Intellectual Property (IP) Rights and Nanotechnology - an Overview of the Nano-Patenting Sector

Topics Covered

Background

How Intellectual Property (IP) Can Be a Major Obstacle to Nanotech Start-Ups

Ways in Which Intellectual Property (IP) Can Hamper Nanotech Start-Up Companies

Patenting Experts Predict Frequent Litigation in the Area of Nanotechnology IP Rights

How the Race to Register Patents Affects the Nanotechnology Sector

Background

For most nanotech start-up companies (especially those that operate without products or profits), intellectual property is the most essential asset. In the words of one industry executive, the strength of a nanotech company’s patent portfolio is what separates the winners from the losers. Consider, for example: Nanogen’s stock jumped over 50 per cent on the day it announced it had won a patent on a technology to detect genetic variants; NVE Corporation’s stock surged 41 per cent when it announced its new patent on magnetic random access memory.

How Intellectual Property (IP) Can Be a Major Obstacle to Nanotech Start-Ups

But the transaction costs of filing for and defending patents are enormous. Competing in the high-stakes patent game requires not only winning and defending patents, but also using them as bargaining chips to cross-license other proprietary technologies. Intellectual property is one of the biggest expenses for fledgling start-ups, and nanotech industry insiders predict that long and costly patent litigation battles could inflict mortal wounds.

Ways in Which Intellectual Property (IP) Can Hamper Nanotech Start-Up Companies

Consider, for example: 

•        In the US, depending on the complexity, claims, and length of the application, filing fees can go as high as $1,000.

•        For nanotech start-up companies, patent fees are often a major cost of doing business - sometimes second only to payroll. Legal fees for winning a patent in the US can cost $25,000-$30,000, and up to $250,000 for international patent claims.

•        Outside the US, countries charge around $5,000 per year on each pending patent. The translation fees alone to win a patent in Japan are between $12,000 and $20,000.

•        The number of patent lawsuits filed in the US more than doubled over the decade of the 1990s. Based on a survey of intellectual property lawyers in 2000, the cost of defending a large (more than $25 million at risk) patent infringement suit ranges from $2 million to $4.5 million. For cases with less than $1 million at risk, the cost was $300,000 to $750,000, or about half the amount in dispute.

•        Most shocking of all, it is estimated that only about two per cent of all issued patents end up generating more revenue than the cost of obtaining the patent. Among this small group of “profitable” patents, only some will end up being worth the price of litigation.

Patenting Experts Predict Frequent Litigation in the Area of Nanotechnology IP Rights

Many intellectual property experts in the US are predicting that large-scale nanotech patent litigation is inevitable, and it’s likely to be ugly. Because of the large number of over-lapping and conflicting patents being granted, nanotech companies must be prepared to vigorously defend their patents in court. It’s conventional wisdom that, in most patent battles, it’s the largest enterprises - not the most innovative - that will prevail. According to authors Josh Lerner and Adam Jaffe, “the firm with the best lawyers or the greatest capacity to withstand the risk of litigation wins the innovation wars - rather than the company with the brightest scientists or most original, valuable ideas.”  

How the Race to Register Patents Affects the Nanotechnology Sector

Firms can use patents as “strategic weapons to strangle competition.” If a larger firm believes that its dominance in a nanotechnology market is threatened, it “can slowly starve their start-up competitors into extinction by waging a protracted battle on the IP front.” As with biotech in the 1980s and 1990s, nanotech start-ups holding key patents may also become attractive takeover targets because it’s less costly for a multinational firm to acquire the company than to litigate in court.   

Note: A complete set of references can be found by referring to the original document.

Source: ETC Group report entitled ‘Nanotech’s “Second Nature” Patents: Implications for the Global South’, April/May 2005.

For more information on this source please visit the ETC Group.

Date Added: Aug 29, 2005 | Updated: Jun 11, 2013
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