Understanding IP Matters: Unreliable U.S. Tech Patents Impede Breakthrough Inventions

Stakeholders in U.S. patents no longer have certainty about their rights and it is affecting licensing and transaction activity and impeding innovation. On the current episode of Understanding IP Matters (UIPM), Louis Carbonneau discusses the weakening of the U.S. patent system and why he is hopeful for a future where patent enforcement is more viable but less necessary.

Since the “golden era” of patent assertion in the mid 1980s to the early 2000s, several elements have made U.S. patents less certain, making enforcement less reliable. Carbonneau discusses how some of the elements, including the creation of the Patent Trial and Appeal Board (PTAB), the Supreme Court’s Alice decision, and disparate treatment by judges in different jurisdictions, each have had a negative impact.

Carbonneau is the founder and CEO of Tangible IP, a patent brokerage and strategic intellectual property advisory firm, focusing on IP sales and licensing, as well as strategic IP advisory services. Since founding the firm in 2011, Carbonneau has brokered the sale or license of over 5,000 patents and has helped several technology companies with various advisory engagements. Prior to founding Tangible IP, Carbonneau was the General Manager of IP Licensing at Microsoft Corporation, where he spent 15 years.

In this episode, Carbonneau and host Bruce Berman discuss:

– The current landscape for patent sales

– Why Carbonneau receives about three or four patent portfolios for consideration every single day but rejects 99% of them. He believes that there’s only about 1% of the patents up for sale that may have some value on the secondary market due to legislation, case law and the PTAB.

-That the Golden Era of patent assertion occurred from the mid 1980s to the early 2000s, then it started to change due to the America Invents Act (AIA) that created the PTAB, which Carbonneau believes has resulted in unexpected outcomes not intended by legislators.

– The patent industry has been the victim of the “patent troll myth” for over a decade; for the past several years the dominant narrative has been the one “paid for” by big tech – that patent trolls are everywhere and significantly detrimental to business and innovation.

-Why it’s so hard to transact patents due to the doubt over their validity. Carbonneau asks if you could imagine this doubt in real estate transactions, where you buy a house and you’re never quite sure whether the seller has the right title or is the verifiable owner, and demand is suppressed. The real estate industry would slow to a crawl overnight.

Even with the current difficulties, Carbonneau is optimistic about what’s occurring legislatively because there’s pressure from around the world to have a stronger patent system in the United States.  Carbonneau thinks it is “almost inevitable that they have to restore patent rights in the U.S.” due to the current impact of weakened patents. “It’s going to be too little too late, but at least it will be something.”

Key Responses

How would you assess the current landscape for patents?

Louis Carbonneau: “It has been a buyer’s market for almost a decade now. There’s no doubt about it. That has not changed. I would say conceptually, because there’s first more supply than demand. And as we all know, Alice has done some carnage in terms of patent eligibility, and the PTAB has been the other shoe to drop in the last 10 years and has invalidated issued patents at a rate of roughly 80%. So, because of that cloud over validity, obviously there’s very few patents that will be transactable. Having said that—and we are in this day to day, every day—we have seen quite an uptick in the last 12 months in terms of buyers’ interest.”

Legislation and court decisions have diminished the value of many patents. Which industries or technologies do you think have suffered the most?  

Louis Carbonneau: “The people who have suffered the most are small inventors, individual inventors [and] small companies, regardless of the technology area. When you have an invalidation rate of 80 to 85% [by the PTAB], there’s not a single industry that could get away with that except if it were the government, and that’s why it’s still happening.  It’s just a charade because you have one arm of the government charging you a lot of money to issue a patent in the first place and another arm, which is an offspring, charging you an order of magnitude more to tell you that the patent was never valid in the first place.  In any other [industry] people would be in jail for doing this.”

What do you attribute this trend towards weakened patents, and to many young companies believing that they could do without the patents?

Louis Carbonneau: “The unicorns are obviously funded by VCs, and many of them are in Silicon Valley. The current thinking in Silicon Valley is that patents and patent rights are not what they used to be… because most of the Silicon Valley behemoths there have been applying themselves very well for the last decade by lobbying to weaken patent rights because of their efficient infringement model. These companies prefer not to take a license every time people knock at their door. [Due to the success of this lobbying and the efficient infringement model used by many companies], it has permitted the thinking in Silicon Valley that patents are not that important anymore.”

More Highlights

Carbonneau says that patents have a long lifespan and that he has experienced many cycles in the past 20 years “where patents were very high and then very low and then a little bit higher and a bit lower. So don’t get discouraged by the current landscape because I think it’s improving.”

Listen to the entire episode to learn:

• Many of the best patents to assert are 12-15 years old because the industry has caught up. If they’re 12 or 15 years old, it means they were drafted in the world pre-Alice.
• Why Carbonneau tells people not to stop filing patents because in 10 or 15 years the market “might be quite different.” “You have to take the long-term view.”
• Even with all the difficulties with patent enforcement the “market seems to have found a way to make this [some patent sales] work despite all the obstacles.”