Nanotechnology, narrowly defined, means that materials have new characteristics or functionality as a result of their small length scales not previously seen before. These length-scale-dependent properties present unique challenges for protection of intellectual property, as well as for commercialization.
Essentially, many nanotechnology innovations create a “core” or pioneering material potentially having many uses. These new materials can present “disruptive” technologies since they are so new and unique that they make older technologies obsolete. The potential market for nanotechnology-based innovation is virtually limitless and is just now beginning to be explored.
An example of a disruptive technology is clothes treated with a new nanotechnology coating to prevent staining. As a result of this technological advance, the detergent industry might see a reduction in product demand if the technology becomes popular enough. Another example of a disruptive technology is carbon nanotubes (CNTs), essentially carbon-carbon bonded material that can form a tube shape that may be pinched at one or both ends. Reported properties of CNTs include high strength, functionalized surfaces, and unique and controllable electrical conductivity. As such, CNTs can be used in everything from composite reinforcements, targeted drug delivery systems, and display devices. Coupled with each of these potential applications of nanotechnology-based materials is a vast commercialization potential, both domestically and internationally.
Novel nanotechnology-based core materials present many new and distinct opportunities for commercial exploitation. However, for successful commercial development, the nanotechnology-based company will need to clearly articulate the technological and commercial advantages of the company’s nanotechnology-based core materials to maximize opportunities and chances of success.
Like any other entrepreneurial company, a startup nanotechnology company may need to secure outside funding from individual angels, angel networks, venture capital firms and other outside sources of financing. One critical issue that these companies are likely to face, from a purely business standpoint, is the fact that institutional and individual investors tend to invest in technologies with which they are familiar and which they understand.
Many life sciences companies are acutely aware of this phenomenon. This reluctance to invest in a little-understood industry may be even more applicable to nanotechnology companies. This certainly presents a challenge for a nanotech company seeking outside investment, as they are competing for investment dollars with other companies whose technology may be more familiar to the investment community, especially information technology companies. This simply highlights the need for the management of nanotechnology companies to develop a method of “telling their story” in a way that easily can be understood by the lay community and to educate the investment community (much as the IT industry had to do 25 years ago).
Another critical issue is the current venture capital trend of investing later in development cycles. This heightens the need to obtain early investment and the associated need to sharpen the story to obtain such investment.
Once a material is protected by patents or trade secrets, the owner could license the core materials, perhaps with limitations such as restrictive fields of use (e.g., limited to medical and/or pharmaceutical applications, display device emitters, transistors, composites for use in aeronautical applications) and/or geographical restrictions.
Alternatively, the owner could sell the core material to players in certain industrial sectors. Finally, the owner could utilize the core material in one or more industry sectors by manufacturing macro devices incorporating the novel core materials. Of course, combinations of these basic approaches could be appropriate as well.
The basic point is that new nanomaterials, however legally protected, actually can present multiple and evolving paths to successful commercial exploitation. Unlike a new Internet business that must capture a sizeable and sustainable market share in order to remain viable in the long run, or a new gadget that could easily be superseded by the next advancement, new nanomaterials can and should have many new lives as the owner and others explore new uses for the material. Indeed, commercially useful applications for CNTs will continue to be discovered for years to come. Owners of the basic patents in these areas, through appropriate exploitation strategies, can enjoy significant returns on investment.
The problem (or the salvation depending on your perspective) is that many of the very basic materials in the world of nanotechnology were never protected by patents, or were discovered so long ago that the patents have lapsed or will have lapsed long before the new innovations have made it to market. For example, NEC, as the holder of the first patents on CNTs, has successfully started licensing its technology. On the other hand, patents covering the basic technology for fullerenes (also commonly referred to as “bucky balls,” which are geodesic balls of carbon-carbon bonds) do not seem to exist, perhaps because, in the university setting, obtaining patents was not popular at the time. Still, the discoverers of the fullerenes received the 1996 Nobel Prize in Physics.
Investing in a company that controls a novel nanomaterial makes sense, but rarely do such opportunities present themselves so clearly. First, does the company really “control” the basic technology? Does it have the right patents of the appropriate scope? Are there others that can lay claim to the same technology? Are there voids in the protection? Also, if another controls the basic technology or the technology is in the public domain, are there no other investment opportunities?
The answer to the above questions is, of course, there are. While the basic nanotechnology-based core material may be beyond the ability to be protected by patenting, this certainly is not always the case with protecting the commercial exploitation of nanotechnology. Developments in the uses or applications of the novel material can be protected through patents and/or trade secrets and exploited in the market. In fact, in situations where the holder of the basic technology is reluctant to license, a “picket fence” of patents can be built around the core technology, meaning that the core technology owner’s options to exploit the new material are limited by patents obtained on applications. Likewise, there are often bottlenecks in commercially exploiting a technology, such as the current search for inexpensive ways to form CNTs in bulk. The owner of the cheapest, most effective way to make a nanomaterial has a pretty good chance of exploiting his or her invention, even if the basic material is patented by another.
For a savvy investor, however, this new nanotechnology wave may well be the biggest one yet, mostly because any true nanotechnology innovation has the potential of crossing many industrial sectors as “disruptive” technology wholly replacing the existing technology. Riding the wave, or at least monitoring its progress, is not only a wise investment strategy, it may well be a must for entrenched industries.