Nano World: The rise of nanotech secrets

By CHARLES Q. CHOI   |   Nov. 26, 2004 at 9:18 AM
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NEW YORK, Nov. 26 (UPI) -- Nanotechnology ideas that define how devices or parts are made most often are defended visibly with patents, but in the future the field may see the rise of secrecy to protect these crucial concepts.

"In terms of what is trumpeted by companies, I would say the patents are likely to be eclipsed by trade secrets," Matthew Nordan, vice president of research at the nanotechnology analysis firm Lux Research in New York, told United Press International. "You can already see this happening in a bunch of places where several nanotech companies trumpet their trade secrets as much as their patents."

Nanotech companies now mostly guard their research investments with patents, where an idea is made public in exchange for the right to exclude others from manufacturing, using or selling that invention. A trio of reasons could trigger a shift from publicity to secrecy, Nordan said.

First, if a company promotes its technology far and wide for a device, such as a liquid crystal display or LCD, via a patent, "you can be pretty sure others won't abuse the patent because to fabricate the LCD you'd need to spend billions on a plant. With nanotechnology, you can throw away a barrier for people to infringe on your patent, the barrier of capital expenditure."

For example, Nordan referred to nanotechnology under development from Cambrios Technologies of Cambridge, Mass.

"They use viruses and other microbes not to synthesize organic material, such as DNA or RNA, but to create inorganic nanostructures. In much the same way a mollusk grabs calcium from the sea and makes its shell, Cambrios is using viruses and other microbes for circuit manufacturing," Nordan said.

"Right now, to assemble a chip large sums are money are needed to build a lab facility," he explained. With nanotechnology such as that from Cambrios, "if you can grow a chip with benchtop tools available to any genomics researcher today, you can pretty dramatically change the cost economics to make a chip. Nanotechnology makes recipes matter more than facilities."

Next, since it can take years for a novel material to come to market, patent protection for it may expire before that happens.

"For instance, Hyperion Catalysis in Massachusetts is by far the biggest manufacturer of multi-walled nanotubes, and I hear about companies such as Nanocyl in Belgium, and Shenzhen Nanotech in China gearing up to rush in and compete when the core patents run out this year," Nordan said. "You can put a lot of blood, sweat and money into a patent, incur a lot of cost to make a thing, and when it's time to start in volume and reap the rewards, the patent runs out and competitors rush in."

Finally, Lux researchers suggest manufacturers in developing economies with weak or poorly enforced intellectual property laws, such as China and India, might read Western papers, inspect their patent filings and concoct homegrown alternatives that either remain legal or go unpunished. By 2009, they said, nanotechnology may join in global trade imbroglios over intellectual property that currently manifest themselves in Chinese pirated software and Indian generic drugs, with diplomacy failing to solve the problem fast enough to protect Western manufacturers.

"At the SEMI NanoForum (in Austin, Texas, in November), speaker after speaker said that if you were going to take intellectual property to China, you have to be prepared to lose it," Nordan said.

In the face of these pressures, Lux researchers said nanotech leaders will respond by taking a page from the specialty chemicals industry and relying more on trade secrets to protect sensitive intellectual property that cannot risk the visibility of a patent.

"It's not a change that is going to happen overnight. But it is a general trend we see, particularly among nanotechnology startups," Nordan said.

The most famous trade secret currently is certainly the formula for Coke. Such trade secrets receive legal protection in the United States via the Economic Espionage Act on the federal level, and the Uniform Trade Secrets Act that most states have adopted in some form.

To win cases against those accused of stealing a trade secret, a company has to demonstrate it took efforts to keep secrecy -- such as high security, nondisclosure agreements for employees and third parties, access logs and other monitoring schemes -- and clearly marked confidential information.

"This could create a boom for physical security and information security firms," Nordan said.

Trade secrets, however, are rife with problems, said John Miller, a managing editor at the journal Nanotechnology Law & Business and vice president of intellectual property for the Pasadena, Calif., nanotech firm Arrowhead Research Corp.

"If anyone else develops the trade secret on their own, your trade secret is destroyed," Miller told UPI. "And if someone steals your trade secret and puts it on the Internet, you can sue, but if they're insolvent, you're done."

Moreover, advertising one's patents is an excellent way to raise capital and interest.

"And if someone later infringes on your patent, you can sue. You can use patents offensively. Trade secrets are more a defensive tool," Miller said.

Miller argued trade secrets would not eclipse patents in importance.

"Even if companies in countries like China or India don't respect patent law, if they try to sell products protected by patents in the U.S., they can't. Similarly, if the product is patented in Japan or Europe, they can't. And the U.S. and Europe and Japan are the biggest markets in the world, more than 50 percent of the world GDP," he said.

In addition, "as India and China become increasingly innovative in the international system, there is good reason to believe they will strengthen intellectual property protection," Miller said.

Nordan agreed India and China would one day strengthen intellectual property protection but he disagreed over how long it would take.

"The rhetoric in China is extremely strong about respecting intellectual property and vigorously enforcing intellectual property protection, but the action on the ground is not matching the words," he said.


Nano World is a weekly series by UPI examining the developing field of nanotechnology. E-mail

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