A Nano Startup Bets on Its Patents

Every few weeks, Nantero general counsel Robert Lindefjeld and his patent team travel to the Boston area or Silicon Valley, with one goal.

"We come out here to shake the bushes," said Lindefjeld during a recent visit to the company's office in Sunnyvale.

Nantero's engineers are using tiny carbon nanotubes to develop what they hope will become the next generation of semiconductor devices. And it's Lindefjeld's job to meet regularly with the company's engineers in Sunnyvale and Nantero's homebase of Woburn, Mass. to find out what they're doing. His legal team then rushes to file patent applications on their inventions as quickly as possible.

On one trip, "we went out to California and wrote up a patent application that day," Lindefjeld said.

Nantero's products may be small, but its ambitions are big. It wants to revolutionize consumer electronics, and much of the company's efforts have been focused on developing small high-density memory chips to replace all existing forms of memory. Last month, after lengthy delays, the company released design specifications for the chip at a semiconductor conference in Spain.

"If everything works like we expect, our chips will be in every cell phone, laptop and camera in the world," Lindefjeld said.

And Lindefjeld's legal team is central to the making that happen. The company's primary business strategy is to develop, patent and then license its nanotechnology innovations to companies such as Lockheed Martin Corp. Meanwhile, Lindefjeld must keep an eye on product safety issues as the Environmental Protection Agency begins regulating nanomaterials.

Some studies have shown that nanomaterials may be health hazards if inhaled, like asbestos. So lawyers at nanotech companies like Lindefjeld's are trying to ensure that new rules and regulations issued by the EPA don't stifle innovation.

"The EPA is trying to make sure we don't have a problem," he said. "They're just trying to do the right thing,"

For years, nanotechnology (the manipulation of matter on an atomic scale) has been hyped for its potential to cure diseases, solve energy problems, and make computers run faster. Companies now sell more than 1,000 nanotech-based consumer products, from clothes to golf clubs to household cleaners, according to The Project on Emerging Nanotechnologies , a partnership between the Woodrow Wilson International Center for Scholars and the Pew Charitable Trusts.

Nantero has focused its efforts on making a tiny memory chip for electronic devices using carbon nanotubes, which are microscopic cylindrical molecules produced by any natural or man-made combustion process. They can also be manufactured.

They're about half as dense as aluminum, 50 times stronger than steel, and efficiently conduct heat.

"They really have pretty amazing properties," said David Goren, a partner in Fish & Richardson's Silicon Valley office who works on patents for nanotech companies but doesn't represent Nantero. "It's just a matter of time before someone finds a way to make really interesting products with them."

Carbon nanotubes may have intriguing potential, but realizing that potential can be a real struggle for small companies.

For years, Nantero promised its memory chip would be unveiled soon. But delays followed delays. Finally in September, Nantero unveiled "[t]he world's first publicly disclosed Nanotube RAM (NRAM) product" at a semiconductor manufacturing conference in Seville, Spain.

Nantero hopes to make its own memory chips someday. But its primary strategy depends on striking licensing deals and partnerships. "The entire purpose of the company is generating licensing revenue," said co-founder Brent Segal, who is no longer with the company. Lindefjeld explains the strategy this way: "The more people who use your technology, the more money you make."

Lindefjeld won't provide any revenue or licensing figures for the company. In 2007, the company had about $15 million in sales, according to data from Thomson Reuters.

The company's survival depends on new inventions it can patent, license and eventually monetize. That's why Lindefjeld and his lawyers meet with engineers in Boston and Sunnyvale every few weeks.

Getting nanotechnology patents approved, though, is no easy task. The U.S. patent office will often deny them as obvious, saying they're just smaller versions of current patents.

"It can be an uphill battle," Goren said. That hasn't stopped Lindefjeld from encouraging Nantero's team of two patent lawyers and four patent agents to file at least one patent application every month. Three technical advisers and one paralegal round out the rest of Lindefjeld's team.

The company now has about 108 U.S. patents and about 200 in other countries, most of which cover the design and manufacture of its various nanotube-based chips.

