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By Elizabeth Gardner

On the principle that it should understand something before it tries to regulate it, the U.S. Environmental Protection Agency is considering a proposal to encourage companies to volunteer information about nanomaterials that they manufacture or use in their products.

The Nanomaterials Voluntary Program, or NVP, would cover materials now being used commercially, or those due to come out of the laboratory soon. The EPA would use the resulting information to figure out the potential risks of the materials, how they differ from the risks for non-nanomaterials and how best to regulate their manufacture and use.

“I don’t think anyone believes that existing regulations, completely untouched, are likely to be sufficient,” said Richard Denison, a senior scientist at Environmental Defense, a New York City-based environmental group interested in the potential impact of nanomaterials. “The debate is on whether tweaks would be enough, or whether a whole new set of regulations is needed.”

Just one example is the current exemption from certain regulations for materials that are manufactured or released in very low volume. The current low-volume threshold is 10,000 kilograms, or about 22,000 pounds. “That’s a lot for nanomaterials,” Denison said.


Participants in the Nanomaterials Voluntary Program would provide the Environmental Protection Agency with information about nanomaterials that are in, or are poised to enter, the marketplace. The information may help the EPA assess risks and determine what, if any, regulations may be needed. Here’s a proposed timeline for the project.
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A program proposal is circulating within the EPA, developed by an ad hoc working group of the EPA’s National Pollution Prevention and Toxics Advisory Committee. The group included EPA scientists and representatives from industry and environmental organizations. The proposal was submitted to the EPA director in late November.

“Theoretically we could accept it verbatim or ignore it,” though most of the basics will probably be retained, said Jim Alwood of the EPA’s Chemical Control Division. He is shepherding the proposal through the approval process. He declined to put a timeframe on the program’s development, but said he hoped to have a version out for public comment before the end of the summer.

The proposal outlines a two-tiered program. All participants in the basic program would be required to:

  • Report all the existing information they have about the characteristics of each material they make or use (including risks associated with making it or using it) and the risk management practices they have in place.
  • Do whatever research is necessary to fill in gaps in basic information about a material’s characteristics.
  • Implement basic risk management practices.

Participants in the in-depth program would do all of the above, plus generate new or more detailed information about certain nanoscale materials, at the request of the EPA. They would also institute risk management practices identified by the EPA, and monitor nanomaterials in the workplace and in the environment.

The program would run for some specific period of time (the proposal recommends 24 months), at which point the EPA would evaluate the information received and decide whether the program was worth continuing.

The basic program covers information that many companies, especially larger ones, may already have compiled for their own internal use, and they may even have done some of the work covered in the in-depth program, said Bill Gulledge, manager of the nanotechnology panel of the industry group American Chemistry Council (ACC). “A lot of our members are interested in participating because it gets them in on the ground floor to develop a regulatory framework for nanomaterials.” Representatives of the ACC participated on a committee that developed the program proposal.

Gulledge said that smaller companies may need incentives to participate, and will have to be assured that the confidentiality of their trade secrets won’t be breached. The EPA already is required to keep trade secrets confidential for other substances that it regulates.

The proposal includes several suggestions for encouraging companies to participate. The agency might fast-track participants’ applications for permission to manufacture nanomaterials covered by the program. Companies might be allowed to promote their participation in the voluntary program in their corporate materials (though as of now not on individual products). With public concern growing about the safety of nanomaterials, evidence of good corporate citizenship might have some market value. The EPA might also list participants on its Web site.

PPG Industries Corp. in Pittsburgh has several materials on its roster that would fall under the NVP, especially in the area of coatings, said Paul Ziegler, global director of product compliance assurance. “We’re probably going to participate in the program even if there’s not something in it for us, because we do act as a responsible company,” he said. “We try to develop the information and understand the hazards already.”

Concerns that still need addressing

A number of unresolved issues are listed in the nanomaterials proposal, including:

  • How to distinguish between new and existing nanoscale materials.
  • Whether the EPA should publish an inventory of nanoscale materials.
  • How much of the data should be available to the public.
  • Whether the EPA should develop special data sheets for existing chemicals that are re-engineered into a nanoscale format.
  • Whether businesses should be compensated for some types of data collection and whether small businesses should receive special assistance.
  • Whether nanomaterials should automatically be treated as hazardous until complete information is available on potential risks, from manufacture to disposal.

