EBC22 | Blockchain Patent Risks — How to protect your company from Patent Assertion Entities?

[Music] well thank you as an attorney from the united states it might not surprise you i don't often get any applause let alone enthusiastic applause so [Applause] the effort is greatly appreciated so good afternoon my name is andy block and i am the general counsel of a company called lot network and we are one of the gold sponsors here and i hope you all have a little bit of energy left i'm going to be talking to you about a a problem that's faced by really every member of your blockchain and crypto community lot network um my company i is a an association of more than 2 200 companies from the largest technology most well-known technology and financial services companies in the world to numerous small startup other early stage companies and um lot network our sole mission is to work on behalf of our members to limit risk associated with patent assertion entities um sometimes these patent assertion entities are referred to as patent trolls may be a familiar term to some of you so a little bit of background i spent my entire 30-year legal career helping both large and small technologies limit exposure to intellectual property risk for 15 plus years as the chief intellectual property attorney at time warner cable where i dealt with literally hundreds of these patent assertion entities and in the few minutes that i have with you this afternoon i'm going to give you a brief overview of what the patent assertion entity problem is why you and this audience need to care about it and a simple step that you can take to help limit the future risk of your company so let me jump into it what are these patent assertion entities or patent trolls they are entities that generally have no they don't offer any products or any services their sole business model is to acquire patent rights from companies who develop technology and assert those patents against operating companies companies like sitting in this audience in order to extract money it's often viewed as an exploitation of the patent system again these companies don't produce anything they don't develop technology they go out and buy patents and sue or assert them in order to extract money how big is the problem well it's literally tens of billions of dollars a year that gets spent because of the patent assertion entities this is a chart that shows the number of litigations over the past decade or so literally tens of thousands and it's really just the tip of the iceberg because for every case that ends up as litigation there are many many more that are assertions that settle before they get to that point and what these assertion and assertion entities do is they are leveraging the cost and uncertainty of these litigations you spend on average but it's usually more more than four or five million dollars to defend the patent litigation and you have uncertainty as to the outcome even if you do your best to win and so they come to you they say we have a patent we can sue you there are these costs and risks settle with us for call your number two hundred thousand a million dollars fifty thousand dollars and we will go away so this is not a problem that only affects large companies i in fact 50 of all companies sued by the patent trolls make less than 10 million 10 million dollars a year and it skews even smaller when you talk about just the assertions not the actual lawsuits and the reason is that the smaller companies tend to be softer targets they don't have as deep financial backing they may not have the legal expertise and they are an easy mark for settlement so why does this matter to your community uh this we call it a storm but it it really is a a scourge on the technology and financial sector it has been going on for the better part of a decade where technology is deployed and and funds are invested as in the blockchain and crypto community uh that is where the trolls or the patent assertion entities look to make their mark and i know that there are many companies at this conference who favor open source type applications they would like technology to be open to everybody there are also companies in the audience i'm sure who invest in research and development and look to protect innovation by patents for the trolls it really doesn't make any difference as long as you're an operating company they're going to come after you for money um we've made and i'll talk a little bit more uh about lot network in a minute i just have uh some quotes up here from one of your uh one of your um someone in your community uh that you know well coinbase who is a member of lot network talking about the patent assertion entity problem calling him patent trolls i will make my presentation available to everybody if you contact me after the show so before i can talk about the solution that we offer uh the source of the problem um let me just review quickly on the left-hand side there's a pie chart that shows that almost 90 percent of litigation in the u.s that happens for the high tech and financial services industry are initiated by these patent assertion entities when you see news about patent litigation it's usually you're hearing about apple and samsung fighting it out those competitor suits are really relatively rare and almost 90 percent of the cases that we see today in the high-tech sector are from the patent assertion entities and it begs the question where do these entities get the patents and the sad fact is they come from other operating companies who invest in research and development they get patents they are looking to recoup some of that investment part of that is selling patents part of that ends up being selling to these patent assertion entities the patent assertion entities buy the patents and they assert them against other operating companies in some sense the operating companies are creating their own problem so in 2014 some of our founding companies some of the of the lot network got together and there were six of them and said there has to be something that we can do about creating this problem for ourselves and they said what if we create a community where if you become part of it you can use your patents and by the way you don't need any patents or any revenue minimum revenue to join a lot network but let's create a community that says we'll use our patents however however we want we will license them we'll enforce them we'll provide them to standards organizations but if any of us ever sell to a patent assertion entity everybody else in the community will get a license first so they cannot be a target from the patent assertion entity a little more technical it's a license among all members of our community that applies only on and after transfer of a patent to a patent assertion entity hence lot license on transfer it's a pretty clever idea and the question was uh was it going to be successful this was happening in 2014 and it did take a little while to catch on and on the right it shows over time the growth of lot network and we are now as i said 2200 members and it has been exponential growth in the last few years and the right-hand side is rather hard for you to see but if you go to our website there's a list of all of our 2200 members large and small two-thirds of our members are small um but it's a who's who it's your app your googles and and microsoft's and ibm's and alibaba's and the point is for every one of those companies that's a member of lot network if you join our community you get protection from every patent owned by those companies if they transfer it to a patent assertion entity a little bit uh hitting closer to home for you in financial services our members these are just exemplary include nine of the top ten banks uh all of the major credit card companies uh in the fintech world these are all uh very famous companies that you will be familiar with and even in the blockchain and crypto community we've started to make substantial inroads and we're here at this conference because we want to make ourselves known to you again we are run as a non-profit the costs for many of you if you have revenue less than 25 million dollars it's free to join and there are fairly minor administrative costs if you have substantially more revenue than that if there's one slide that i'd like you to walk away from considering these are a list of the 30 top patent holders in the blockchain community nine of the top nine of the top 10 of them and 20 out of the top 30 of them are member of lot network you get a license to all of their patents if they sell to the trolls more information from coinbase as to why they like it last slide that i'm going to present is ibm is a the largest holder of blockchain patents u.s blockchain patents in the world they are a member of lot network they also actively sell to trolls they have sold more than 2 000 patents since they've been a member to the patent assertion entities every lot member is licensed to them is not a target if you're outside our community you are a target so i'm going to be out back grab my lapel send me an email and we'll be happy to talk to you at any level that you like about our community thank [Applause] you okay too many microphones