A private ordering solution to non-practicing entity (NPE) risk has quietly grown to cover a quarter of US patents, but it cannot help a client who joins too late.
Patent assertion entities (PAEs) accounted for 90.3% of high-tech patent litigation filed in the USA in 2025. That figure is familiar enough to have lost its power to alarm. The one sitting behind it should not have: 81% of the patents PAEs acquired last year came from operating companies. The assertion arriving on a client's desk was, in all likelihood, assembled from portfolios that companies very like that client sold or divested without much thought about where the assets would end up.
Two developments have sharpened this:
- Institution rates at the PTAB in Q3 2025 ran at 14.7% against NPE-held patents and 33.9% against those held by operating companies. The first line of defence has weakened precisely where operating companies most need it.
- Capital has also arrived: 2025 saw $2.8 billion in new commitments across commercial litigation funding generally, with patent matters making up 27% of funded cases. Assertion is now a financed asset class with a diminished counter-move.
What LOT does
LOT Network is a non-profit operating a mechanism narrower than it is often assumed to be. Members grant one another a licence that lies dormant and becomes effective only on and after a particular patent transfers to a patent assertion entity. Nothing else changes. Members retain the full right to assert their patents against competitors, whether or not those competitors are members. This is the point most often lost in summary, and worth being precise about with clients: it is not a patent pool, not a cross-licence, and it does not blunt a company's ability to enforce against a rival. It removes value from the asset only in the hands of an NPE.
The scale is what makes the mechanism work. More than 6,400 companies now participate, covering over six million patent assets, or roughly 26% of US patents and 22% of German patent assets. The German figure deserves attention from anyone advising on European exposure, given what the UPC now offers a well-funded claimant. Membership spans Samsung, Microsoft, IBM, Google, Volkswagen, BASF, Bayer, Daimler, Bosch and Barclays, alongside OpenAI and Anthropic. In the technologies where assertion is concentrating in the US, coverage runs to 53% of user-interface patents, 43% of machine-learning patents and 37% of robotics patents. Recent UPC data also indicate that PAE/NPE activity is a significant feature of the European litigation landscape. Over the UPC's first three years, NPEs accounted for 147 of 933 substantive cases (16%), rising to 114 of 319 cases (36%) in a six-field high-technology basket, with particularly high concentrations in wired networks, image processing and security technologies.
The timing problem
The mechanism does not operate retroactively. A company must be a member before an asset leaves the network; if it joins afterwards, the licence will not have attached.
This is not theoretical. Over 180,000 assets had left LOT by August 2026, almost 3,000 of them going to NPEs, and 12 companies were subsequently sued on former LOT assets. LOT states that membership at the relevant time would have prevented those assertions against the member companies.
The clearest illustration involves Netgear, which sold a tranche of patents to Estelgia in February 2025. Suits followed in May against ASUSTek, D-Link, Hon Hai and Plume Design. Netgear's Chief Legal Officer, Kirsten Daru, has described membership as having let the company realise the value of its portfolio while assuring its executive team that its partners were protected. Supporters of the model point to examples such as this as evidence that transfer-related assertion risk can be addressed at the point of a portfolio transaction.
Where this touches practice
Two moments matter:
- The first is when a client is preparing to move patents, the point at which the timing rule either helps or is already irrelevant.
- The second is quieter and easier to miss: when a client receives an assertion, it is worth establishing whether the patent passed through a member's hands before reaching the asserting entity. Where it did, a licence defence may already exist. That is an enquiry to run at the outset, not a product to recommend.
Our work sits precisely at these junctions. We see portfolio transactions before they close, and we see assertion letters before litigation counsel does. Attorneys practising across jurisdictions are also well placed to observe whether trends long familiar in the US are beginning to emerge in Europe through the UPC and national courts, including Germany. Whether mechanisms such as LOT become a routine feature of portfolio-management advice is likely to depend on how that litigation landscape develops over the coming years.
Source note: LOT Network approached FICPI following the CIPA reception at Lancaster House on 5 May 2026, proposing that FICPI make members aware of the mechanism. The figures above are drawn from LOT's own materials, which cite Unified Patents, LexisNexis Cipher, RPX and Westfleet. Readers may wish to verify them independently before relying on them in client advice.