By Candace Stuart

The nanoworld is a baffling place. With nanoscience still in its infancy, much of how matter works – or doesn’t work – at the nanoscale remains a mystery. Most of the technology that builds off that scientific knowledge resides in the labs and lobes of innovative researchers. And almost all of the commerce is still a far-off dream.

In “Nanotechnology: Science, Innovation and Opportunity,” editor Lynn Foster has attempted to build bridges among the disparate professions and interests involved in nanotechnology. Writers from a variety of backgrounds – scientists, lawyers, entrepreneurs, investors and even a sociologist – guide readers through their segment of the nanoworld.


“Nanotechnology: Science, Innovation and Opportunity”
Edited by Lynn Foster
(nonfiction, 283 pages, published in 2006 by Prentice Hall, $29.99 in hardback)
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“With the diversity of professional cultures in mind, a central goal of this book is to promote communication and cooperation between researchers and industry by including similarly diverse articles written by experts but accessible to everybody,” Foster writes in his preface.

Foster, the emerging technologies director at the law firm Greenberg Traurig, is tapped into the movers and shakers in nanotechnology. He’s directed numerous nanotech trade shows and conferences, written studies, and sits on three nano advisory boards. His affiliations likely helped him secure prominent names such as the late Richard Smalley, a Nobel laureate; Mike Roco, an architect of the National Nanotechnology Initiative and nano adviser for the National Science Foundation (NSF); Steve Jurvetson, a managing director with the venture capital firm Draper Fisher Jurvetson; and Larry Bock, veteran biotech entrepreneur and founder of Nanosys Inc.

The results are mixed. With more than 30 authors represented, the book is sometimes repetitious, uneven and stale. But the scattershot approach ensures there is a topic of interest for just about everyone, with occasional insights that entice the reader to continue into the next chapter.

Several authors feel compelled at some point in their essays to provide a definition or spell out rudimentary principles of nanotechnology. While a standalone essay might require such an explanation, a series suffers from the redundancy.

The multiple-essay format also lends itself to inconsistencies in tone, style and writing quality. Some essays are little more than extensive lists, informative but not particularly deep. Others read more like a review from the journal Nature, replete with citations, illustrations and esoteric language. (For the record, I enjoyed those chapters but wonder if they fit Foster’s “accessible to everyone” criteria.)

And a few chapters reeked of the recycling bin. Smalley, the Nobel laureate, submitted a piece explaining how nanotechnology could and should be used to solve the energy crisis. A grand and articulate thinker, Smalley was by then at his most masterful – like a musician who had perfected his craft. But I wonder how many of the book’s readers would have, like me, already heard the performance during one of Smalley’s many keynote addresses. Or read one of his many other writings on the subject in this magazine or elsewhere. An essay on nano-enabled sensors was also a retread. A version of the piece had appeared in Sensors magazine in 2003.

There were delightful parts as well. Tech transfer veteran Larry Gilbert and lawyer Michael Krieger took the contrarian approach of focusing on the unique features that make or break a deal, rather than explain the process. Intel’s George Thompson provided a short but insightful look at how new technology gets inserted into a product. Sociologist and NSF program director Bill Bainbridge explained why industry should care about ethics.

And Mark Reed, an applied physicist and electrical engineer at Yale University, stands out for creativity and humor: “One might view this field (nanomaterials) as a variant of engineering; instead of studying what is, we try to create what never was – and at unprecedented levels.”

“Nanotechnology” has its shortcomings, but it has helped make the nanoworld a better place.

VC funding hits high but no IPO party yet

By David Forman

U.S. private equity investors put a record amount of money into nanotechnology companies in 2005, but they likely won’t see the kind of IPO market that would let them cash in on their investments until late 2006 or 2007.

Nanotechnology funding reached $434.3 million in 2005, up 121 percent over the $196.4 million invested in 2004 and well over the previous record of $301 million invested in 2003, according to a Small Times analysis of the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. The average deal size was $8.5 million.

