Episode 27: How not to spend money on bad patents

Lisa Desjardins (Lisa): You're listening to Canadian I.P. voices, a podcast where we talk intellectual property with a range of professionals and stakeholders across Canada and abroad. Whether you are an entrepreneur, artist, inventor or just curious, you will learn about some of the real problems and get real solutions for how trademarks, patents, copyrights, industrial designs and trade secrets work in real life.

I'm Lisa Desjardins and I'm your host.

The views and opinions expressed in this podcast are those of the individual podcasters and do not necessarily reflect the official policy or position of the Canadian Intellectual Property Office.

Filing patents is a big investment—and it also involves a lot of risk. Because, what if you don't get a useful patent—or what if your patent is invalidated by someone else? This is the reality for many start-ups, and in this episode we're finding out what they need to know in order to plan and file for I.P. rights that will be valuable in the long term.

The person who would know a lot about this is the founder of the biggest patent brokerage firm in the world. Louis Carbonneau is an I.P. professional who has over 30 years of experience from all facets of I.P. law and business. Louis is a lawyer who has litigated patents in court, managed licensing at one of the biggest software firms in the world, and then transitioned into funding innovation through venture capital whilst coaching start-ups as a member, several boards of directors and also teaching law students about I.P. licensing. His team values hundreds of I.P. portfolios every year, has developed a good sense for what kind of strategy and quality goes into creating a valuable I.P. portfolio.

Originally from Montreal, Louis now lives in Seattle where his business "Tangible I.P.", a patent brokerage and strategic advisory firm, has their head office.

Louis Carbonneau, it is such a pleasure to have you here on the podcast. It's a real privilege. I know that you've been instrumental to some of the main thinking around I.P. in Canada and even the I.P. national I.P. Strategy, so it's a real privilege for us to have you in our podcast. Welcome!

Louis Carbonneau (Louis): Thanks for having me.

Lisa: Can you tell me a little bit about yourself and the key events that have taken you to where you are today?

Louis: Sure, most of it I would say, is serendipitous. I'm a lawyer by profession and I essentially join a small litigation firm as a summer student in Montreal where I hail from. And there were 2 new lawyers that had just joined the firm that were doing intellectual property litigation and ended up working on a lot of files with them. Litigation cases like types of Tapis-Sauve-Pantalon, there were there L'Oiseau Bleu, this famous or infamous cheap wine in the wide bottle, or a lot of hockey equipment-related litigation. So I liked it because it talked to me, hockey, wine, cars.

So I just ended up working a lot on that. So kind of fast forward I became an I.P. litigator myself for the first 7 years with that firm, then one of the partners went to start the litigation group at Smart & Biggar in Montreal, and then after a few months, kind of poached me to join them and so I was at Smart & Biggar for 4 or 5 years doing essentially litigation work. And then one day I got a call out of the blue from a head-hunter saying that a company called Softimage was looking for an in-house counsel to be kind of their general counsel, but I realized it had just been acquired by Microsoft. So I interviewed and the funny thing is I got an offer from Softimage and then Microsoft stepped in and said, no-no, this is a legal headcount. This is our headcount, we have to do the interview because this person is going to roll over to Seattle and so they started the whole process. So I had 2 offers. And I, well, I had the final one, so I took the job and I became the general counsel for Softimage. But because my boss was in Seattle at the headquarters of Microsoft, I started flying fairly regularly to Seattle and made some connections with my colleagues there and after a few years ended up with a promotion with a one way ticket to Seattle. And I ended up doing a bunch of different jobs. I was lucky enough to support all the research organizations, so I would always be exposed to really cool stuff that they were coming up with. That was way before it's time. And the last few years that was in charge of the I.P. licensing business so having to monetize this kind of vast portfolio was quite interesting and very challenging at the same time.

