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April 21, 2005

Patently Confusing

Sarah Lacy

Our friends at Lux Research have given us another reason to be wary of all the dollars and hype poured into nanotech: Patent madness. According to a report, released today, as of March 3,818 nanotechnology patents had been issued by the U.S. government with 1,777 more pending. Wow- there must be a lot of innovation going on that will surely yield promising commercial opportunities, right?
Wrong, says Lux.

Due to the recent Nano tech frenzy, many of these overlap and will be useless to enforce. The report describes "crowded and entangled landscape" where startups, researchers and large companies have filed anything that could be a patent in hopes for a windfall in the future. There’s a host of different terminology describing the same thing and a pervasive view that the Patent Office is just approving willy-nilly putting the onus on the courts to sort it out later. Law firm Foley & Lardner, who collaborated on the study, advises startups to submit more focused claims, as broad patents could be rejected in court.

This throws cold water on the idea that just because you've got a patent you've got something. It seems like every year one of those clichés entrepreneurs use in pitching VCS falls by the wayside. Remember "Get big fast" and "First mover advantage"? This may be the year for patent bragging. Since the downturn the number of patents a company has seems to have moved up on the PowerPoint slide, in an attempt to assure investors--and reporters-- they're a real technology company.

Venture capitalist Jeffrey Bussgang writes in his blog about his experience at ecommerce company Open Market. The company had several patents surrounding shopping carts and secure credit card transactions online, which at one time landed them on the front page of the Wall Street Journal with a big jump in stock price following. Guess what? It has been twelve years and no value has ever been extracted from them.

But getting back to nanotech: Questionable patent protection seems an especially dicey issue. First of all, with so many large companies going after the market, start-ups are going to have to have the cash to vigorously defend what they think is theirs. Second, so few actually understand the science of what nanotech is doing and with such a fragmented market, few understand the competitive landscape. There might be a temptation to believe the patent means more than it does, setting some well meaning investors up for a fall. We've certainly seen this in the public markets where small cap nano companies rise and fall on the mere mention of a new patent.

06:28 PM


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» Comments on: Patently Confusing from Empire Hart
Came across this thread, Patently Confusing. Patents are definitely the buzz right now,... my guess is that "IP" will be replacing "strategic" as the new b-word for 2005. At any rate, I see a lot of business plans strong in 'IP'... and the folks that... [Read More]

Tracked on April 21, 2005 05:05 PM



Patently Confusing is a good start on this subject. True in general is that most firms screw around with patenting - either too many unfocussed or low commercial value patents OR almost ignore IP patenting altogether.

Sad but true.

In nanotech, most of what is being filed is often of little commercial value largely due to lack of applications focus in a signifcant market benefitting by the purported innovation.

General Nanomaterials / nanoprocesses are of limited value in IP largely because the IP generated does not block an end use application with a significant barrier to entry to a market.
(markets = money and if you don't block a portion of the market now or in the future where is the IP value ? )

If the IP on the other hand enables a significant commercially valuable performance improvement in a typically existing device / market - there can be real value, if the result is truly differntiating, ( be honest about the actual market pull and the level of threshold for "sigificant" ) desireable, cost effective and there is no other way to get there .....

This is not true for most nano materials efforts, or generic devices ( carbon nanotube sensor platform and similar (?m)ilk.... )

One former boss of mine - Dr. Virgil Elings - founder of Digital Instruments of Atomic Force Microscope instrument firm ( 50% world market share in its time ), had one perspective on patents something along these lines - "patents are like poker - you have to have enough to play, but it is still a crapshoot."

You depend on judge and jury or even the special master to understand what you are claiming and how the defendant infringed. Not a trivial matter in numerous examples. And that testimony does not blow up in your face in the course of trial.

Art Nutter of TAEUS ( recent forbes article ) indicated that strong patents have 1st claims that pass the three finger rule - if you can cover the first claim with three fingers, it might be able to have a decent chance of being enforced ( due to lesser complexity needed to understand and breadth of coverage )

Reality is still yet more shades of grey.

Partnering with competitors has to be done very carefully, else on occasion it can bite your ass off.

Applications focussed patenting enabled by nano and described as such in a patent with useful specificity that can be upheld ( due to novelty and absence of prior art ) can find paths to being commercially significant.

And lastly are the boneheads who think patents don't matter enough to file provisionals regularly when their engineers invent, because the manager thinks the company can license, "as this is done all the time" .... ( sound strategy ? but you better license what you need first ..... to ensure there is truth to your strategy.

Yours Truly,

merely a nanoengineer

Posted by: Mark Wendman at April 22, 2005 02:42 PM

Challenges Facing the PTO: Too Little? Too Late?

