Webinar - Avoiding Risk and Fostering Innovation with Blockchain Patent Communities

Hello and welcome to our webinar on avoiding risk and fostering innovation with blockchain patent communities. I'm Perianne Boring, the founder and president of the Chamber of Digital Commerce, a trade association dedicated to promoting the acceptance and use of digital assets and blockchain-based technologies. We believe that blockchain technology is driving the transition to the new digital economy and will prove to be as impactful as the internet itself. When we talk about intellectual property and blockchain technology, it is essential that we honor Satoshi Nakamoto's example and we protect the open-source ethos of the community. It was just over 4 years ago when I first met Mark Kauffman, who brought to our attention the need for collaboration across the industry to address the growing patent landscape. This need has only grown as more and more organizations are seeking patents on their proprietary blockchain innovations. Of course, there's others that are choosing to innovate openly. Whatever the path, we encourage innovators to educate themselves on the rights that are available when it comes to IP, the risk of infringement of patents, and how to navigate the patent landscape broadly. There is a fine balance between protecting intellectual property and the transparency required for innovation. Patent communities have historically provided a good balance between proprietary rights and freedom to operate in many technology spaces. These communities and others are available to blockchain innovators, and they should be explored in order to minimize infringement risk and foster innovation in blockchain technology. And here to lead us in this discussion is Mark Kauffman of Ramone Law.

Thank you, Maryann. Before I bring on the panel, I'm going to provide you with a very brief, high-level overview of the patent landscape related to blockchain technology. Briefly, there are over 32,000 patent families worldwide directed, directed solely or primarily to blockchain technology. This does not include general cryptography and networking. This is directed to blockchain technology. Uh, we have even seen some litigation lately with respect to these, and we're going to talk a little bit about that later on. If we look at filings by publication year, we see a steady increase since 2011. In fact, a sort of exponential increase in patent publications worldwide related to blockchain technology. Note of course that the 2021 number is not yet complete, but if extrapolated, looks over the year, looks like we will continue to see the same kind of growth. This is something that's changed a lot recently when we look at patents, patent families that have granted patents, we now see that well over 20% of these 32,000 patent families actually have at least one granted patent. And that's something that, that has risen very tremendously very recently. And because of the recent nature of the technology and the filings, we're going to see the number of granted patents continue to increase at a very fast pace. When we look at the primary patent filers, I think what is most interesting and most apparent is that we have a very diverse set of players here. And this graph shows patent families filed worldwide by the various patent owners who are listed on the left. First, we'll notice the diversity. We have legacy technology companies like Microsoft. We have large financial service companies like Bank of America. We have retailers, Walmart and Amazon, and we have some emerging fintech type companies. Another thing to note is you'll see a lot of Chinese companies, Chinese-based companies on this list. The filings, patent filings related to blockchain technology coming out of China and from Chinese companies has grown tremendously in the last couple of years to where more filings are originating in China than anywhere else in the world. And this chart shows you that in addition to many filings coming out of China indicated by the, the very dark blue, You see that there are filings coming from all the major markets and in the major markets, the US, Canada, Germany, UK, throughout Europe and Australia, and even some in South America and the African continent. So it's apparent that There are many, potentially many, many blockchain patents, tens of thousands coming that have to be dealt with. And the, the focus of this panel will be to discuss how do we manage, what is the risk presented by those patents, and how do we manage that risk? It's now my pleasure to briefly introduce you to each of our panelists one by one. And let them tell you a little bit about their own experience and their thoughts regarding blockchain space. So Ken, you're up first.

Okay.

Allow me to introduce Ken Seton. Ken's the CEO of LOT Network, a group that I've done quite a bit of work with, and I think presents a very, very interesting pad community. So Ken, please tell us a little bit about you and LOT Network.