So I had a blast, but after 15 years, you're kind of ready to maybe do something else, so I left in 2009 and then did a bit of the legal work for former clients who had joined start-ups and then someone threw in my lap some patents that they were trying to sell to a company called Intellectual Ventures and they were having a hard time getting their deals closed and they said, "Well you, Louis, you're local. You can kind of drive there and meet there, and maybe it will help." So I started doing that and end up closing a bunch of deals for these guys until I realized that frankly I could do all this by myself, I didn't have to be helping someone else and just kind of getting the crumbles at the end in terms of the compensation. So greed took over I guess, and I decided to start my own patent brokerage firm while still doing a bit of legal work and then it became pretty much the business.

Fast forward today, and we're probably the largest brokerage firm worldwide in terms of patents. Not that they are that many, so I don't want to make it sound bigger than it is, but it's a very, very niche area, there's about 15 people around the world to do this full time, I would say, and we're probably the most active one. We've brokered over 5,000 patents over the years, we closed about a transaction every month, so a mix of sales and licenses. It requires really an understanding of the law of the business and of the technology, all kind of wrapped in one. So it's pretty challenging. That's why there are few people doing that, and it's a challenging environment for patent owners as well, which doesn't make it easier.  But I'm still having fun doing that.

Lisa: You've moved to the U.S., where the general understanding of intellectual property is different than in Canada. If you were talking to a group of entrepreneurs, how would you describe the difference on the view on I.P.?

Louis: In Canada, I.P. is really a recreational sport, whereas in the U.S. it's a full contact sport. I'm a venture partner with a V.C. firm in Montreal and I also mentor a bunch of companies through accelerators and I've worked with hundreds of entrepreneurs in Canada, and Canada is usually their pilot market. Their real market is the U.S., just from a scale standpoint. So it's almost a fore given conclusion that they're going to have to go to the U.S. to be successful and to scale. So they need to understand the environment in the U.S., it's not an if, but when they're going to go there. There are very few companies that can survive and scale and stay in Canada.

In Canada, there's not a lot of litigation around I.P. I mean, you will have sometimes competitors that will be at each other's throats. I was part of that as a lawyer, when what used to be called Canstar and Sport Maska which is essentially Bauer versus C.C.M. had like 12 to 13 open litigation at any given time and kept us busy. But that's kind of rare. In Canada, you don't have jury trials like in the U.S. for patents, which is really interesting concept, and because the damages are not that great you don't sue people just because they infringe patents if you're there for the money. So the whole ecosystem that you see in the U.S. where patent owners or people acquire patents, to assert against infringers, doesn't really exist, what people call the patent troll business, which I don't like the word because it's derogatory. In many cases it's inventors who just couldn't afford to do that. They have to sell their patents to companies who do that for a living. But you don't have that phenomenon in Canada, so most of the I.P. disputes will be trademarks, former employees who leave, trade secret misappropriation, copyright and you have a few patent cases here and there, sometimes to get an injunction or get rid of a competitor, or it's never, or almost never for financial reasons that people do that.

In in the U.S., by contrast, you get about 5,000 new patent lawsuits every year, it's about 20 new cases a day that are filed for patent infringement. So, you can imagine that it's hard to avoid being on the receiving end of that at some point if you're going to have commercial activities and you're selling products, you're selling technology. So it's really important for entrepreneurs to know that to understand that although Canada may be somehow shielded from all this, the market that they're really aiming at, has a very different environment, and it's a much more dynamic I.P.-centric ecosystem that they have to take into account.

So when they start building their I.P. strategy, the first thing we tell them at the very basic is: no surprises, first do no harm, so make sure you're not infringing upon third parties' patent. Because the typical cost of the lawsuit in the U.S. only, whether you win or lose, if you're on the defending side, you have really no money to make at the end, even if you win. So it's all about fees you're going to have to pay to your lawyers to defend you. And a typical patent case will be between 3 and 5 million dollars U.S. to defend. Most start-ups, most S.M.Es. in Canada don't have that kind of cash and their investors certainly don't want to use the cash that they just invested in the company to defend a lawsuit.