However, the actual number of deals that took place during 2005 increased only slightly, from 45 in 2004 to 51 in 2005. While the six extra deals contributed to the funding total, the primary reason for the boost was an increase in the later stage funding of startups founded two, three and four years ago.

There were 20 nano deals during the year worth $10 million or more, six of them for $20 million or more. Nanosys captured the year’s biggest round, with $40 million, followed by a $35 million round for Nano-Tex and a $30 million round for Aspen Aerogels.

California companies raised the lion’s share of nano funding in 2005, with 19 rounds worth a total of $235.8 million. Massachusetts was a distant second, with eight rounds worth $81.2 million. Texas had the third most activity of the states, with four rounds worth $27.8 million.


Small Times has a partnership with PricewaterhouseCoopers under which it performs a quarterly analysis of the MoneyTree survey for the purposes of tracking funding in nanotechnology as well as the broader category of “small tech,” which includes nanotechnology, MEMS and microsystems. Research by David Forman.
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On an industry basis, the leading category for nano-related investing in 2005 was the industrial/energy category, which attracted $146.5 million in 13 deals. Companies developing nano approaches to solar energy conversion were popular, as HelioVolt, Solaris Nanosciences, Konarka Technologies, Miasole and Nanosolar all raised funds during the year.

On a deal basis, both biotechnology ($53 million) and semiconductors ($66.6 million) were responsible for 11 deals each, though the electronics and instrumentation category’s eight deals accounted for more money: $86.1 million. The categories of computers and peripherals, medical devices and equipment, and networking and equipment accounted for the rest of nanotech investing activity.

Despite the uptick in activity and a smattering of nanotech-related IPOs in 2005, the sector’s longing for a blockbuster IPO remains unrequited.

Last year saw Oxonica go public on London’s Alternative Investment Market (AIM) and Nucryst Pharmaceuticals float shares on the Nasdaq. However, Oxonica, an English company commercializing nanomaterials in a variety of markets, raised slightly more than $12 million – a decent fund raising, but hardly an exit opportunity for prior investors.

And while Nucryst, a Massachusetts company that makes wound care products using nanocrystalline silver, raised close to $40 million, the public offering was a partial spinoff of a corporate subsidiary rather than the IPO of a venture-backed startup.

The July IPOs on the AIM by Oxonica and Mountain View, Calif.’s Polyfuel put London’s junior market on the radar screen of panelists at the Nanotech Investing Forum held Jan. 31 and Feb. 1 in Palm Springs, Calif. Members of a panel on the IPO market debated whether the Nasdaq or the AIM would be the center of attention in 2006, but they mostly agreed on what the year’s activity would look like: Four out of five said the year would see somewhere between two and four nano-related IPOs, but that the sector wasn’t likely to really heat up until at least the end of the year, if not 2007.

When an invention appears potentially patentable, the inventor should consult with a patent attorney without delay. Often, the patent attorney will advise that a patent application be prepared and filed promptly before the invention is publicized, used in public, or offered for sale. If such advice is not sought or followed, some patents issued in the United States may be susceptible to being invalidated later on for one of several possible reasons. Inventors of emerging technologies such as microsystems and nanotechnology are vulnerable to that scenario.

For example, if it is determined that an invention was in “public use” or “on sale” (e.g., sold or offered for sale) in the United States more than one year prior to the date an application for a patent was filed, then a patent issued from that application may be invalidated under the “in-use bar” or the “on-sale bar” of U.S. patent law. In these circumstances, an inventor may overcome an assertion of invalidity of the patent by showing that the public use or the sale/offer for sale of the patented device was “primarily an experimental use.”

Experimental use may take place when an inventor feels that it is desirable to test the invention under actual operating conditions or in an environment where the invention is likely to be used. In such cases, there is a risk of a future challenge to the validity of a later issued patent for the invention. However, the risk may be minimized by following at least some of the 12 guidelines listed after the summary of the recent court opinion below.