Thanks, Mark. It's a pleasure to be here with so many experts from the blockchain community. I'm the CEO of Lott Network. I originally came from the high-tech community working at companies like Motorola, Intel, Apple, etc., companies with large patent portfolios, and worked in the high-tech industry. What Lott Network is about is protecting companies from the issue of Patent assertion entities, commonly referred to as patent trolls. Patent trolls are these entities that go around buying patents from companies and then asserting those patents against operating companies. PEs typically assert about 2,000 patents a year in new litigations in the United States, and they represent about 90% of all patent litigation that happens against high-tech companies in the US every year. So if you're a high-tech company, which of course blockchain companies typically are, it's typically your number one primary source of risk of patent litigation. The irony of this problem is, and this is really what led to the genesis and formation of Lott Network, is that most of the patents, about 80% of the patents that patent assertion entities use in their litigation campaigns originated from an operating company. So the real source of the problem is companies sell their patents to PAs, they go off and sue other companies, make money, and go off and buy more patents and repeat this cycle. And so Lott Network was formed as a way of solving or taking responsibility for this problem. Lott was formed in 2014 with 11 companies and since then has grown from those 11 members to now over 1,300 members. As you can see very quickly, it's some of the largest patent holders across all industries who have made a very simple commitment. All members sign the exact same document that very simply says, if any of my patents ever fall into the hands of a PAE or patent troll, I agree to give the other members of my community a license to that patent. So we are effectively creating herd immunization. We are protecting the community or the herd against any of the patents that ever leave the community and fall into the hands of a PAE. And very quickly, here's kind of a quick overview of the patents— and I'm sorry, the types of companies that are already part of our community. Naturally, we have a lot of those big software companies who are often targets of lawsuits from PAEs. All the big names like Microsoft, Google, Facebook, IBM, who's the number one issuer of patents year after year in the United States. The banks who are migrating from brick-and-mortar companies to now integrating more technology with cloud security, etc. We now have 9 of the largest banks in the United States. The retail industry, as they're adopting more and more technology as they deal with the pandemic and COVID. Folks like Coca-Cola, Pepsi, Instacart have joined in the last year. The automobile industry, as they become more high-tech, we now have all 7 of the world's largest carmakers are part of LOT. The entertainment industry, obviously, as they're directly interacting with consumers, folks like Netflix, Amazon, Disney, a lot of the cable companies, TikTok, etc. We are a global organization. We have members in 37 different countries. China, of course, as Mark was mentioning earlier, is a huge filer of blockchain patents. A lot of big names like Alibaba, Tencent, JD.com are members of our community as well. But we're not just a community of big companies, large patent holders. We're very proud to say that about two-thirds of our members are startups. These are companies who are making the exact same commitment and enjoying the exact same benefits of being immunized against all of these patents. A lot of them are very prestigious, well-known blockchain companies who are enjoying this immunization as well. As Mark was saying, we, um, with the addition of IBM, we now have 12 of the world's largest holders of blockchain patents. So we are very proud to say that we have a very strong commitment from the blockchain community to protect themselves from this issue. So what LOT is, very simply, we are a nonprofit organization where this group of companies who have made this commitment to protect themselves and really to protect innovation. We believe we don't want to waste our money dealing with patent assertion entities. So before our patents fall into the hands of PEs. These companies have just all agreed to make this commitment. But while you're a member of our community, all the normal uses of patents are fair play. As a member of our community of LOTT, you're free to license each other, assert your patents against each other, participate in patent pools like Bill will talk about. You're free to even sell your patents to other companies inside or outside of the community. All we're simply saying is if any of our patents in the community either directly or indirectly fall into the hands of a patent assertion entity or patent troll, then and only then do those that are part of our community and have made this commitment, do they enjoy the benefit of this free license. So it's truly herd immunization. So just a quick example, lots a day with our 1,300+ members. Collectively, we have over 3 million patent assets worldwide. If any one of our members, either directly or indirectly, transfers one of their patents to an assertion entity, all the other members of our community are going to get this free license and are never going to be harmed or harassed by that asset. But at the same time, as a member, as a member of community, you can sell your patent to another company. You can do a joint venture. You can have an IPO, that patent can travel through 1,000 M&A transactions, and everyone's still getting full value for that asset. But if 5, 10, 15 years from now it's transferred to a troll, then everybody who was part of the community is going to get a free license to that asset. And lastly, before passing on back to Mark, as I mentioned, we are a nonprofit organization. All of our large big companies pay the exact same fee, which is $20,000 a year to be part of our community. But because we've got so many of these large companies that have joined, we are able to now provide this immunization benefit to companies with less than $25 million to be part of our community for free. Everyone signs the exact same agreement. Everyone's treated as an equal. But effectively, the large companies now are able to subsidize the cost for this PAE, or patent troll immunization, for the smaller companies. Thanks, Mark.

Great, thank you, Ken. Next up is, is Bill Gary, and Bill is the Vice President of Business Development at MPEG-LA. MPEG-LA is a patent pool management company. Who has been very successful in implementing patent pools in various technology spaces. And Bill, frankly, I'm hoping that we'll see one with respect to blockchain technology sometime in the future. So Bill, the floor is yours.