So when I advise my investors to invest or not in a start-up or company, whether it's a C or series A or B, the first thing we do systematically is to conduct a freedom to operate. A very thorough one; we look at sometimes over 1,000 patents because we want to make sure that with a very high level of confidence that the company is not infringing upon someone else's patent. Because what's going to happen is the minute we invest in the company it becomes a bit more visible. There's a press release made or they or they start kind of scaling up, approaching people in the U.S.—that's when the problems arise. It's not when they're very small, obviously. It's when they're getting a bit more investment and scaling up. Then they attract attention, and very often either a competitor or most of the time a company a non-practicing entity that buys patents to assert like people buy accounts receivable to collect same phenomenon. We'll approach them and say you need to pay a tax because you're infringing. So if they have not modeled this into their financial provision or forecast there, it's going to be a different budget at the end than what they expected.

So the very first thing for companies to do is really to avoid encroaching upon other people's right. And doing this on the trade secret, copyright side is fairly easy because it almost assumes that there's some level of wrongdoing. You're not misappropriating someone's trade secret by accident, you have to usually know that you're doing this. Same thing with copyright, you're not copying someone's source code by accident, or someone's literature by accident. But most of the infringement on the patent world is innocent. You don't know you're infringed until you're being told that someone had a patent that has these claims, and suddenly you say oh, wow, my product reads these claims. So that's why it's so hard, because it usually comes after the fact once people told you about it. So, the right thing to do is to prevent and pre-empt this by doing a freedom to operate. So that's the first piece of advice that we give to entrepreneurs.

Lisa: We're going to talk about the services that your firm provides in a little while. They're very important services, just like you mentioned, the freedom to operate, but you also mentioned trolls and how that term is derogative. I thought maybe to place what your firm does in bit of a context, you're a patent brokerage firm, how is that different to a troll?

Louis: Well, because we don't own patents. A troll, let's call them non-practicing entity, is a company that will buy, usually through a broker or directly from the patent owner, assets, patent assets that usually have some assertion value, meaning someone is infringing upon the patents and we'll turn around and we'll approach the infringers and ask them to take a license. And if they don't want to take a license, then that's their choice but very often they will have no other choice than to assert in court. So that is very different. And we sell to these non-practicing entities all the time. They constitute the main pool of buyers these days. They're much more active buyers than the operating companies. An operating company, especially a large one, is usually already sitting on tens of thousands of patents and I can tell you because I managed that budget 12 to 13 years ago. A budget in a large company, a Fortune 500 company that has already let's say 50,000 patents and files maybe 1,500 to 2,000 more each year, the budget just to maintain the portfolio and file and prosecute the new one is probably half a billion dollars per year, by my estimate. So these people have very little incentive to go and buy other patents just because they might be in the same space there and they already have a hard time justifying their own budget and filing new ones.

So they're not really the buyers. I mean, sometimes they'll do an opportunistic acquisition most of the time they will acquire a company and then the patents will come along for the ride, but it's an M&A deal, it's not a patent sale. People will say, well such and such companies sold their patents to Google for 50 million dollars. I'd say no, they sold their companies for 50 million dollars and they probably had one slide that says: "we have patents", and that was probably it, because that's not what Google paid for.

So it's very important to distinguish between the company itself and the patents. The patents can have some inherent value, but they're not the company. So to answer your question, we're not a N.P.E. because we do not assert patents ourselves. We do not buy patents, we help people buy or we help people sell. Most of the time we represent the seller, but we just finalized the transaction recently where we represented a small start-up in Sweden that bought some patents from a large U.S. pharmaceutical company. So we can play that matchmaking role. This is really what we do as brokers. I'm not different than a realtor for real estate, except our assets that we're transacting are patents.

Lisa: You've seen thousands of patents, you've seen hundreds probably pitches by entrepreneurs trying to make a valuable proposition. In your experience, what are the biggest mistakes entrepreneurs can make when they're giving a pitch?

Louis: Well, first a lot of them respond to what is a perceived request to have patents by saying: "yes, we have patents" so we filed patents, check the box, everybody's happy. All patents are not created equal and in some cases patent protection might not be the right protection or type of protection for a certain type of I.P. In the A.I. space for instance, in many cases it is better not to patent because when you patent, you are disclosing your invention to the rest of the world and then they can copy it. And if you cannot detect the copy, because it resides in the black box, in the cloud, then you essentially enabled your competition by putting almost your invention in the public domain, because you don't really have any way to exclude them. A patent is a negative right, it's a right to exclude people from practicing the invention. If you cannot detect then you cannot exclude. So the first mistake is to think that patents are a panacea for every situation. There's no such thing as one size fits all. The best I.P. strategy usually is multipronged. You may have some patent protection on some aspects that are easily detectable or can be reverse engineered. You may have some trade secrets and other aspects that you keep internal, you have some trademarks, you have some exclusive contracts, maybe copyrights… I mean it's a multifaceted approach.

