Turning Nanotech Ip into Commercial Products

Especially in an early-stage technology such as nanotechnology, intellectual property is worth its weight in gold. Nanotechnology has the potential to spur some of the most lucrative product lines ever developed, "and if you can lock up the foundational technology, there's no doubt you've got something special," says Edward K. Moran, director of product innovation for Deloitte & Touche's technology consulting practice.

But IP alone is not enough to guarantee the success of a fledgling nanotech business. "I think a lot of entrepreneurs become overly fascinated with IP. They see it as a panacea," Moran says. "What they often don't realize is that real 'heavy lifting' takes place after you get the patent."

Nik Rokop, president of Chicago Microtechnology & Nanotechnology Community, makes the same observation. "Most companies spend too much money trying to patent instead of focusing on product development and application," he says. Seduced by IP that has seemingly obvious applications, start-ups often fail to perform market assessments and due diligence.

They may get excited about a novel nanotech-based coating process, for example, losing sight of the fact that it has to compete with traditional processes used to perform the same function. "The value of the IP associated with these alternatives will only be proven by the marketplace," Rokop says.

Market potential was something that Quantum Dot Corp. factored into its IP strategy right from the start, says Ken Barovsky, the company's vice president and intellectual property counsel. Realizing that quantum dots had extremely diverse applications, "we spent a lot of time, effort, and money doing marketing surveys to try to determine the best ways to commercialize the product."

Ultimately, Quantum Dot focused on commercializing its semiconductor nanocrystal technology in the broad category of biological, biochemical, and biomedical applications. And unlike many in the nanotech field, Quantum Dot is already making money selling its products to more than 1,000 customers, including major pharmaceutical companies and academic research centers.

Likewise, Degussa's IP strategy involves not only protecting the IP for its proprietary nanomaterials--including zinc oxide and indium tin oxide--but also "selectively protecting the IP of related applications and processes in the economically most promising fields," such as cosmetics, dispersion technologies, and coatings, says Markus Pridöhl, senior manager for R&D at Degussa Advanced Nanomaterials.

"The bottom line is, you can have great IP, but it will do you no good if there's no market for it," says Douglas W. Jamison, a vice president at "tiny tech" investment house Harris & Harris Group. "A good business plan and fantastic management--those are the keys to success from a business standpoint."

However, many nanotech start-up companies--often managed by scientists--may not be equipped to bring their nanotech IP to the marketplace. Recognizing this, three nanotechnology entrepreneurs formed Benet Group in Washington, D.C., just three months ago.

"We are not a venture-capital group, and we are not an incubator. We are a company that creates new companies from raw technology to satisfy a specific market need," says Clark Taylor, a former vice president of business development for Veeco Instruments and one of Benet's founding partners. The other two founders are Chris Anzalone, former CEO of NanoInk, a private nanotech company commercializing dip-pen nanolithography, and F. Mark Modzelewski, founder of the Nanobusiness Alliance, an industry association.

Armed with a wealth of nanotech R&D contacts, "we literally form companies," Taylor says. "We license the technologies from the institutions. We hire the technologists, executive staff, and the marketing people. We develop the business strategy. And we sit as acting chief executive officer through the technical proof-of-concept stage. So we are really a nanotech new-venture pipeline. We are building the product for venture capitalists to invest in."

With solid business plans, Benet Group expects to attract venture capitalists that have been reluctant to invest in nanotech. "The venture community has been stung by the dot-com fiasco and is feeling a little tenuous about raw technology right now," Taylor says. "They've got plenty of money to invest, but they are cautiously waiting to see what's next."

Benet Group is now poised to test its business model for the first time. It is "very close" to founding its first company, about which Taylor will reveal little except that it will be based in Virginia. And Benet Group sees the opportunity to start many more.

"There are billions of dollars going into nanotechnology at the research level over the next five years," Taylor says, but few entities are positioned to capitalize on that technology. "So who is going to meet the market need? Who is going to bridge the gap from technology to company? That's our niche. That's what we are set up to do."