Thank you, Mark, and thanks so much for having me here to discuss patent pools and blockchain. Well, we certainly hope that in the future there will be one or one or more patent pools for blockchain. So the question comes up, you know, what is, what is a patent pool? And the modern patent pool was an innovation of MPEG-LA back in the days of the introduction of the MPEG-2 video standards. A number of the companies who created that standard were concerned about licensing and they were concerned about how to market and price their products without any sort of knowledge of what the patent licensing fees might be. So they got together and created a patent pool. And there's a link at the bottom of this slide to a Department of Justice Business Review letter in 1997 that, that really lays out the structure of our patent pools. And so many of you are familiar with typical patent licensing where there is a company that has patents and they license it to multiple potential licensees. And, and licensees certainly are familiar with obtaining rights to patents for particular products or even services that they sell. What a patent pool does is it aggregates these patents in a pool and licensees take a license to a package of these patents. And the pools have been defined by standard specifications. So a number of these pools are in the video area. And an important part of a pool is how do you define the scope of that pool? Which patents go into the pool and which patents are outside of the pool? And since 1997, we've introduced a number of patent pools, over 24,000 patents. Across all countries of the world, many different licensors and licensees. And I'll give a quick summary of the patent pools that MPEG-LA has just to give you a flavor of the size of these pools, what technologies they cover, and the types of licensors who put money or put their patents into these pools. And so the next couple of slides show different patent pools when they were formed and at the time they were formed, how many licensors, how many patent owners were in those pools and how many patents, and then how those pools grew over time. And what's important here is that a licensee who takes a license through the pool gets the benefit of additional patents that come into the pool without paying additional royalties. Now, these pools are— do collect royalties. When the pools are created, the licensors, the patent owners, agree on what should be the royalty terms and then how those royalties are divided among them. When they're collected. And if these pools are created, MPEG-LA goes out and does the licensing. Everyone pays the same royalty, so it creates the opportunity for a level playing field. It's a nondiscriminatory license. There's no negotiating on the rates. MPEG-LA is given a non-exclusive license to license these patents only at the terms that the licensors have determined. Moving on to slide 6, you can see the types of companies who have put their patents into various MPEG-LA patent pools. It covers 2 slides here, slides 6 and 7. So that's the basic outline of patent pools, how they work. In, in the blockchain space, I'd expect to see see these applied in various areas that we can discuss later during this discussion.

Mark? Great. Thank you, Bill. Much appreciated. Jed, I'm going to call on you next. Jed Grant is a person that I, I often find I'm at a loss as to how to introduce Jed because Jed wears a lot of hats. Jed is a, what I'll call, a serial and parallel entrepreneur and also recently has founded the Open Crypto Alliance, which is another patent community related to blockchain. And Jed is here to tell us a little bit about this. So Jed, you're on.

Thank you, Mark. It's a pleasure to be here today. I am a regtech and fintech leader. I'm a technologist at heart. I've been in technology all my career, mostly focused on security, cryptography, and these types of technology decentralization. I was named one of the top 200 fintech leaders in Europe by Lattice80 in 2018. I was named a top EU blockchain expert by Blockpool in 2019. I founded a company called KYC3 that I'm CEO of that does automation for compliance in the KYC/AML space, a lot of big data and AI used there. And I also work with blockchain technology in both crypto and traditional use cases through a project called Peer Mountain, where I'm also the founder. Peer Mountain is a member of the LOT Network, by the way, and has filed a defensive patent on a peer chain technology, which is a layered 2 blockchain cross-chain protocol. I'm based in Europe and Open Crypto Alliance is another nonprofit that I founded. I think it's my 4th or 5th. I'm a founding member of the Luxembourg Blockchain and DLT Association, founding member of Infrachain, a nonprofit, and several other older efforts. The Open Crypto Alliance is aimed at preventing abusive patents from being granted in the first place or invalidating them as quickly as possible. And this comes out of where blockchain comes from. If you look at Bitcoin, the original Bitcoin white paper, this was all released to the public under MIT licenses, we all know, through an anonymous team or individual who built this technology. Yet we do see a lot of patent activity building on this. But in many cases, we suspect and can see pretty clearly that a lot of these patents are actually based on prior art and that, that hasn't been claimed by any individual. So our mission is really to complement the work of LOT and the work of organizations like COPA and other patent pools in order to protect innovation in the space by keeping the technology technology that should be open and free in that domain. And as a matter of fact, just this morning was announced on another podcast that we are partnered with Square Crypto and COPA, and we'll be working closely together because we share the same goals in keeping blockchain technology open and free.

