A Proposal for a License on Transfer (LOT) Agreement

This paper proposes a standardized, networked, royalty-free License-On-Transfer (LOT) patent license agreement. Under the terms of the LOT license, every LOT User agrees that when it transfers a patent, the transferred patent automatically becomes licensed to the other LOT Users existing at the time of the transfer, except (i) transfers that are part of a legitimate spin out or of a Change of Control to a Non-Assertion Entity or (ii) transfers to another LOT User. This structure protects LOT Users from being subject to the extraction of patent rents by the entity (e.g., a patent assertion entity) to which the patent is transferred. The licenses are subject to “defensive termination,” e.g., in the event that a LOT User brings an offensive patent suit against a non-assertion entity to which a patent subject to the LOT has been transferred then, at any time after the institution of the offensive patent suit, the non-assertion entity can terminate the license for the subject patent granted to the LOT licensee bringing the offensive action.