Member Info for Nanonano

Nanoco Group, a UK-based SME that was spun out of the University of Manchester in the early 2000s, struck a “transformative” $150 million settlement with Samsung last month, ending a patent infringement dispute spanning the US, Germany and China.

The assertion campaign that brought about the big-money deal would not have been possible without the backing of a litigation funding entity, Nanoco’s CEO Brian Tenner has said. And now, he told IAM in an exclusive interview, the company is eyeing up other infringers and forming a new strategy for future patent monetisation efforts.

Nanoco asserted five patents against Samsung in the US prong of the legal action, which got underway in 2020. These cover fundamental inventions relating to cadmium-free quantum dots, which, Nanoco claimed, are used in Samsung’s QLED TVs. After 47 challenged claims were upheld in inter partes reviews at the USPTO’s Patent Trial and Appeal Board, and with just hours to go before the beginning of a Western District of Texas jury trial, the parties were able to reach an agreement.

Samsung will hand over the $150 million in two equal installments: one this month and one in February 2024. It will owe no further royalties for use of the technology and will also gain ownership of a small portfolio of Nanoco’s non-core patents.

Nanoco will get only $90 million (60%) of this money, with litigation funders GLS Capital and the company’s legal advisors taking the remaining share. Nevertheless, the deal represents an extraordinary boost for Nanoco, which earned just £2.5 million in 2022.

“We have used the word ‘transformational’ to describe this litigation’s significance for the business and its prospects,” comments Tenner. “There are all kinds of reference points to illustrate how important the agreement is.” In the 20 years the company has existed it has raised a total of just £60 million from shareholders, he notes.

“We have had two or three equity raises over the past few years just to keep the lights on, so this net settlement allows us to push that into the long grass and push forward with some of our projects.” Another telling illustration of the deal’s value is that, when it filed suit against Samsung, Nanoco was worth around $75 million – less than the payment it has now won.

The value of Nanoco’s IP

Nanoco has no product of its own on the market, so the settlement underscores the commercial importance of the company’s IP portfolio. According to its 2022 annual report, this includes 503 patents and a “significant amount of know-how and business secrets”.

“IP is important for us as an R&D based company with no product of our own on the market as yet,” explains Tenner. “In the darker days for Nanoco – because we have been jilted at the alter twice: once by Samsung and once by another large company – we started to ask ourselves what the residual value in the business was. cont.....

Probably trying to stir up a bit of froth before the interims.

Interesting to see the specific examples for SWIR and eye tracking and iris recognition- both things the Apple AR/XR device is reputed to incorporate.

I'm not expecting anything huge for sensor materials until 2025 at the earliest. All the other companies beyond STMicro have come on board since 2021, and as the development window is about three years, that would take the company until 2024 before commercial supply is likely to commence, if at all.

I expect the company know this too, and I'm sure that was a large factor in settling for the amount they did with Samsung.

It's been posted before. Sadly only the first five minutes of the presentation, the rest you have to pay for a pass 600 euro, cough!

In the lawyers piggy bank.

Nanoco has gone from being a company that relies on dilution of shareholders equity to fund itself, to a company with enough cash reserves to consider a return of capital to investors.

That counts as transformative IMO. However the company has yet to demonstrate it can sell it;s own tech in the marketplace.

Going forward, the expiring patents for molecular seeding are a concern and the company is largely reliant on a fresh branch of technology for future growth.

May-be, maybe not?

The backers and lawyers take the lions share of that first payment.

I see STMicro's share price has rebounded nicely after yesterday's rout.

If only Nanoco's share could grow in the way STMicro's has over the last few years.

Less carbide used in vehicles, perhaps, but much more vehicles in production equals a win win for everyone in that business.

Tesla have indicated they want to reach sales of 20m cars per year by 2030. Somewhat bold when they produce about 1.5m cars at the moment, but even if they reach a third of that figure the extra demand for components will be enormous, and that doesn't factor in other vehicle OEMS plus other infrastructure using the same tech.

Page 75 of Nanoco's annual report.