Great, thank you, Jed. Last but certainly not least is my, my colleague Matthew Poppe. Matthew, in brief, is a seasoned patent litigator and will be able to provide us a bit of a litigator's perspective with respect to blockchain technology. So Matt, you're on.

Thanks, Mark. You of course know me well because you and I work at the same law firm, Ramone PC. We are a national and international firm with about 120 lawyers based around the country and almost every continent in the world. We're a full-service practice covering a wide range of corporate M&A, cross-border tax litigation, about everything you can think of. Mark is on the patent prosecution side within IP, and I am part of our large and growing IP litigation practice. Like many of our litigators and other attorneys, I come from what we call a big law background. I spent 20+ years at Orrick, Harrington Sutcliffe in its Silicon Valley office before moving to Ramon a few years ago. And we have a general philosophy in our IP group of settling litigation where we can, but where necessary, we're prepared and well experienced taking cases to trial, whether in district courts around the country or the International Trade Commission. I'm going to be relatively brief in my introductory remarks because I can't claim direct experience in blockchain patent litigation yet because, as I'll talk a bit more about a little later, There's been virtually no blockchain patent litigation in the US yet, but I think we can expect that there are going to be a lot of commonalities between future blockchain patent litigation and other computer technologies with which we have a lot of experience, from software to internet-based technologies, computer networking, storage, etc. And so We're following the blockchain developments closely, and like I said, I'll talk a little bit later about what little we have seen on the US scene related to blockchain patent litigation. And with that, I'll pass it back to you, Mark. Thanks.

Great, thank you, Matt. So now we're going to— now that we've heard a little bit about everybody and you know what they do. We're going to start our panel discussion. And Matt, I'm going to come right back to you. You know, you just mentioned that there hasn't been much blockchain, much patent litigation related to blockchain technology yet, and I assume that's because of the relatively few granted patents at this point and the relatively new markets and, you know, and the, again, relatively low volume of dollars sort of flowing through infringement at this point. But have there been any blockchain patents asserted through litigation yet? And you know, what do you think we can expect going forward as all this changes?

So first of all, I think you're right that there are a number of factors that explain why we haven't seen a lot of patent litigation yet related to blockchain technologies, and a big factor there is the fact that we're really only just starting to see the patents be issued themselves, and there's always a lag between when patents start to issue and when litigation related to those patents actually starts to occur. Once the patent is issued, of course, the patent holder has to detect infringement. There has to be infringement. The patent owner has to be motivated to pursue and try to stop that infringement. Management. And all, all of these things take a while. We heard Ken talk a little bit earlier about how a lot of patent litigation in the US is brought by patent assertion entities, and although some PAEs are formed by the inventors and they can, if they're again motivated to do so, can try to start asserting those patents right from the time that they're issued. Most PAE litigation that we see arises from assignments of patents, often from big companies to the patent assertion entities, and that's something that can take a while. The larger companies may want to hold on to them for a while. You may not really see a lot of patents in a particular industry make their way into the patent assertion entity hands for quite a while. And with any luck, with efforts like Ken talked about, LOT undertaking, maybe that will nip some of this in the bud. But people have been trying to stop patent litigation for a long time, and it always seems to have a way of rearing its head. So I think we should all expect that within a couple years we're going to start seeing litigation bubble up. We have seen at least one litigation related to a really core blockchain technology or something that has blockchain at its heart be filed so far in the US. I have a couple slides on that that I will pull up at this point. About one year ago, almost exactly a year ago, a lawsuit was filed in federal district court in Manhattan by a man named Max Rady, or Roddy, against Boston Consulting Group and De Beers Group. Roddy is the inventor on a patent, US Patent Number 10469250, and this is one of the reasons why most likely this is one of the first patent litigations that we've seen related to blockchain technology. It's been brought by the inventor. It hasn't needed time to kind of make its way to, let's say, for example, a patent assertion entity. And the technology, it's not about the functioning of blockchain, but it's about a particular application of blockchain. In this case to gemstones. So the 250 patent, as I'll refer to it, issued about a year and a half ago and very quickly became the focus of this lawsuit by Mr. Roddy. And one of the relatively unique factors about this case compared to most patent litigation is He actually used to work for one of the named defendants, Boston Consulting Group, and he actually alleges not only that his patent has been infringed, but that BCG misappropriated his trade secrets related to this blockchain technology. And again, this is probably one of the things that led to this case being filed a lot earlier than other blockchain patent litigation that were like, likely to see. This is somebody who has a very personal stake, or at least claims to have a very personal stake in the alleged taking of intellectual property, and presumably because it's his own former employer that he alleges did so, something that he was able to become quickly aware of and act upon. The, the nature of the invention in a little more detail. Is, uh, both a device such as a computer network node or server, as well as a method of authenticating gemstones using blockchain technology. So what the patent talks about is using an imaging device to scan any physical item, but focused on gemstones, use computer software to process those images and identify unique physical characteristics of that item and then use that information to generate a unique identifier for the item that can be used in the blockchain context. Once the identifier has been determined, the software checks prior blockchain records to see whether there have been prior records related to this particular physical item, and it can then go ahead and record a new blockchain record for the instance of the item. But we're going to keep watching this case and again, most likely many others to come in the coming couple of years.