A judgment of invalidity of U.S. Patent Nos. 5,169,242 and 5,567,056 under the on-sale bar was affirmed in Electromotive Division of General Motors Corp. v. Transportation Systems Division of General Electric Co. The Court of Appeals for the Federal Circuit concluded that the inventions claimed in the patents were the subject of commercial sales to several railroad customers more than one year prior to the dates of application for the two patents. The question was whether the circumstances surrounding each of those sales objectively showed that the sales were “primarily made for experimentation.”

In concluding that there was insufficient objective evidence to prove that the sales were primarily for experimentation, the court referred to a list of 13 objective factors in an earlier case, Allen Engineering Corp. v. Bartell Industries. After noting that the list is not exhaustive and that all factors may not apply in a particular case, the court held that two factors are “critical” and must be proven if experimentation is to be found – the inventor’s control over the alleged testing, and a customer’s awareness of the purported testing. Since the patent owner did not produce adequate evidence of either of these critical factors, both of its patents were held invalid. (If both critical factors had been shown, the court would have considered the rest of the 13 factors listed in Allen Engineering.)

In reaching this decision, the court discussed the types of evidence needed to prove that a pre-critical date sale (i.e., a sale/offer for sale more than one year before the patent application was filed) was “primarily made for experimentation.” The list of 12 guidelines below is based on the court’s discussion of what the inventors and patent owner did not do. Doing at least some of the following actions should establish the inventor’s control and customer awareness of the inventor’s testing:

  1. Document the fact that the invention is being provided to the customer for the purpose of testing the invention in actual use rather than as part of a commercial sale.
  2. Have the customer sign a confidentiality agreement or other agreement consenting to participate in a field program.
  3. Provide protocols to the customer directing their use of the invention.
  4. Supervise or restrict the customer’s use of the invention.
  5. Require the customer to operate the invention under specific conditions.
  6. Monitor the conditions under which the customer uses the invention.
  7. Require the customer to provide feedback, such as comments or data concerning the operation or durability of the invention.
  8. Have the inventor, or someone under his direction (e.g., the customer), collect data, keep progress reports, and operate the invention during specified times.
  9. Maintain records of the testing or require the customer to do so.
  10. Control, monitor, or systematize the field testing of the invention.
  11. Examine the invention being tested in the field on a schedule.
  12. Consider discounting the price of the invention sold for the purpose of experimentation.
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James J. Kozuch is a partner/shareholder at Caesar, Rivise, Bernstein, Cohen & Pokotilow Ltd. in Philadelphia. He can be reached at [email protected].

The fast changing world of micro and nanotechnology development demands that its businesses focus on their core products and services. At the same time, many of these companies have personnel requirements that demand time and expertise – both often in short supply at startups and small companies.

In some cases, outsourcing vendors that can deliver high service levels and predictable outcomes for non-core business processes provide a solution. With the right outsourcing partners in place, businesses are free to focus on the areas that directly affect the bottom line, such as R&D, manufacturing and quality controls.

In the area of employee and human resources (HR) services, professional employer organizations, or PEOs, can serve as HR outsourcing partners. There are now some 700 PEOs in America serving businesses in all 50 states. Careful selection of a PEO is key. Here are some tips on what to look for in a PEO.

A variety of HR services. PEOs perform functions similar to those assigned to in-house HR departments of large companies. These functions include: payroll preparation and reporting, time and attendance tracking, payroll tax filings, W-2s, garnishments, Internal Revenue Service and state inquiry management, policy and handbook development, unemployment administration and disability management. PEOs also handle all federal and state postings, equal employment opportunity reporting and compliance with workplace legislation. PEOs also manage Workers’ Compensation insurance administration and claims management, Employee Practices Liability Insurance and work site safety assessments.

More choices, more perks. PEOs may bring benefits and economies of scale to their affiliated companies and their employees. Among the benefits PEOs offer are cafeteria plans affording employees choices regarding their medical insurance, dental and vision coverage, options such as flexible spending accounts and health savings accounts and various insurance plans. Investment-related benefits include 401(k) plans and Web-based portfolio administration. Many PEOs offer secure, password protected Web sites for benefits and claims information, and online access for employers.

