{"id":2171,"date":"2015-09-08T09:20:02","date_gmt":"2015-09-08T13:20:02","guid":{"rendered":"http:\/\/cpip.gmu.edu\/?p=2171"},"modified":"2026-02-03T21:16:55","modified_gmt":"2026-02-03T21:16:55","slug":"googles-patent-starter-program-what-it-really-means-for-startups","status":"publish","type":"post","link":"https:\/\/blogs.uakron.edu\/ualawip\/2015\/09\/08\/googles-patent-starter-program-what-it-really-means-for-startups\/","title":{"rendered":"[Archived Post] Google\u2019s Patent Starter Program: What it Really Means for Startups"},"content":{"rendered":"

The following guest post comes from <\/em>Brad Sheafe<\/em><\/a>, Chief Intellectual Property Officer at <\/em>Dominion Harbor Group, LLC<\/em><\/a>.<\/em><\/p>\n

By Brad Sheafe<\/em><\/p>\n

Recalling its rags-to-riches story of two guys with nothing but a great idea, a garage, and a hope of making the world a better place, Google recently announced<\/a> its new Patent Starter Program. As part of its commitment to the culture from which it came, Google claims that it simply wants to help startups navigate the patent landscape by assigning them certain patents while it receives a license back. It describes the situation as follows:<\/p>\n

The world of patents can be very confusing, cumbersome and often distracting for startups. All too often these days, the first time a startup has to deal with a patent issue is when a patent troll attacks them. Or when a prospective investor may ask them how they are protecting their ideas (\u201cYou don\u2019t have any patents???\u201d). These problems are the impetus behind the Patent Starter Program[.]<\/p><\/blockquote>\n

There are of course many tendentious assertions here \u2013 from the well-established definitional problems<\/a> with the use of the pejorative term \u201cpatent troll,\u201d which is often used to attack startups, to the untrue statement that patents are \u201cdistracting\u201d for startups (which is false<\/a>, as any person who watches Shark Tank knows). But we will not go over this well-tread territory here. For our purposes, this statement is notable because it is couched entirely in terms of a desire to help other tech startups. But when one looks at the specific details of the Patent Starter Program (PSP), it\u2019s quite clear that it is designed to benefit Google as well \u2013 perhaps even most of all.<\/p>\n

On its face, the PSP is advertised<\/a> as an opportunity for the first 50 eligible participants (\u201cstartups or developers having 2014 Revenues between US $500,000 and US $20,000,000\u201d) to select 2 families from Google\u2019s patent portfolio out of an offering of between 3-5 families of Google\u2019s choosing. These families are intended to be broadly relevant to the participant\u2019s business, but Google makes no guarantee that they will be, and there is no \u201cre-do\u201d if the participant doesn\u2019t like what Google offers the first time.<\/p>\n

In exchange for access to these patents, many are not paying attention to the fine print that creates some significant contractual restrictions on anyone who uses the PSP. First and foremost, the patents cannot be used to initiate a lawsuit for infringement. They can be used only \u201cdefensively,\u201d that is, if the participant is sued for infringement first. In fact, if a participant does choose to assert the supposedly-owned patent rights outside of Google\u2019s terms, the Patent Purchase Agreement<\/a> punishes the startup by requiring \u201cadditional payments\u201d to be made to Google.<\/p>\n

The boilerplate text of the Agreement states that this additional payment will be $1 million or more! Although specific payments may end up varying from this based on the negotiating tactics of the startups who make use of the PSP, the punitive nature of this payment is clear. For an undercapitalized startup that is just starting out in the marketplace and perhaps still living on the life support provided by venture capitalists, a $1+ million payment is a monumental charge to write down. This is especially the case if the startup is simply exercising a valid legal right that is integral to all property ownership \u2013 the right to keep others from trespassing on one\u2019s property.<\/p>\n

