How Quantum developers must leverage their intangible assets to position themselves in a developing market

There have recently been massive technical breakthroughs in second generation (2G) quantum technologies across a range of applications including in simulation, sensing & metrology, optimisation, computation and communication. Quantum can be a game changer across all walks of life – from accelerating scientific and medical discoveries and enabling completely new territories of computing, to reshaping the financial world.

Quantum companies continue to expand all along the quantum stack, and it is becoming clear that there is room for collaboration and acquisitions. A great example is the collaboration between Honeywell and CQC, where a hardware and a software quantum developer (respectively) merged to become Quantinuum in 2021.

Interestingly, the pace of innovation and invention is not necessarily being reflected in recent patenting trends of the technologies, with just 1,500 quantum patents granted worldwide last year. Quantum technology is still in early stage development and a lot of a businesses' innovations are therefore niche and incremental. This, coupled with the barrier to prove a quantum effect, mean that most inventions do not overcome the strict requirements for patentability, despite being necessary for the progression of the technology.

The complex nature of quantum technology requires considerable investment into research to achieve even an incremental improvement. It is often smaller companies, typically closely linked to universities, that are the pioneers in this quantum space. For them, securing funding can be challenging because there is a high-risk to capital invested due to the lack of patents to show potential suitors, and limited prospect of short-term revenues or profits. So these companies have to perform a delicate balancing act between demonstrating a clear use case for an innovation, and demonstrating a secure consolidation of the technology and the ability to control it in the market.

Careful management of the assets they hold - whether patentable or not - allows quantum innovators to negotiate these choppy waters as the quantum stack becomes more established and the quantum value chain begins to take shape.

Breaking that down a little further, senior management must have a clear understanding of the assets supporting its offering, how those assets contribute to their value proposition and distinguish it in the market place, and how those assets can be controlled to prevent value leaking away. Control may come through patents, but where not available, businesses must use more creative approaches using secrecy/trade secret law, contract law and controlled relationships.

Without this understanding, it becomes difficult to demonstrate to investors that you have sustainable competitive advantage, or to negotiate the scope of any collaboration on new quantum developments: there is a thin line between knowing what can be shared to facilitate a collaboration, and what needs to be kept proprietary at all costs.

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