Under the category of Employee Assistance Programs, PEOs provide their clients with legal assistance, college savings, scholarships and tuition, adoption assistance, addiction and recovery services and wellness programs. Other possible perks: store and health club discounts, movie and theater tickets, travel promotions, transit checks and qualified parking.

Accreditation and other protections. Over the past decade, PEOs have raised the standards within their industry. Exemplifying the heightened emphasis on quality assurance is the Employer Services Assurance Corp. (ESAC). It can be likened to what the Federal Deposit Insurance Corp. and Security Investors Protection Corp. are to the banking and securities industries, respectively.

ESAC is an independent, non-profit organization designed to protect businesses and employees served by PEOs. It is led by a board of experienced regulatory professionals and is an accreditation and financial assurance governing entity for PEOs. ESAC-accredited PEOs are covered by a $1 million bond held in trust by a national bank and a $4 million umbrella bond to cover any claims in excess of the $1 million bond held for each PEO. Since its formation more than 10 years ago, there have been no defaults by ESAC-accredited PEOs, unresolved claims or litigation.

Many states also have licensing and certifications requirements that firms should inquire about when making a PEO selection.

Read the fine print. PEOs generate approximately $43 billion by providing a wide range of employment services and benefits through a co-employer arrangement wherein the PEO assumes certain responsibilities and risks along with the affiliated business (its client).

As part of the arrangement with a PEO, clients remain responsible for compliance with various laws. For example, they must comply with regulations that require a safe and healthy workplace. They must not violate laws governing discrimination and retaliation. Their PEO will guide and advise them to make sure that they comply with the law.

Charges for the service can vary and are determined by the service agreement negotiated with the PEO. Some PEOs will charge a fixed amount per employee per year, while others will charge a percentage of payroll. A client must make certain that all charges are spelled out clearly in the service agreement.

The service agreement should provide the client with an escape clause for reasonable termination of the arrangement, usually with a 30-day notice. Clients dealing with a PEO that is certified by ESAC are protected by a bond in the event that their PEO fails to meet its financial obligations, including the payment of taxes and health insurance premiums. For more information about ESAC-accredited PEOs, visit www.ESACorp.org. For more information about PEOs, visit: www.napeo.org.

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Barry Shorten is executive vice president of The Alcott Group in Farmingdale, N.Y. He can be reached at [email protected].

Being a numbers person, I’m always looking for meaning in data. The recent IBF Nanotech Investing Forum in California provided new information that begs some analysis.

Here’s the quandary: Venture capital funding for nanotechnology went from $196 million in 2004 to $434 million in 2005, according to analysis by David Forman, Small Times associate editor. Attendance at the investing forum was flat, if not lower than last year. The number of startups looking for cash was dismal.

Dollars up, interest down. If more dollars go into the technology (small tech hit $1 billion in venture investing in 2005), why would interest fall?

The first explanation would be that interest in nano investing isn’t falling, but interest in this specific conference decreased due to factors unrelated to investing drive – poor speakers, disorganization, etc. That would be understandable, but everyone I spoke to thought the conference had been a stellar event in past years. Palm Springs, golf, sunshine, great networking, solid programming – what isn’t there to like?

So, if it wasn’t the conference itself, then we are led down a path many of us would rather not go. Did interest in nanotechnology venture investing already hit its peak? Or is this just an evolutionary trend in which we move from broad technology to specific market applications? Or is this conference just a fluke?

Nano isn’t for the faint-hearted. First, no one can agree on what it is. Is Intel nano or not? What makes a property novel? Second, it is complex. It’s hard enough to understand how things act, react, move and behave in the normal world, let alone try to create products in a realm where those laws no longer apply.

Did I mention that conclusive toxicology studies aren’t available? Who cares if there are thousands of products on the market that are toxic (for example batteries and cleaning supplies) if nano gets a bad public rap like genetically modified foods?

We haven’t talked returns yet. Venture capitalists like big exits. Too bad they are few and far between for nano companies to date and the future prospects are not that hot. On the IPO panel I sat on at the conference, the highest expert projection was four nano IPOs this year. I think we will have to stretch our definition of what is classified as a nano company to get that count.