So as far as the biggest mistake is, I mean very often companies in their first few years will spend way too much money on bad patents and then when it's time to file the good ones they run out of cash. And what I mean by bad patents again, you have to look at the context here. Most Canadian companies will file a U.S. patent in addition to a Canadian patent or sometimes in lieu of a Canadian patent.

I mean systematically, they'll file in the U.S., and this is really where the patent has the most value. If you look at the patent marketplace, the U.S. is driving the market just because of the awards that you can get in court for infringement. So the typical price of just one patent in the U.S. over the span of the life of the patent. So, from drafting prosecution, issuance fees, maintenance fees through the life of the patent is usually between 50 and 60,000 dollars U.S. That's a lot of money. And then if you want to file in maybe 7-8-10 countries like most companies do when they want to scale up, it's the price of a condo essentially, that's what you're talking about. It's going to be easily a quarter million to half a million over time. So it's extremely expensive. So if you file 3 or 4 patents then you file these patents in 7-8 countries, you are approaching over the life of the patent, probably a million dollars and a lot of that is front loaded because the big invoices are coming when people are drafting and prosecuting. After that, it's mostly paying maintenance or annuities. It's expensive, but not as much as what you've paid the first 2 or 3 years.

Now look at the situation in the U.S., currently about 80% of the issued patents, those are presumed valid, when they are challenged in this tribunal that is called the P.T.A.B., it stands for Patent Trial and Appeal Board, about 80% of these patents that are challenged end up being invalidated. So that's an 80% defective rate of a product called a U.S. patent, which is absolutely egregious and it's a scandal, but that's the reality. So you're paying 50 to 60,000 dollars for a U.S. asset that has only a 20% chance of remaining valid when the time comes that you need it. So you can see that when I say bad patents, there are a lot of bad patents and why are they invalidated? 99% of the time, because that's what the P.T.A.B. does, is because there was some prior art that was relevant to these patents that basically anticipated those inventions that was not considered by the Patent Office. And why is that? Well, because a lot of times the law firms, the patent agents or the patent attorneys who work on those will tell the client, the inventor, "Uh, don't spend money and time looking for prior art, this is the job of the examiner, they will do that and you don't have to pay because they do it for free."

Well, the problem is that the examiners don't find anything relevant. They'll only look pretty much on their desk, and if they don't see anything relevant, they'll just assume there's nothing else. The reality is very different. There's ton of prior art and prior art is not only in patents, it can be in scientific articles and journals. It can be at trade shows. It can be in products on websites and specifications. It can be almost anything.

Prior art is anything that basically shows the same invention prior to the date it was filed, it's very simple, worldwide. So you can imagine that if you did not attend this trade show in Japan 12 years ago where a prototype was shown and never commercialized, you certainly don't know that there's prior art  there. But if someone wants to invalidate your patent, they will find it. So you have to help yourself by doing this. So the second biggest mistake most people do is not to do a very thorough prior art search and patentability assessment prior to spending 50 to 60,000 dollars on filing a patent. 

In many cases they would realize if they did that that, their invention is a lot narrower than what they thought. Or maybe it doesn't exist because everything was already there. And if it's narrow enough, by the time it issues 3 years from the day it was filed, maybe it will have zero value strategically, because by that time well the little slice of the innovation that the patent might recite will have been, leapfrogged by something else that will be way beyond what's going to be there.

So it's in many cases people file patents, prosecute patents, nobody's telling them that the patent they got at the end is likely to be invalid because nobody really told them they had to look for prior art. And unfortunately it is not in the business model of law firms and patent agents to tell clients, "I don't think you have a great invention here, you should just keep your money and spend it on R&D or marketing and sale." So it's a dirty little secret that when I talk to patent attorneys is they agree with me, but they don't want me to say it publicly.

