.1 million patent assets in the hands of a patent troll. The herd gets stronger with each new member, regardless of the size of the new member.

More than half of companies sued by trolls make less than $10 million in revenue. We also appreciate that cash is king with startups, and we did not want cost to be a barrier to protecting the next generation of innovators. That is why membership is free for any startup with less than $25 million in revenue. Even if the startup doesn’t have any patents.

We see this as an investment in innovation that benefits everyone equally in the community.  Disruptive startups are the big tech companies of tomorrow. They will eventually have substantial patent portfolios—patents for which our community members want reciprocal immunity from patent troll lawsuits. Thus, the community is providing immunity from troll suits today to startups, in exchange for the startup protecting the membership from troll suits in the future. At the same time, LOT members are free to use their patents in all the traditional ways: sell them, license them and assert them against competitors in and outside the network.

This self-preserving strategy is good for startups too—without any cost to them. By joining our community, startups have a proactive, pre-emptive patent protection strategy that can save them from costly patent troll litigation—to the tune of over $1 million per lawsuit. In addition, they have the opportunity to network and learn from some of the most respected tech companies in the world.

Alexandra Sepulveda, vice president of legal at Udemy Inc., said it best: “The last place you want to be is in front of your board answering questions about why you didn’t put preventative measures in place.”

Ken Seddon joined LOT Network in April 2015, bringing over 20 years of experience managing all areas of intellectual property. Previously, Seddon was with some of the largest patent holders in the world including Apple Inc., Micron Technology Inc., Motorola, Intel Corp. and most recently as the vice president of IP at ARM.

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