Time to market doesn’t work in nano’s favor when it comes to venture capital. It takes lots of capital and a commitment to many rounds of financing. Five to seven years is average for most nano companies – with the exception of clinical trial products, which may come to market in our children’s lifetimes. It is a long, long road when Food and Drug Administration approval is thrown in the mix.

We didn’t even tackle the question that gets many people rabid: Is there really a nano market? Or is nano just a platform technology that has no meaning without a vertical industry application. If you are a tool company, you may not care what vertical you are selling into, but only that your prospect is doing nanoscale research or manufacturing that requires processes and equipment unique to the technology. Some venture capitalists say there isn’t enough upside potential in tool companies to make it worth an investment, though.

While I’ve spent most of my column discussing why venture capital isn’t a great fit for nanotechnology, this isn’t a recent conclusion. Our tracking of the space over the years has shown that a very small percentage of companies are venture-backed. This is an area where early hype drove a lot of curiosity and interest. But the players with expertise and risk tolerance have stayed, thus the series of large follow-on rounds in 2005. Many of the interested, but not invested, will move on to the next fad. Can anyone say clean tech?

I wish nano was continuing to be a hot investment trend, but it isn’t surprising that the bloom is fading. Deep vertical venture capitalists will invest in the technology when it makes sense for the industry. Corporate players will invest, acquire and partner with the companies that will best further their long-term goals. And government will continue to feed the valley of death funding for at least the short term.

I’m trying to be realistic about the “bubble” that always seems 18 to 24 months out. Nanotechnology is here to stay. Venture dollars flowing to the space will continue to grow. There are endless applications and opportunities for nanotechnology to improve and revolutionize our lives. However, the growth in “nano” investing as a specialty is reaching its peak. Those who can stomach the ride will remain.

Patti Glaza is vice president and publisher at Small Times. She can be reached at [email protected].

Team Phonak has a message for the other cyclists racing in the Tour de France this summer: Eat our dust. That is, if their 15-pound BMC Pro Machine bicycles churn up much dirt during the 2,256-mile marathon journey that begins in Strasbourg, France.

The Pro Machine owes its featherweight status to Easton Sports, which engineered and manufactured the frame using a carbon nanotube-based material called CNT Nanotechnology. Carbon nanotubes give the frame its needed strength and stiffness without the weight of traditional materials.

“Durability improves with the use of CNT Nanotechnology,” said John Harrington, vice president of Easton’s bicycle division. “The weak link is the epoxy. Nanotubes strengthen the resin in the matrix.”


The BMC Pro Machine weighs about 15 pounds and retails for $3,650. Photo courtesy of Phonak Cycling Team
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Working with the nanotech company Zyvex, Easton found a way to evenly disperse nanotubes into resins that could be formed in components such as seat posts and forks. Easton introduced its CNT Nanotechnology frame in 2005, which the Swiss-based Team Phonak used in the Tour de France.

Easton customer BMC showcased the frame with its new Pro Machine bicycle during the Eurobike show in August, and won a gold award for design at the show. Team Phonak will ride the commercially available Pro Machine at this year’s Tour de France.

“We’re shipping now to the dealer,” Harrington said. “The sales have been really good. We can’t keep up.”

As a former racer and biking enthusiast, Harrington knows how the slightest advantage could mean victory for the 26 cyclists in Team Phonak. While they climb grueling mountain slopes, he’ll be in a race of his own. “It’s a never-ending chase to be lighter, stiffer, stronger.”
– Candace Stuart

Doggone.

AIBO, the robotic dog that barks, plays fetch and follows commands, is being discontinued. Sony confirmed in late January that it no longer manufactures the mutts, whose canine capers were achieved in part with MEMS sensors.

“Sony as a whole will be focusing on three core business domains: electronics, games and entertainment, with an emphasis on profitability and strategic growth opportunities,” wrote Kirstie Pfeifer, a spokesperson for Sony Electronics Inc. AIBO, with a pedigree that dates back to 1999, apparently made piddling profits even though it cost one to two grand a pup. “In light of this focus, it has been decided to discontinue the AIBO business.”