Additionally, participants in the PSP must also join the LOT Network<\/a> (LOT stands for \u201cLicense on Transfer\u201d), which presents itself as a cross-licensing network committed to reducing the alleged \u201cPAE problem.\u201d Members of the LOT Network must<\/a> \u201cgrant a portfolio-wide license to the other participants\u201d in the LOT Network, but \u201cthe license becomes effective ONLY when the participant transfers one or more patents to an entity other than another LOT Network participant, and ONLY for the patent(s) actually transferred.\u201d<\/p>\n

On its face, this might still seem a reasonable concession for the \u201cfree\u201d acquisition of some of Google\u2019s patents. But the fine print makes it clear that there are additional burdens agreed to by the startup. First, the LOT Network agreement includes all of the participant\u2019s patents, and not just those it acquires from Google. Second, even if one decides later to withdraw from the LOT Network, the agreement explicitly states that all<\/em> of the patents owned by the participant at the time of withdrawal will continue to remain subject to the terms of the LOT agreement. The LOT Network thus operates in much the same way Don Corleone viewed membership in the \u201cfamily\u201d \u2013 people are welcome in on certain non-negotiable terms, and good luck ever getting out.<\/p>\n

These all add up to be incredibly onerous and surprising restrictions on startups, which often need flexibility in the marketplace to adopt their business models. But as the old, late-night television commercials used to say, \u201cBut wait, there\u2019s more!\u201d If the terms and conditions of the LOT Network seem highly limiting on the rights associated with patent ownership and overly broad in terms of who gets a license to the applicant\u2019s patents, there\u2019s an even greater surprise in the license-back provisions of Google\u2019s Patent Purchase Agreement<\/a>. Once one wades through the legalese, it becomes clear that while a participant in the PSP and LOT Network nominally owns the patents granted by Google, these patents are effectively licensed to everyone<\/em> doing anything<\/em>.<\/p>\n

There is substantial legalese here that is clearly \u201cvery confusing, cumbersome and . . . distracting for startups,\u201d the very charge<\/a> leveled by Google against the patent system as the justification for the PSP and LOT Network. We\u2019ll break it all down in a moment, but here\u2019s the contractual language that creates this veritable universal license. The agreement gives Google, its \u201cAffiliates\u201d (defined to include any \u201cfuture Affiliates, successors and assigns\u201d), and its \u201cPartners\u201d (defined as \u201call agents, advisors, attorneys, representatives, suppliers, distributors, customers<\/em>, advertisers<\/em>, and users<\/em> of [Google] and\/or [Google] Affiliates\u201d) a license to the patents Google grants to the participant if the participant were ever to allege infringement by any of these partners through their use of any of Google\u2019s \u201cProducts\u201d (defined as \u201c\u2026all former, current and future products<\/em>, including but not limited to services, components, hardware, software, websites, processes<\/em>, machines, manufactures, and any combinations and components thereof<\/em>, of [Google] or any [Google] Affiliates that are designed, developed, sold, licensed, or made, in whole or substantial part<\/em>, by or on behalf of that entity\u201d).<\/p>\n

So let\u2019s review: A startup can acquire some patents from Google, but only from the handful of patents that Google itself picks out (which may or may not relate to the participant\u2019s business). The startup must agree to an incredibly broad license-back provisions and promise not to assert any ownership rights (unless the participant gets sued first) on penalty of $1+ million payment to Google. And the startup is bound to join the LOT Network, where Google execs are on the Board of Directors<\/a>, which further reduces the rights not only in the patents granted by Google, but in the startup\u2019s entire portfolio of patents<\/em>, including most importantly patents not acquired from Google.<\/p>\n

To be fair, Google is far from the only large corporation to take advantage of its size and financial strength to mold public perception, markets, and even government policy to its liking. Some might even turn a blind eye, calling it \u201cgood business\u201d and accepting such behavior as the price we all must pay for the products and services that established corporations like Google offer. To some extent, there is some truth in this \u2013 most of us use Google\u2019s services every day and many of us working in the innovation industries continue to be impressed with its innovative approach to those services and its products.<\/p>\n