For example, this year, Nantero received a patent for a microscopic nantotube switch that controls the path of electricity along electronic circuits. The switch will be a fundamental building block for all the nanotube-based chips Nantero designs, whether they're memory, logic or photovoltaic. "Think of it like a transistor in a radio, or the old tubes in televisions," Lindefjeld said. "What makes this switch so important is that it's really, really small, like the size of an atom."

Nantero has fewer patents than big semiconductor makers like Samsung Electronics Co., which filed more than 3,500 patents in 2009 alone. But the patents Nantero does have are cited frequently by other companies for a wide range of uses, according to the Institute of Electrical and Electronics Engineers.

In fact, Nantero's patents are ranked second among semiconductor manufacturers on the IEEE's 2009 Patent Power Scorecard, ahead of Intel Corp. and Broadcom Corp. Samsung topped the chart.

"They are working in a new technology that could well be a breakthrough if it worked," said Anthony Breitzman, a principal at 1790 Analytics who worked on the scorecard.

Lockheed Martin was so impressed by the military applications of Nantero's patents that it bought the company's government business unit in 2008 for an undisclosed amount. It also entered into an exclusive licensing arrangement for government applications of Nantero's IP portfolio. Together, the two companies developed a radiation-resistant version of the NRAM chip that was successfully tested during a Space Shuttle Atlantis mission in May 2009.

About half of Nantero's 60 employees left to join Lockheed, including co-founder and chief operating officer Segal, who had been managing the company's patent portfolio.

After his departure, Nantero hired Lindefjeld, who had spent most of his career as an IP lawyer at Jones Day , to head its legal department. Nantero has about 60 employees again, and Lindefjeld plans to hire more patent attorneys and agents instead of turning to outside counsel to do routine patent work. And they'll all work from home, wherever that might be.

"For some reason, people think you can't work from home and still be a good lawyer," Lindefjeld. "We will save a ton of money by doing that."

While monetizing Nantero's inventions takes up most of Lindefjeld's time, that's not his only major concern. He's also responsible for dealing with environmental regulators and the potential, but unclear, health risks associated with carbon nanotubes.

The tiny particles may eventually help cure diseases or make airports more secure, but they're also considered chemical substances under the Toxic Substances Control Act. The EPA has found potential negative health effects from breathing airborne carbon nanotubes in their raw form, similar to breathing asbestos.

But there is no conclusive evidence yet indicating how dangerous breathing carbon nanotubes may be, or how dangerous other nanomaterials might be, said Jim Alwood, an environmental protection specialist with the EPA.

"No one has seen anything that looks like carbon nanotubes before," said James Votaw, a regulatory counsel at Wilmer Cutler Pickering Hale and Dorr in Washington, D.C., who works for Nantero on environmental issues. "They're projected to be an extremely important industrial material in the future, and there will be lots of these in commerce. The aim is to control how much of these are in the environment until we better understand any health impacts they may have."

Lindefjeld is responsible for making sure Nantero's employees follow the workplace safety regulations required by the TSCA and the EPA, such as wearing protective clothing and goggles when they handle nanomaterials. He's also trying to make sure new regulations the EPA implements don't hurt the nanotech industry.

In a Dec. 7, 2009, letter, Lindefjeld urged the EPA not to issue new regulations until there is clear-cut evidence that carbon nanotubes present an "unreasonable risk." Nevertheless, the EPA issued its first rule for significant new uses of carbon nanotubes in September, which requires companies to notify the agency 90 days before making, importing or processing them. Under the rule, which takes effect Oct. 18, the EPA can limit or even stop their plans.

Lindefjeld said he supports the EPA's efforts. The agency should control a substance that could prove harmful in some form. "But it is important that the regulatory environment not be utilized to squelch nascent technologies that will bring the U.S. into the next century as a leader in technology," Lindefjeld said. "

Update: This article has been fixed to correct a mistake. Due to an editing error, the article referred to Brent Segal as the former CEO of Nantero. He is actually the former chief operating officer.