As one of the 2005 litter, this AIBO model was among the last available to buyers. Photo courtesy of Sony
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AIBO created a special breed of pet enthusiasts. Owners have formed clubs, organized races and traveled to international gatherings to show off their version of man’s best friend. To entice buyers, Sony infused more and more intelligence into the bloodline. The latest generation understands more than 100 English words as well as a smattering of Spanish.

While AIBO is headed for extinction, some of its DNA may live on. Pfeifer said Sony will continue to do research and development on AIBO’s sound recognition, visual recognition and other technologies that could be applied in future products.
– Candace Stuart

Making the various patent systems of the world work more effectively together is a perennial concern. They have differing criteria, grant protection for different periods of time, and only cover their own geography. That poses challenges in an age when companies source products on a global scale and seek to address worldwide markets. Would it be better if patent offices were more alike? Small Times’ David Forman asked four experts from different countries how the globalization of intellectual property impacts micro and nanotechnology.

Q: Do your clients in the micro/nanotech sector currently file for patent protection in a variety of countries? In your opinion, which systems work best? Why?


Donald Featherstone
Director
Sterne, Kessler, Goldstein & Fox
Washington, D.C.
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FEATHERSTONE: Our clients within the micro/nanotech sectors generally seek protection abroad. Most commonly our clients file within Europe and Japan because of the overall market importance of these regions and their well established patent systems. Additionally, nanobio clients also tend to file in China and India because of their large populations, while nanoelectronics clients tend to also file in China, Korea, Taiwan and Singapore to target manufacturers. While there is room for improvement in patent systems throughout the world, we have found that the EPO (European Patent Office) and JPO (Japan Patent Office) systems work reasonably well, which is likely a reflection of their experienced examining corps.

KREYE: Clients from the nanotech sector usually are looking for broad protection. Thus, if possible they like to file in Europe, the U.S. and Japan. China is also becoming increasingly important. However, some companies in the nanotech field are small research entities and don’t have the financial capability to seek broad global protection. I usually recommend to those clients to file a German national application and within the priority deadline a PCT (Patent Cooperation Treaty – a global IP collection hosted by the World Intellectual Property Organization) application. This saves costs at the beginning and at least ensures that they can claim a good priority.

SUSTRIK: For clients seeking international protection, the PCT filing system continues to be an effective and cost-efficient route. However, the cost of entering national phase at the end of the PCT period continues to be a significant hurdle for many mid-size and startup companies.

WILLIAMSON: Most of our nanotech experience within the firm lies in the optics field, with MEMS devices and the like. We have not encountered any greater variety in the level of service or the competency of examination in this area than in any other sector.

Q: Would your clients benefit from global patent harmonization? If so, how?

FEATHERSTONE: Global patent harmonization needs to occur. However, realistically our current nanotechnology clients are likely to see little if no benefit from current global patent harmonization efforts. The need to harmonize patentability standards is not as great as the need to strengthen global patent enforcement. With stronger and more effective enforcement of patents, our clients are likely to be more willing to engage in joint development with overseas companies and introduce products into other markets sooner.


Boris Kreye
Partner
Bird & Bird
Munich, Germany
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KREYE: This depends a lot on how the system would be harmonized. Some formal aspects are certainly beneficial. Harmonization would strengthen the legal certainty of what can be protected in the different jurisdictions and it could reduce administrative work. Nevertheless, whether such harmonization is really desirable for my clients can only be answered if the would-be regulations are known.

SUSTRIK: Global patent harmonization would be beneficial in simplifying matters – in particular, the issues regarding novelty and prior public disclosure. It should make it easier to develop a global, intellectual property protection strategy and should also provide opportunities to reduce costs.

WILLIAMSON: Global patent harmonization is a very commendable goal and in many ways the patents profession is moving toward harmonization. For example, outside of the area of computer implemented inventions there is really not a great difference between major jurisdictions regarding patentability. I don’t believe that further harmonization would be beneficial to the nanotech sector in particular.