When it comes to the underpinnings of the innovation economy \u2013 the startups that drive economic growth and the patent system that provides startups with legal and financial security against established market incumbents (again, as any episode of Shark Tanks makes clear) \u2013 the restrictive contractual conditions in the PSP and LOT Network give one pause. After all, Google began as a startup relying on fully-licensable IP, despite the fact that Google apparently wants us all to forget about its founding page-rank patent (Patent No. 6,285,999<\/a>, filed on January 9, 1998). One will search in vain in Google\u2019s corporate history website<\/a>, for instance, for evidence of Larry Page\u2019s patent. Yet it\u2019s well-established that Google touted this \u201cpatent-pending\u201d search technology in its announcement<\/a> in 1999 that it had received critical venture-capital funding.<\/p>\n

The next Google is out there, counting on the same patent rights to be in place for it to rely upon just as Google did in the late 1990s. Instead of making every effort to collapse the very structure on which its success was built, shouldn\u2019t Google be the first to defend it? Competition will always be the greatest motivator for those who have what it takes to compete \u2013 and with its balance sheet and world-renowned collection of bright, inventive minds, Google should not be afraid of competition. Or worse, give the appearance of promoting competition and then use that appearance to dupe potentially competitive startups into emasculating the intellectual property those startups need to actually compete.<\/p>\n

So, if Google and its far-flung business partners in the high-tech sector want to support startups on terms that are reasonable for both the startup and Google given their relative positions, there is certainly nothing wrong with this. But, Google shouldn\u2019t hide behind the bugaboos of \u201cpatent trolls\u201d and the supposed \u201ccomplexity\u201d of a patent system designed to benefit small innovators in order to drive a largely one-sided partnership while hiding behind confounding legalese that certainly does not match its feel-good rhetoric to startups, to Congress, or to the public.<\/p>\n

If an established company wants to support innovation by providing worthy startups with the stepping stones they need for success, then go for it! Everyone should be 100% behind that concept \u2013 but that is not what Google\u2019s PSP or the LOT Network represent. These aren\u2019t stepping stones to successful innovation, but rather they are deliberately fashioned and enticingly placed paving stones that lead to the shackling of startups with terms and covenants that give the appearance of ownership but strip away the very rights that make that ownership meaningful \u2013 and all the while Google benefits both from the relationship and the public perception of munificence. When one is using someone else\u2019s idea, one should compensate them for it, and the nature of the license and the compensation should certainly match what one is saying publicly about this agreement.<\/p>\n

All we can ask, Google, is that you treat others as you were treated in the past as a startup, and now approximately fifteen years later as a market incumbent just, well, Don\u2019t Be Evil.<\/p>\n","protected":false},"excerpt":{"rendered":"

The following guest post comes from Brad Sheafe, Chief Intellectual Property Officer at Dominion Harbor Group, LLC. By Brad Sheafe Recalling its rags-to-riches story of two guys with nothing but a great idea, a garage, and a hope of making the world a better place, Google recently announced its new Patent Starter Program. As part […]<\/p>\n","protected":false},"author":3627,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[7,26,30,36,1],"tags":[170,221,379,452,625,887,899,1094,1389],"class_list":["post-2171","post","type-post","status-publish","format-standard","hentry","category-commercialization","category-innovation-2","category-inventors","category-patent-licensing","category-uncategorized","tag-assignment","tag-brad-sheafe","tag-cross-license","tag-dominion-harbor","tag-google","tag-license-back","tag-lot-network","tag-patent-starter-program","tag-startups"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts\/2171","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/users\/3627"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/comments?post=2171"}],"version-history":[{"count":1,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts\/2171\/revisions"}],"predecessor-version":[{"id":15901,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts\/2171\/revisions\/15901"}],"wp:attachment":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/media?parent=2171"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/categories?post=2171"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/tags?post=2171"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}