Understanding Freedom to Operate (FTO) Concerning IP & Patents

BlogIntellectual Property RightsPatent    December 29, 2021
Understanding Freedom to Operate (FTO) Concerning IP & Patents Posted On

Three pharmaceutical companies, including Enzon Pharmaceuticals, Micromet AG, and Cambridge Antibody Technology (now acquired by AstraZeneca), in September 2003 announced signing a non-exclusive cross-license agreement. The agreement enabled the three parties involved to obtain Freedom to Operate (abbreviated as FTO), thereby authorizing one another to use some of their respective patented technologies without worrying about Patent Infringement. It also allowed them to research well and come up with therapeutic and diagnostic antibody-based products.

FTO is a pretty simple and straightforward concept, which implies that at a given point in time, no Intellectual Property (IP) from any third party is infringed upon a given product or service in a given market or geography. FTO agreements have now become common in certain sectors, particularly the IT sector, where there is extensive Patent Filing and risks involved in commercialization are being blocked by a competitor who holds a patented technology incorporated within some product. Without any doubt, stepping into patent litigation can be uncertain, full of risks, and expensive. Hence, business companies and firms look forward to ensuring at all times that the commercial production, use of their products, processes, services, or marketing activities don’t infringe upon the Patent Rights of others.

Although a complete guarantee of FTO will never be attainable, there are some ways (as mentioned below) of minimizing the risks involved that can help save a company its significant resources.

Conducting FTO Analysis Based on Patent Literature Search

An FTO analysis always starts with searching the patent literature and documents for granted or pending patents. It also involves obtaining a legal opinion corresponding to whether a process, product, or service may be considered infringing upon any patent or patents already owned by others.

When it comes to conducting FTO search and analysis, it is essential to note some of the limitations (as mentioned below) on patents that can offer potential opportunities to the companies and innovators:

  1. Patent rights are territorial. It implies that while a specific technology may be protected in the main markets of a company, it may lie in the public domain in some other countries. In the latter case, no license or permission of any sort is required from the patent owner for commercializing the product.
  2. Patents have a limited protection period. In most countries, they typically last for a maximum of 20 years, after which they lie in the public domain and can be freely used by anyone. Furthermore, as per the estimations of the European Patent Office (EPO), less than 25% of the patents issued through EPO are maintained well for the 20-year protection period as most of them usually lapse through non-payment of the patent annuities.
  3. Patents have a limited scope, and it is defined in the claims section of a patent document. To be specific, any aspect of the invention not covered in the claims isn’t considered to be protected. However, in this case, it is imperative to note that determining the scope of a patent is not easy. It undoubtedly requires a lot of experience in interpreting the patent claims, the specifications, and the history of the Patent Application Process.

Overcoming Obstacles 

Conducting an FTO analysis based on the search of patent documents and literature is only the first step. If the result of the patent search reveals that there exist one or more patents limiting a firm’s FTO, the firm needs to decide well on how to proceed. In the scenario where the blocking patent is valid, firms and companies can consider the following options:

  1. Licensing or Patent Purchasing – The licensing process involves obtaining written consent from the patent owner to use the patented technology in some specific markets for some specific acts and a specified period. The convenience of a licensing agreement majorly depends on the terms and conditions mentioned in it. While there is a possible loss of autonomy, and the patent owner will require payment of a lump sum amount or royalties from time to time, it may still be the simplest way of clearing the obstacles concerning the commercialization of some new technology or product.
  2. Inventing Around the Invention – It usually involves doing some R&D for making some changes to a process or product so as to avoid infringing upon the patent or patents owned by others in the market. For instance, if the FTO is limited by a product patent, a firm can consider developing an alternative product to arrive at a pretty similar end result, thereby successfully commercializing the invention without paying a licensing fee to some other person.
  3. Cross-Licensing– It involves two or more firms exchanging licenses for being able to use the patented inventions owned by one another. For cross-licensing, a firm needs to own a well-safeguarded patent portfolio that offers considerable worth to the potential licensing parties.
  4. Patent Pools– It is a mechanism under which two or more firms practicing similar technologies put their patented inventions in a pool to create a clearinghouse for the respective patent rights.

Seeking Patent Protection for the Technology

If the patent analysis and search show that there are no patents blocking access to the market, and the new technology is likely to be eligible for patentability, a business owner or innovator may look forward to obtaining Patent Protection for ensuring a greater degree of FTO, in place of just keeping it as a trade secret.

There is, however, a well-defined limit corresponding to which a patent holder has the FTO. In itself, a patent doesn’t offer the right to commercialize the patented technology but only prevents others in the market from doing so, and it is indeed a crucial distinction. Therefore, if a company or firm is looking forward to commercializing its technology, it may require using the patented technologies of others. Despite all these factors, FTO is still one of the major reasons behind big companies and firms applying for patent protection. Although the grant of a patent in itself is not enough to clear the path for commercialization, it is indeed a beneficial step and helps prevent a lot of problems down the road.

Opting for Technical Disclosures or Defensive Publishing

Many reasons exist behind a firm or company avoiding seeking patent protection for a given invention, including the cost or the concern that the invention might not be eligible for patentability. An alternative that businesses sometimes opt for is technical disclosures or defensive publishing, which is a total contrast to keeping the invention as a trade secret. This mechanism focuses on disclosing an invention to the public to ensure that nobody else patents it. It offers some degree of FTO to everyone. In this case, it is essential to note that the disclosure should be made in a well-acknowledged technical journal or some other publication that is most likely to be consulted by the patent examiners for examining the Patent Applications.

Bottom Line

No matter what means is chosen, technology firms and companies are always recommended to consider all the available options well in advance. In some circumstances, paying a licensing fee to the patent holder or coming up with minor product adaptations may be sufficient in avoiding future conflicts. Analyzing a firm’s FTO adequately before releasing a new product is, therefore, a brilliant way of minimizing the risks involved in infringing upon the patented inventions owned by others. Doing the same shall also enhance a firm’s chances of coming across suitable business investors and partners for supporting its development plans and strategies. ✅ For more visit: https://www.kashishipr.com/

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