Thanks, Matt. I do want to give everybody else a chance to chime in, but I want to back up a bit here. We've been telling everybody, oh, you have to manage and avoid patent litigation. Litigation is a part of doing business, particularly in the US. We all know that, but in a few words, why should investors and innovators be particularly concerned about patent litigation?

So, of course, patent litigation bears a lot of common features to other types of litigation that all companies want to avoid if they can. It's expensive, although you see a pretty wide range of costs depending on the nature of the patent, the forum, the firm that's handling it. Kind of a rule of thumb is you can expect that if you're— if the case is going from filing all the way to trial, you could be looking at $1 million or more in litigation costs over anywhere from 1.5 to 3 years. It's a big distraction because you have people in the company having to take time away from trying to grow the business to focus on litigation strategy, collecting documents, preparing for and attending depositions, potentially attending trial at some point. And again, this, this is a process that can be going on for several years. Of course, there's potential liability down the road. Patent litigation, we're seeing increasingly large damages awards every year. Just a couple weeks ago, there was a $2.5 billion patent infringement award against Intel Corporation out of the Western District of Texas. And although it's not uncommon to see the really massive damages awards get whittled down on appeal, that's still something that a company doesn't really want to have hanging over its head. Also, depending on the context, patent litigation can be a basis to stop a company's infringing activities, either through a preliminary injunction early on in a case or a permanent injunction at the end if there's a finding of infringement. It's relatively rare in patent litigation to see injunctive relief, but particularly if there's a competitor relationship between the plaintiff and the defendant. That's a possibility. And as a result of all of these things, particularly for relatively young new companies, patent litigation can actively interfere with their relationships, whether it's attracting invest— investors, an acquisition type transaction. Even customers and business partners can sometimes be scared away if you have a patent litigation going on and your competitor doesn't, does not. They're going to be using that information against you to try to make your potential customers and business partners scared that you're not going to be around, or your prices are going to go up because you're going to have to pay licensing fees, etc., etc. So it's really a threat to businesses, again, particularly new businesses, in a variety of ways.

Yeah, thanks. Expensive, time-consuming, and disruptive. Yeah, so, so, Ken, we're talking about patent litigation generally, you know, and of course, Lot Network relates to the patent assertion or patent assertion entity or patent troll issue. You know, are there any indications that patent assertion entities in particular are going to be a problem with respect to blockchain technology?

Sure, let me just pull up my slide here for a second to answer the question. Yeah, I couldn't— so can you see the slide OK?

We can.

