A Freedom-To-Operate analysis – do you need to bother?

August 11, 2023
4 min read

When a company is in the process of strategizing the development and release of a new product, a notable concern arises, especially in technology-driven fields abundant with patents. The risk is the potential impedance of the product's commercialization by a competitor possessing a patent related to a technology embedded within said product.

This underlying uncertainty prompts many companies to actively pursue the establishment of their "freedom-to-operate (FTO)" during the preliminary planning phases. This should assure unhindered feasibility for the manufacturing, promotion, and utilization of their innovative product, procedure, or service, all while avoiding any infringement upon the intellectual property rights owned by external entities. In short, FTO can be defined as the ability of your company to develop, make, and market
products without legal liabilities to third parties (e.g., other patent holders).

However from practice, significant proportion of companies - especially young - do not see the need for an FTO analysis, do not want to pay for attorney and consulting fees, or simply forget to carry it out, which may have significant implications for the company down the line.

First, let us take a look at different stages of a typical FTO analysis.

a) Primary qualitative interview research; interview the scientists or engineers in the company about the discovery. Your goal is to understand the scope of the science, the subject matter, therapeutic areas, and the specific market, among other factors.

b) Search strategy development; designing a search strategy for patents your invention might infringe on. Your goal is to find keywords that will help you find technology in the claims section of patent applications.

c) Review; reviewing the patents and looking at individual claims. Identify barriers to entry, or patents and technology that are most likely to block your pursuit of an intellectual property patent. “Discard” results that aren’t relevant, and keep the subset of patents that could present a problem.

d) Identify solutions; identifying solutions to specific issues. For example, you can look at the patent status, potential expiration, and/or research, and prepare an invalidity opinion.

Secondly, in the course of conducting an FTO search and analysis, it's essential to recognize that certain limitations within patents can also present opportunities. For instance:

Territorial Protection: Patent rights are bound by geography. A technology safeguarded in a company's primary markets might lack protection in other countries, where utilizing the technology doesn't require permission or licensing from the patent holder.

Finite Duration: Patents have a finite lifespan, lasting a maximum of 20 years. Beyond this period, a patent enters the public domain and can be freely utilized. In practice, a considerable proportion of patents granted, especially through bodies like the European Patent Office, do not reach the full 20-year term due to non-payment of maintenance fees.

Scope Constraints: The scope of a patent is defined by its claims section. Aspects of an invention beyond these claims remain unprotected. However, gauging the exact scope necessitates skilled interpretation of claims, specifications, and application history.

Finally, should the search reveals potential patent limitations, the company must strategize its approach. Assuming the obstructive patent is valid, available options encompass:

Acquisition or Licensing: Purchasing the patent or obtaining a license involves securing authorization from the patent holder to use the technology within specified parameters. While this might entail royalties or lump-sum payments, it streamlines the path for product commercialization.

Cross-Licensing: Companies can exchange licenses to use each other's patents, contingent on the mutually beneficial patent portfolios.

Inventing Around: The company might innovate to circumvent patent infringement. This involves altering processes or products to achieve similar outcomes without violating existing patents.

Patent Pools: Firms dealing with related technologies can aggregate patents in a pool to simplify patent rights management. A well-known example from the life science industry is e.g. the patent pool for HIV research.

Protective Patents: If the FTO analysis indicates no barriers and a technology is patentable, seeking patent protection can enhance freedom to operate, rather than relying on trade secrets.

All in all, it's vital to recognize that owning a patent doesn't automatically guarantee unrestricted freedom-to-operate and a FTO analysis might be essential to your immediate and future IP strategy. If another party holds a broader patent encompassing a company's subject matter, it can pose challenges. This scenario often necessitates utilizing (in-licensing or purchase of) others' patented technology to bring one's own innovation to market or other ways of dealing with the situation.

For young spin-offs we highly recommend to have a proper look at your patent strategy as soon as you move the IP to your company, you can choose to carry out the analysis in-house or appoint an external body or a patent attorney.

Get in touch to learn how can we help you with your FTO analyses at info@ambiom.com.



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