Director shareholdings
In order to align the interests of Executive Directors with those of shareholders and to demonstrate the Executive Directors’
ongoing personal financial commitment to the business, Executive Directors will be expected to build up a shareholding. Under
the policy approved by shareholders at the 2021 AGM, the required holding was standardised at 200% of salary for all Executive
Directors. Executive Directors are required to retain at least 50% of any post-tax shares that vest under any share incentive plans
until this shareholding is reached.
Dr Nigel Pickett holds shares substantially in excess of the shareholding guideline (c. 2,072% of salary using the three-month
average closing share price to the end of July 2022). Brian Tenner, having joined the Company in August 2018, is building up
a holding which currently stands at 87% of salary (or 195% assuming 50% of Deferred Bonus Plan awards are retained until the
minimum shareholding is achieved). Liam Gray, having joined the Board in November 2021, is building up a holding which currently
stands at 15% of salary (20% assuming 50% of all Deferred Bonus Plan awards are retained until the minimum shareholding
is achieved). Non-Executive Directors are not subject to the shareholding requirement

Executive's of the company are expected to build up a shareholding reflecting 200% of their annual salary.

The last director deal didn't do much for the share price, it continued to fall.

The only thing that'll drive a significant and stable share price rise are contracts for commercial supply.

I think it would be worth looking at what formulations LG are using in their QNED range. They appear to have partnered with Nanosys, but are they cadmium or cad free dots? The Chinese OEM's seem to be using cadmium or cadmium light (Hyperion) which I think incorporates phosphors, but perhaps they may switch?

Seems odd that the EU have clamped down on 8k displays because they need a higher wattage backlight, but allow cadmium to continue. The OEM's have found it easy to comply with the 8k legislation whilst evading its consequences by creating an eco mode on sets, which can be switched off by the buyer. Not so easy to avoid cadmium use without actually using a cad free QD supplier.

A company like Nanosys has much lower resources to draw on if they were legally challenged when compared with a behemoth like Samsung. I wonder if they would be backed up by the likes of Samsung or LG though, after all they have a vested interest in keeping Nanoco down, especially Samsung.

The news stories continue unabated from QS Ltd.

https://quantumscis.com/2023/03/01/funding-grant-success-helps-quantum-science-expand-lead-free-quantum-dot-production/

"The lawsuit with a known infringement value of $14bn just for US representing a third of total global sales, yields $150m/$90m retained, what would be the point in pursuing anybody else?"

$14bn was a rough estimate based on $1000 per TV set added value over a conventional LCD tv. The amount of lost revenue for the QD's would have been around $90m for the US historic sales based on Dow royalty of $6.60 per item. I would say at least double that for future revenue.

Don't know how long it will take for IR sensors to scale, and its not something within Nanoco's control.

Looking at analysts projections like Yole, it'll be huge eventually, but small initially. They're looking at 2025 to scale, and 2027 before it becomes really mainstream in devices, plus volume manufacturing of SWIR VCSEL's etc. has still to scale up, as you need a SWIR light source of adequate strength in addition to a good receptor.

Alternatively it could scale more quickly and be bouncing by 2024, but there's a lot of risk in that approach, and if they got it wrong, where does that leave the company and its shareholders then, either huge dilution or reduced to a shell, or bust.

That was the inference in my last post.

If Nanoco considers $150m acceptable for past and future sales of 100m+ TV sales, how will that influence future negotiations with other OEM's?

Course that might not be the case, but the share price seems to indicate the market thinks otherwise.

Nanoco should hopefully be able to keep a tighter control of IP and supply for the infrared materials, as the manufacturing is done in house.

I suspect a great deal of information leaked from Dow to Samsung, and wouldn't mind betting there are a few former Dow employees that were headhunted by Hansol and Samsung to assist with their nefarious activities.

My concerns are less about the amount they got from Samsung, but on the potential affect it might have on the value of the business Nanoco can secure going forward.

Those figures don't take into account sales in 2022, or future sales (say double historic figures). If that had been taken into account fully, and multiplied by three for worldwide sales you get pretty much the $/£500m that was bandied about in the media.

If you applied the other rates in that document, you'd be into the billions.