Great. Yeah, and maybe so to answer that question, maybe I'm showing my age, but I couldn't help but feel a lot of déjà vu as I was listening to Matt speak earlier. I couldn't help but think back to when cloud computing patents were first coming on the scene. People were debating 20 years ago, could you get patents on cloud computing? Computing or distributed networks or virtual computers. And I remember people debating whether, you know, is that a patentable subject matter? Well, clearly we're past that point and now we're seeing plenty of patent litigation on cloud computing. And I kind of see history repeating itself all over again. I think people have this false sense of security that somehow blockchain patents are going to be somehow different because it's a new technology, but I think it's going to be exactly the the same. It is patentable. We're already seeing, Mark, as you showed us, plenty of patents being filed on that, and, and that's the purpose of the patent system, is to encourage innovation, and patents will, will issue. And sadly, I think history is going to repeat itself. We do have some data that just kind of shows what is to be expected of PAE activity. This is data that came from the Oliver Richardson law firm. These are a law firm that works with Locke quite a bit. This is just showing what happens in a down market. Unfortunately, as we know, last 2020, a lot of companies were struggling, and that's really what we're worried about happening over the next couple of years. If you go back in time, 2008 was really the last economic downturn or recession. In the years that followed 2008, there was a huge uptick in PAE litigation, and that's really what's got me worried about what's going to happen with this global pandemic. We know there's going to be some sort of economic recession. I have no idea how bad or how deep or how long it's going to last, but we're already starting to see the signs that it's going to lead to a strong PAE uptick. Last year, while companies were tightening their belts, some were already putting their patents on the open market. These are on the open broker market. If you look at who was buying patents in 2020, last year alone, of the assets and packages that were bought, PAEs alone were responsible for 70% of the assets were being bought last year. That really shouldn't be a surprise. Last year, most operating companies were just struggling with the realities of the pandemic. They were cutting their budgets, trying to deal with just operational issues. There's an oversupply of patents on the open market. There still is. Anybody can buy patents cheap right now, but the reality is most operating companies don't have the, the budget or the appetite to be buying patents. There's a flood of investment capital right now who are looking to buy patents cheap, take advantage of buying up assets, and they're not buying these patents just to hang them on the wall. They're seeing an opportunity to get patents in bulk at low pricing, and we expect the patent litigators are going to be very busy and they're going to be asserting these assets expecting an ROI. And don't take my word for it, this is, you know, straight from the CEO of Dominion Harbor, PEs, the large PEs backed by large sums of investment capital are definitely seeing in downturns in the economy as companies put their assets out on the market, there are depressed prices for patents and unfortunately downturns in the market are when PEs are able to buy patents on the cheap. So I think a couple of years of patent acquisition, give them some time to put their claim charts, and then that's, you know, will lead into a couple of years of litigation uptick.

Yeah, thanks. Yeah, it seems like previous history is repeating itself as we go through these cycles. We've seen it before. Jed, so as I mentioned earlier, you wear many hats. You're an entrepreneur, You're an inventor, you're a patent owner, you're an investor, all in the blockchain technology space. So you're really on the ground, so to speak. I want to ask you, are you concerned about patent assertions stifling innovations? I think I know the answer. And how have you balanced protection of your business model with encouraging a network effect in blockchain ecosystems?

Yeah, I am very concerned, and I am convinced that the patent activity that I'm seeing does stifle innovation and it hinders innovation in a big way. I started thinking about this subject actually in, in 2015 and 2016, and Matt, that case on the, the diamonds, actually I was talking with people about Kimberly Process on chain in 2015, so there's probably prior art for that patent. To me, he's not the guy who thought of that idea.

At first.

But, but I was thinking this is the way it's going. And then we saw in 2017 the ICO boom, and all of a sudden you had all these startups working in a space with millions and millions of dollars of capital in their, in their accounts in crypto, and they were just ready to be attacked. And I actually thought we were going to see the patent assertions there, but not enough patents have been granted, and that's why we didn't see it in 2018. And now we're at the point where these, you know, 20,000+ patents are getting through the system and they're going to come out. And this is why I founded OCA late last year, because this is— the time is now. We need to fight these patents while they're being granted and while they're— as soon as they're published, we need to identify the prior art. We need to invalidate them before they're granted. That'll cost a hell of a lot less than dealing with the litigation of the first assertion, not to mention the subsequent ones if they are granted and fall into the wrong hands. In terms of protecting assets and, you know, protecting my business, I did file a defensive patent and I joined LOT Network and take these steps which are rational and one can do, but also setting up OCA is It's a benevolent organization, a nonprofit, and we certainly need donors and sponsors and lawyers and engineers to join us at opencryptoalliance.org. But it's also self-serving in that I want to protect the community that I'm part of. I want to protect the technology that I'm building on. And this is very, very important to do for all of us in this community, particularly because The real blockchain, the Bitcoin white paper, the technology behind Bitcoin— there is no organization behind that. There is no company that is going to look after this technology. It's a community effort. And that's, that's all we've got. So that's what OCA is there to do, actually, is to stop abusive patents. And then at the same time, if you take that logic a step further, I think it is our obligation as entrepreneurs from, from my standpoint, to lobby for patent reform. Software patents are dubious in my opinion. I can understand patents on physical product and processes, machines, but software itself is, is a very dubious thing to patent. And particularly when you get into decentralized systems, which is what public permissionless blockchains are. That's like trying to patent air ultimately, and it's just not going to work. So it's somewhere where we've got to look at some basic reforms like a use-it-or-lose-it type reform so that only operating companies can assert. Of course, non-practicing entities could broker patents, but they shouldn't be going around asserting them against operating companies. And that is a direct, you know, attack on innovation because you may only have one operating company that's trying to bring a great innovation to market and they get shut down because of you know, a PAE attacking them.