Patent offices around the world are struggling to evaluate and prosecute nanotechnology
patent applications. As the US patent system expands to accommodate nanotechnology-related
inventions, the PTO has yet to implement a plan to handle the soaring number of patent
applications being filed. The rise of nanotechnology is presenting new challenges and problems
to this overburdened agency as it attempts to handle the enormous growth in applications filed
and patents granted in a wide rage of disciplines encompassing “nanoscience” or
“nanotechnology.” Some shortcomings at the agency regarding examining nanotechnology
applications requiring urgent attention are discussed below:

(a) Lack of a Technology Center: The agency lacks a dedicated Technology Center
(department) to handle applications on small tech. As a result, US patent examiners lack focused
expertise in nanotechnology. Some have criticized this, especially since there is traditionally
little collaboration or communication among the various technology centers. However, the PTO
has no plans to form a new technology center, primarily due to the interdisciplinary nature of
nanotechnology. This author considers the formation of a separate technology center premature,
and instead suggests creating a working group/committee within each technology center that
identifies small tech patent applications as they are filed, formulates examination guidelines,
undertakes training of selected examiners, and periodically meets with its counterparts from other
technology centers. A progress report should be periodically presented to PTO customers at
nanotechnology partnership meetings (discussed below).

(b) Lack of a Classification System: There is no formal classification scheme for US
nanotechnology patents.41 Additionally, the PTO lacks effective automation tools for
nanotechnology “prior art” searching. This could render examination unfocused and inefficient,
resulting in the issuance of unduly broad patents. Some patent practitioners argue that a
separation of the search from the examination of a patent application, as proposed by the 21st
Century Strategic Plan of the PTO, could further undermine the examination of small tech

(c) High Attrition: The PTO is under-staffed in numerous examining areas and it is plagued
by high attrition rates.

(d) Funding Problems: PTO’s funding problems are compounded by Congress’s longstanding
practice of “diverting” user fees collected from patent applicants to the general budget.43
Naturally, many of the PTO’s problems would be solved by ending this practice of diverting user
fees to other agencies. In fact, the pending legislation encompassing the 21st Century Strategic
Plan of the PTO promises to end this diversion.

(e) High Patent Pendency: The backlog in patent applications continues to build. This
slows the ability of businesses to bring innovative new products to market. Since there is a
backlog of almost half a million patent applications, presently the average time to process an
application (i.e., patent pendency) is over two years44. However, given the current trend, the
agency expects this backlog of unexamined patent applications to skyrocket to more than 1
million by 2008 (it was 70,000 in the mid-1980s). This implies an average pendency of 3-5 years
(or longer) for patent approvals.45 Since small tech patent applications are spread throughout thegency, it may be virtually impossible even to gauge the precise backlog in this case.

(f) Limited Industry-PTO Interaction: Only a handful of experts from industry or
academia have lectured on nanotechnology at the PTO. In fact, the first-ever Nanotechnology
Customer Partnership Meeting was held at the PTO on September 11, 2003.46 The meeting was
designed and developed to be a forum to share ideas, experiences and insights between individual
users and the PTO. However, the agency does not intend to use the meeting to arrive at any

(g) No Examiner Training or Guidelines: To date, no training modules or examination
guidelines have been developed to educate patent examiners in the complexities and subtleties of
nanotechnology. No written guidelines for the practitioner have been published in the Official
Gazette of the PTO.
The results of the shortcomings cited above are all too familiar to the patent community:
 An improper rejection of a nanotechnology patent application due to an examiner’s
erroneous conclusion that the subject matter is not novel; or
 Issuance of an “overly broad” nanotechnology patent that infringes on previously
issued patents and/or gives far too much control over a particular swath of
nanotechnology, allowing the patentees to unfairly exclude competition;47 or
 Issuance of a nanotechnology patent in spite of existing prior art that was
overlooked during patent examination.
Either of the above results is unacceptable. Issuance of patents of poor quality48 (or too
many “invalid” patents on early-stage research) is likely to cause enormous damage to the global
nanotechnology industry by:
 suppressing market growth and innovation; and/or
 causing a loss of revenues, resources and time; and/or
 discouraging industry from conducting R&D and inducing unnecessary licensing;
 resulting in a flood of appeals and infringement lawsuits.

As industry and trade groups continue to highlight these concerns to the PTO, the agency
appears to have finally taken notice. However, critics charge that the PTO has failed to take any
concrete steps to address the numerous concerns of the small tech community. They point to the
fact that the PTO has not taken any proactive steps to train its patent examiners in
nanotechnology or undertaken any classification projects setting out the sub and cross disciplines
in the field, generally first steps in organizing new technologies.

Posted by: Dr Raj Bawa at May 1, 2005 04:38 PM

Nanotech patents and the crowd around them are no different than patents in medical, technology and business fields. By definition, the USPTO will always be catching up to inventors.

But a reasoned view of the competitive patent landscape is often difficult to come by for those looking in, and I would guess that only a small number of researchers and attorneys actually have a precise sense of the important patents and how they stack up.

The oft-heard statements that patents are being loosely allowed by the USPTO may comfort some, but our experience is that the USPTO prosecutes these patents in the same manner as any other art area: Requiring disclosure of the relevant art, and challenging claims that are obvious or redundant, or claim language that is overly broad.

There are no shorthand methods, yet, to reading patents and understanding the patent landscape in any field. It takes time and focus to do it, and the proper background. Tracking numbers of patents and claims with key words may be interesting, but tells us little about the value or originality of the work.

Posted by: Robert Joseph Crowley at May 6, 2005 07:25 AM

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