Q. Would there be any negative implications of global patent harmonization? If so, what are they?

FEATHERSTONE: A possible negative consequence of global patent harmonization is that regulators and legislators will lose sight of strengthening and more consistently enforcing patent rights. While developing global patentability standards is laudable, legislators and regulators cannot lose sight of the most important need – better global enforcement.


Gordon Sustrik
Partner
Bennett Jones
Edmonton, Alberta
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KREYE: Global harmonization would likely require global prosecution. Therefore, if a patent is not granted, this would have worldwide implications. Under this aspect many unharmonized patent systems might leave some protection. Besides that, different countries have different standards for patentability. For example, a German patent generally has a higher threshold for non-obviousness than a European patent. What will be the global standard?

SUSTRIK: No.

WILLIAMSON: Harmonization can bring certainty through uniformity. However, we have to ensure that the levels of examination are maintained at a uniformly high level and harmonization does not result in a lowering of standards. The nanotech sector would not benefit in the long term from a flurry of granted patents of dubious validity.

Q. Do you see micro and nanotech patenting activity as unique in any way? Must clients in the micro and nano sector be more attuned to global protection?

FEATHERSTONE: Nanotechnology patenting activity is unique in several ways. Nanotechnology is evolving at a time when the global marketplace is extremely patent savvy. Furthermore, as author Thomas Friedman has observed, the world is far “flatter” today, leading to aggressive global competition. As a result significant interest and resources are being spent globally to secure patent protection by companies – not just in their domestic markets, but throughout the world. Second, nanotechnology is somewhat unique in that it is multidisciplinary and often quite complex, which strains worldwide patent offices.

KREYE: Nanotech patents are unique in a way because the category of claims is an issue. In some areas you have old material but now on the nanoscale that exhibits new properties in a particular application. A wide product claim may not be obtainable because just the size of a material may not be a proper feature to render something new and non-obvious. Thus, only a claim for a specific application could be obtained.


Brian Williamson
Head of patent prosecution
Olswang
London
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SUSTRIK: On a strategic basis, I do not believe there is anything particularly unique to the micro and nanotech patenting activity. There is a need to integrate the intellectual property protection strategy with the client’s development strategy and marketing strategy. The nuances arise from the nature of the business involved. As with other sectors (biopharma, information technology, etc.) important elements of the overall business plan drive specific decisions with respect to intellectual property protection.

WILLIAMSON: I would say that most nanotech applications come proportionately from small research-based startups and young companies. For that reason nanotech companies have to be careful how they spend their money and should perhaps consider foreign filing programs very carefully. I would recommend, as with most clients, that they focus on the industrially and commercially mature markets with a secondary, but regularly reviewed, focus on emerging markets.

Q. Do you feel your country’s system suffers from overlapping patent claims and/or confusion about nanotech? If so, what could be done to remedy the matter?

FEATHERSTONE: Notwithstanding the general shortcomings that plague the USPTO, the USPTO has focused on improving examination of complex nanotechnology patent applications. As a result – with this extra focus – generally the PTO is up to the task of reviewing complex nanotechnology patent applications. Last year our firm conducted a review of the patent prosecution histories of every nanotube patent that issued in 2004. While some issues existed regarding the quality of the examination, we generally found that the examination was solid, and trending in the right direction.

KREYE: I think the EPO has people who are qualified in nanotech but it is a new and undefined field. One should not rely on a specialized and well-trained examiner in the EPO but should take into account that prosecution may take some time. As I said, available prior art and the respective knowledge are a big issue. At the end, experience, number of patents and some technical training are probably the best remedy.

SUSTRIK: The Canadian Patent Office suffers from a general lack of appropriate staffing levels, and from a lack of specialized examiners. As with other specialized fields such as biopharma, the answer lies in hiring individuals who have educational or industry experience in the relevant field. Such individuals can then offer specialized internal training to other examiners.

WILLIAMSON: This is a criticism which has been leveled at new technologies across the board. I remember biotech not so long ago suffering from this complaint. I don’t believe that nanotech applications suffer from poor examination at either the UK or the European Patent Offices. However, as examiners become more experienced, improvements can presumably still be expected.