Yeah, thanks. And I will say I look forward to having the debate with you about the patent eligibility of software in another forum, because that's a very interesting topic of which we disagree. But, but so, so I mean, but your comments underscore the need for community. Which is what this is all about. And I think that, that, you know, in leveraging the, the community or the, the what I'll call the network effect in this case of, of patent communities to address the issue. Bill, Bill, you've been quiet so far and I have always felt that patent pools were sort of the perfect balance between the rights of innovators and patent owners to be compensated for their efforts. And freedom to operate, and it's worked very well in many different technology spaces. Why don't we at this time have a patent pool related to blockchain technology?

Thanks, Mark. That's a, that's a good question, and I think your comment about balance applies to patent pools. I think the reason we have not yet seen seen a patent pool for blockchain is I think it's a little bit early. We, but I think the time is coming. The, we create patent pools when we see a business problem to be solved. It really doesn't do anyone any good to create a pool to license something for which there is not a, say, a patent thicket, a lot of patents owned by a number of companies. Or when there's not a licensee market of companies who may desire a license for that technology. I think what you see, you see LOT Network addressing a business problem, which is a transfer of assets to PAs. And I think where the patent pool operates is where you have operating companies before they've transferred these assets to a PAE, which they may or may not do. But many of the patent owners in our pools are operating companies, and they may be looking for a return on their assets. And one way to get that return is to sell those assets to a patent assertion entity. And another way is for them to go out and license those patents themselves. And yet another way is to put those patents into a pool. And as I mentioned, a pool has to have some definition of the boundaries of the pool. And I think in blockchain, one way to organize those boundaries is around a particular blockchain platform, which can be done. Another way is to organize the pool around a particular business. One might be in the area of financial transactions. Another could be in healthcare. When you think about healthcare, you think of the many inefficiencies that we see in the healthcare systems in the US, that with blockchain you could have protected chains of medical records, of insurance companies operating with hospitals and doctors and patients who are their customers, all of whom are their customers. And you see an opportunity for creating a lot of efficiency. And so one area in which a pool could be created is in the healthcare space. But it remains to be seen which, which area or which definition in the blockchain area would be most useful. And in terms of balance, many of these patent owners, these operating companies, are also potential licensees. So when they determine the royalties that they would like to see for within this space, they'll have to pay those royalties themselves. And that creates the balance. It creates the balance that you don't see in these one-way transactions where you have a patent owner asking someone else to pay this amount and then there's a negotiation or perhaps a litigation. So I think the answer to why we haven't seen a patent pool in this space yet is a little bit early. As Matt mentioned, litigation is just beginning, but I think this is a prime area area for patent pools where, where they very well could provide benefits here. And I should also say that once a patent is in the pool, the licensor has joined the pool. Even if a licensor decides to leave the pool, the licenses under their patents remain in effect for any licensee who's obtained a license. So even if that operating company should sell those patents someone else, the license will remain for the licensees who were already in the pool, even if that patent happens to be transferred to a patent assertion entity. And that's all I have for now.

Thank you, Bill. Thank you all. I think it's been very informative. That's— we're kind of running out of time for the panel discussion. I want to leave some time to take some questions. So now we'll move right into the Q&A. Thanks again, gentlemen. Okay, we are back live, and I've got some, uh, questions that have come through a few different channels. So let me, uh, uh, pull some of these together. Here's one that is a little off topic, but Jed, I think, I think might be of interest to you. Certainly anybody else can chime in on this. The question is, can any of you comment on Craig Wright's copyright claims and the Cryptocurrency Open Patent Alliance challenges.