Lisa: That's pretty chilling stats and a chilling reality for many Canadians to hear that such a big investment has such a big risk. Which brings me over to the question I had about some of these other preparatory works that inventors should really undertake. I was wondering, since you provide these, if you could give us an overview and explain what some of these things are. For example, freedom to operate versus patentability, landscape assessments… There's a lot of terms here that I think that entrepreneurs need to learn.

Louis: Yeah, so we talk about the freedom to operate, F.T.O. as it's known. This is really to answer the following question: Am I infringing upon someone else's patents? So it's really a risk, assessment-risk management tool here to see: Am I going to attract a lawsuit because I'm encroaching on someone else's I.P.? It has nothing to do with your I.P., I mean just to give you an example; Apple has tens of thousands of patents that are practiced by a typical iPhone. Yet a typical iPhone practices about a quarter million patents. So that means that for the 10,000 they have, maybe that really on their own product there's 240,000 patents and other patent owners whose patents are being infringed or practiced by an iPhone. So the fact that you have patents doesn't mean you're not infringing someone else's. You can have hundreds of patents. You can still infringe a bunch of other people's patents. So that's the first thing people have to understand. The fact that you've filed some patents does not shield you from infringement. So F.T.O., freedom to operate, is always very important from that standpoint.

The second thing we mentioned is patentability assessment is to assess whether the invention that you claim to have made is indeed an invention. And the answer to that is basically by looking at prior art and understanding first if it's not… Because the patent or an invention to be patentable has to be novel and non-obvious. Novel, the novelty means it cannot exist before and non-obvious means that you cannot combine 2 or 3 pieces of prior art and arrive at the same solution without having some scintilla of  inventiveness, if you will. So that's the legal test. So if you're looking at the prior art and you say, okay, we found something exactly similar that was published 2 years prior, then that's it, you don't have an invention. I just saved you $50,000. If you say well, there's not exactly something that resides everything but we're claiming A.B.C.D.E. and we found one patent that recites A.B.C.D. and then another patent that recites E and it's pretty logical to combine the 2 together, then you probably have an obvious invention, which means you probably shouldn't spend money filing a patent.

Then the best thing to do in those cases is to do what we call a defensive publication. You essentially put it in the public domain, but by doing this, your publication becomes priority against everybody else who might want to patent the same thing later on. So you're at least cutting your losses if you will. And it costs nothing to do that.

A landscape, which is what you've alluded to, is a great tool. It's more of a business intelligence tool. It is trying to really kind of see the forest from the trees. And especially when you're entering a new space… A start-up, you don't know who else is doing this. Or maybe not all of them. There usually are small players in the same space, but very often they are entrenched players that are in the same general space and then universities that are researching and that and research labs… So a landscape will basically look at the whole picture and give you a very good sense, okay, of who's doing what, who are the main patent owners in that space? What are they doing? What are their R&D trends? Because by tracking patent filings you can see with a little bit of a latency maybe, 18 months, but you can see pretty much the trend of their R&D road map. And that informs a lot of things. You can see where they're going, which direction they're going. You can see over years which areas in your space are being abandoned or neglected, or simply people have filed a lot of patents 10 years ago in that space now they're not, they're filing in another space…

So you can really understand the landscape, which is the whole point of that project, that you will be operating in for the foreseeable future. So it's like doing a market analysis, but from an I.P. standpoint and a competitive analysis and also understanding okay, there might be some great I.P. there that belongs to universities. Maybe I could license this for very reasonable amount and save myself a year or two of R&D. Try not to reinvent the wheel. Or you might find some white spaces which means that there might be an area in your domain where there has been very little inventive activity, kind of an orphan area. Think of it as a vacant lot in downtown Toronto. That may have a lot of value because you can build a high rise on that. So it's a lot more valuable, dollar for dollar, to file a patent in a wide space where really that you're not competing with thousands of other patent owners versus filing a patent in in a very crowded space where you're just going to be one of many and just very incrementally adding to the value.