Sure, yeah, that's an interesting story. It's not— it's copyright, it's not patent, so it's a different thing. But yeah, Craig Wright claims a copyright on the Bitcoin white paper, which, you know, in the US, copyright is— apparently you can just file it, and if there's no objection, it will go through. I have heard that someone else subsequently filed a copyright on the same white paper, and it was also granted. So now there's some mud in the water as well. And by the COPPA challenges, I'm not quite sure what is meant by that question from Robert. But if that means the defense that they're mounting, because they were one of the organizations that received the notice letters from Craig Wright. Yeah, I think you can see COPPA's response. They tweeted it. It's a very, very well-written letter, and basically their position stands that if Craig Wright is indeed the author of that paper, he needs to be able to prove that he is Satoshi Nakamoto in order to confirm that authorship. And they say that in a number of paragraphs that are very well written. You can find it on their Twitter account. And with respect to COPPA and Open Crypto Alliance, We are in contact with each other, we work together, and I'm quite aware of some other aspects of that case that I don't feel comfortable discussing in a public forum. Suffice it to say, I'm fairly confident that COPPA will smack this one down and win in the end.

Yeah, just to get us all on the same page, Craig Wright is a person who claims to be Satoshi Nakamoto. The inventor, if you will, of Bitcoin, and is also very litigious, and many people in the community doubt his claim, to say the least, to be Satoshi. Okay, here, Ken, here's a softball for you. What if I— I know you like these— what if I don't own patents, and I don't intend to own patents, Can I join LOT?

Sure. Well, we welcome you anyway. LOT was established purely to be a defensive mechanism. So I would say about 20% of our membership don't even own patents. We are simply a defensive mechanism immunization, I guess you would call us the patent troll flu shot, if you will. So you do not, you don't have to own a patent. To be a member. You don't have to plan on filing patents. But if you, you know, if you happen to do, if you want to file patents, they would be under the obligation, but it's certainly not required to be a member.

Excellent. Thanks. Okay, Jed. I will admit to this question originating from me. You mentioned that you don't believe software should be patentable. So why did you seek a patent and why did you join LOT?

We live in a real world. So, you know, the debate that you and I could have about the patentability of software, for me, it's a question of the framework, the legal framework. And obviously within the framework that we operate today, the rule of law that we have today, software is patentable. And accepting that reality, obviously you have to to look at what is in the best interest of your shareholders and your business. And that's exactly why I adopted a defensive strategy that includes joining LOT. It includes patenting technology in order to have that defensive capability. So it's part of a broader strategy.

Excellent. Yeah, Jed, as usual, you are both visionary and pragmatic.

One has to be.

Oh, here's a good question. So I'll try to paraphrase it here. It— well, I will give my comment. Bill, my understanding is that it is sort of like herding cats to get a bunch of competitors to put patents in a pool and agree upon royalty, and that's something you guys do so well. But the question is, how are royalties determined? Is it, for example, by number of patents that are in the pool? Or I'm sorry, how is the share of the royalties, which and how it's divided up with each patent owner determined? Is it by number of patents, number of claims, somehow quality of patent, all of the above?

Mark, that's a good question. Creating a pool is a bit like herding cats. And, um, and so the royalties, what is charged for a license, is something that all the patent holders, uh, together determine. And we lead those discussions and, uh, and help forge, uh, compromises among the different patent owners. Now, your question is about how are the royalties shared among the patent holders and the patents. And that's, that's really separate. It's helpful to look at a pool as having, you know, two faces. One face that faces toward the licensees, and that's the royalties that they pay in those terms. And the other one is how are those royalties split up among the patent holders. And it's a little bit different in each pool, but the formula generally is based on numbers of patents and the countries in which those patents have issued, so that patents that have issued in countries with a lot of economic activity in terms of that particular technology will generally receive more money than patents in countries where there's not much economic activity related to that technology. And so the more patents you have, the greater share you have and the more patents you have in countries where there's a lot of activity, which nowadays probably means China, countries in the European Union, US, and elsewhere.

Sounds complicated, but I guess that's your job. So we're glad we have you. Yeah.

But one other thing that we do too is we often have some equal sharing so that say 10% of the royalties are shared equally, an equal share for each company in the pool. What that does is help encourage smaller companies who may just have one patent or so to join in the pool and share in the revenues. There's an incentive because you want to get as many patents in the pool as possible.

That makes sense. So I see we are out of time. I want to again thank all of my panelists. You guys were awesome, and thank everybody for attending. And on behalf of the panelists, I will say feel free to reach out to any of us if you have any questions about these issues or want to learn more about patent communities. Again, thank you for attending and have a nice rest of your day.