So think of it as you were in the patent pool, and you're the only patent owner. You get 100% of all the revenues. If you're in the patent pool and there are a thousand patent owners and you get only one thousandth of the value that comes back. So that's kind of what the wide space tells you, that the it's an indication of where it might be more strategic to invent and then it's your decision to do that. So that's a great business and competitive intelligence tool on the I.P. side, and that's something we strongly recommend to start-ups. And it's not that expensive to have and then it becomes your kind of own library and it's dynamic. You can continue to search through this. You can update it. Once you have that, it's a great tool and we know for a fact that the companies we've done that for are using it all the time.

Lisa: Is it possible to give a range for how much that would cost?

Louis: Yes, I mean at least what we charge because there are many different work products out there, and again, they're not all created equal just like patents, but going back to what I've said before that, whether you've filed a bad or a good patent, you're going to have to invest anywhere from 50.K. U.S. to sometimes 3, 4, 500,000 dollars, if you file in several countries.

A very thorough prior art search will cost you anywhere from 1,500 to maybe 3,000 dollars for an invention, so a very small fraction of the price of filing a bad patent that will not be of any use the day you need it.

A freedom to operate might cost you, at least the way we do that, which is to look at not only at a few competitors patents, but to look at anything under the sun, sometimes over a thousand patents. That might cost you 10, 12 , 15,000 dollars, usually more around 10 and 12 depending on how it's done. And compare that to the price, just the price of hiring a lawyer to defend yourself against a cease and desist letter, not even a lawsuit, just a cease and desist letter, prepare a non-infringement opinion, send that to the other side and hope that it goes away. Just that will cost you 25 to 50,000 dollars. So it would stupid not to do that because you're preventing that from happening by hundreds of potential companies. So it's always the costs relative to the cost of the alternative that you have to look at.

A landscape study, we do a ton of those, usually anywhere between 15 and 20,000 dollars. Again, it's very, very important development tool, so frankly when you look at the budget, especially where the company has just been funded by investors and it looks at its I.P. budget, frankly, for $50,000 you can do a lot more than just filing one bad patent. You can make sure that whatever you file is going to be solid because you did the prior search, you're going to make sure that you're not infringing upon someone else's patents and then you are going to have a great landscape of your domain that you can basically use for designing your technology road map. So for less than filing one bad patent. So I think these are really important tools. The companies that use them I think see the value. But they're not that well known, so a lot of people just don't think about that because they don't know.

Lisa: We're alluding to something which is really important to entrepreneurs, and that's the value of a patent. So in your experience, what are the main factors that drive value?

Louis: Okay, so there are really 2 types of value, if you will. If you're an entrepreneur or start-up and you say okay, we have patents. How much are these worth? Well, it depends on the context again. They might be worth a lot to your company if you're practicing them because the reason you've filed patents usually is that while you are developing your products or services, you made some innovations and you filed a patent on those. So arguably what you're selling or what you're offering in the market embodies your inventions, so your patents are there to protect you from the cloning by competitors or other parties. So basically, if someone builds a product that is identical to yours, technically they should be infringing because you would be infringing yourself but for the fact that you own the patents.

So there's a deterrence value here in terms of keeping people at bay. There's value in terms of having this competitive advantage or differentiation that you can keep overtime by excluding others from doing exactly the same thing and making it a little bit more harder or more expensive or longer for them to come up with the same solution. Then it's a matter of degree, whether it's easy or hard to design around, whether the design around will have the same level of performance because there's a lot of nuances, but that's the value if you will if you're an operating company.

Now, if someone suddenly infringes your patent, then obviously the fact that you have them is of great value in the right context, but also very often, if for some reason either the company has failed commercially and all you have at the end left are the patents, or maybe the company has pivoted a few times and is not using any longer, the patents that are being infringed. Then these patents they have a value on the secondary market, which is what we represent if you will, where people might want to buy them for their assertion value. Very, very few people will buy patents just because they like the technology. I mean as I said, then you're talking about more of an M&A deal or technology transfer. But to buy just the patent rights if nobody's infringing upon them, frankly, nobody's gonna wanna buy them.

It's like me trying to sell you a car insurance policy. Great premiums, great coverage, but you don't own a car. You don't need it, right? You might need it in 2 years when you buy your first car, but for now you don't need it. So it's the same thing for patents. If people don't need the rights because they're not infringing or nobody else is, there's no real value.

So currently 99% of the patents that transact, and the ones we sell, are patents that have an assertion value, meaning they are being infringed upon by someone or preferably by many people, or they will very soon. So sometimes an operating company knows, and they are the only one to know that they're coming with the product 6 months or 12 months from now that will infringe, so they will pre-emptively buy these patents. But if there's no imminent or actual assertion value or infringement, it's almost impossible to sell.

And there are a lot of questions regarding the pedigree of patents for the reasons I mentioned, many of them might be declared invalid. It's the most fickle title property title that you can think of. There's about 15 different things that could happen that makes the patent invalid, so that affects the valuation as well. Which means that at the end of the day, less than 1% of the patents will have value on the secondary market. I mean, we'll review about 3 new portfolios every day that people want to sell and broker for them and we reject 99% of what we see. So about 1% only we think is good enough and we'll be lucky if we sell half of what we took under brokerage. So that means that less than 1% will actually find a buyer. And that is pretty consistent in the market.

So when people tell us these people are infringing, most of the time, these people are not infringing. They're doing something similar, but you may have some limitations in your claims that make it such that they're not infringing and people don't like when we say that, but it's a legal test that is very hard  to meet or sometimes they'll say, well, we can find prior art that invalidates your patent within 2 hours and they'll say, well, how come the examiner didn't find it? Well, because he spent less or she spent less than 2 hours looking for something. That's the reality.

So the value, and if you want to talk pricing, I had the most recent data today and again you aggregate a lot of patents, it doesn't mean any single patent is worth that amount. The same way if you sell 2 houses on the same street one for 1 dollar and one for a million dollars, and you say the average price as half a million, it doesn't really reflect any of these 2 houses. It's the same thing with patents. But they're a little bit more transaction, so we'll take this with a certain grain of salt. The typical price per U.S. patent is about 100,000 dollars and the price per family these days, and by family I mean you have, you file a patent then you file maybe 1 or 2 continuations, or a continuation in part. Let's say you have 3, 4, 5 assets in the same family. That might be worth 200 to 250,000 dollars. And then if you want to sell 100 families of patents, well people are not going to pay that price for each family. There's a big group discount if you will when you talk about larger portfolios.

So you don't file patents to become rich, you file patents first for strategic reasons, for business reasons. But then you can help yourself by making sure that they're valid, they're solid, they're well drafted, prosecuted, but more importantly, they're going to be vetted at the end so that if everything else fails and the industry catches up with what you're doing, they may have some inherent value, and you may be able to monetize them sometimes for a fraction or sometimes for many multiples of what you think they're worth. We see awards all the time. I mean, again, for one award like that, you may have 9 cases that fail, but there are verdict awards in the U.S. for patent infringement that span from a few million dollars to a few billion dollars. Recently Intel had a verdict against them for over a billion dollars. Same thing with Cisco, 2 billion dollars. So sometimes you can win the lottery, but it doesn't happen very often, just like with lottery tickets.

Lisa: True. Thank you so much for sharing your insights, Louis. This has been such a privilege. Thank you.

Louis: You're very welcome. It was my pleasure.

You're listening to Canadian I.P. Voices where we talk intellectual property. In this episode we met with Louis Carbonneau, a Canadian lawyer and patent broker who now lives in Seattle. Louis values hundreds of I.P. portfolios every year and says that inventors often fall into a trap of thinking patents are the only valuable assets in an I.P. portfolio which may lead them into filing for patents without much preparation.

In fact, a careful investigation of what has already been invented can often be the best initial investment that can help ensure that you understand the competitive landscape and trends around your technology and that the I.P. rights you will file for can protect your business in the long run. This is especially important if you intend to do business in the United States, where many patents can be invalidated. To keep an eye on Louis' observations in the I.P. world, open the description to this podcast for a link to his blog post.