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There are many factors to be considered for a project developing a new product or process, but Freedom to Operate should not be overlooked.
Freedom to Operate, or “FTO”, is the ability to carry out commercial plans without infringing third party Intellectual Property (IP) rights. The term is most commonly used in relation to patents, but can also apply to trade marks and designs.
IP litigation can result in a damages award (a payment to the IP right owner to compensate them for losses due to the infringement) PLUS an injunction (a court order stopping further infringing activities) which may block access to a market for a technology, or prevent use of a particular trade mark. If the infringement has been ongoing for many years, a damages award and/or loss of access to an important market can have a very significant impact on the infringing company.
As the consequences of being found to infringe an IP right can be so serious, being accused of infringement in a court action can be stressful. In some cases, it may be possible to successfully defend against any such action, for example by arguing that the right is invalid. If the court action is unexpected, and preparations have not been made, the stress is likely to be significantly greater.
Many companies take the view that it is important to understand, and where possible reduce, FTO risks before incurring the costs of developing and launching a new product, or using a new trade mark. Some companies may allow a project to proceed without assessing FTO risk and this can be a valid option, but this should be the result of a considered decision to accept the risk, rather than the result of a failure to consider the risk.
To understand FTO risks, searches can be performed and reviewed to find IP rights that could be infringed. These searches are often referred to as FTO, or clearance, searches. The more detailed the search and review, the greater the understanding of the risk, but the cost of conducting and reviewing these searches varies greatly depending upon the rights involved, and the level of detail requested.
The biggest FTO risk for a project developing a new product or process is often patent infringement. A cost effective strategy can be to conduct broad searches near the start of a project and move to more detailed searches as a project moves forward and a final product/process begins to take shape. This means that the cost, and understanding of risk, should be appropriate for the project stage.
A broad search at the start of a project might look at the patent landscape in the technical area. This landscape should include expired patents, as well as those that are in force. The reason for including expired patents is that, if a planned product is very similar to something described in a patent that reached the end of its 20 year life, the risk of a valid patent covering that product is greatly reduced. A dense patent landscape in the technology area could indicate an increased FTO risk. A landscape search should also help to identify particular areas of the project that might be higher risk.
As the development progresses, more detailed searches can be carried out, focussing on particular areas of the project. These can be conducted on an ad hoc basis, or as part of particular project milestones, for example proof of concept or a design freeze.
If a risk is identified, it is a commercial decision whether the project should proceed or not, but it may be possible to reduce, or at least manage, that risk.
A planned name or logo can be changed, or modifications can be made to ‘design around’ a patent or design so that the risk posed by the IP right is reduced or avoided. However, depending upon the project changing the plan may not possible, practical, or desirable if the project is to proceed.
The validity of the problematic right can be assessed to determine the chances of it surviving a challenge during litigation. To clarify the risk posed to the project, the validity of the right can be directly challenged in court or at the relevant intellectual property office to ‘clear the way’ before a particular project step, for example before a commercial launch. In some cases, additional searches could be carried out to find publications to support any validity challenge.
Another option to remove the risk, while potentially benefitting from the protection, is to obtain a license to, or purchase, the IP right.
If the identified risk is primarily financial, the company may consider ensuring that it has adequate indemnities from a well-financed business partner.
In general, more options are available if a potential risk is found early in a project.
“Publishing for Freedom to Operate” is a phrase sometimes used in relation to patents and designs and it can be misleading. Publishing the details of a product will not alter whether third party rights already exist that might prevent commercialisation of that product. However, publishing should prevent a third party obtaining valid rights covering that product if they file an application after the publication has been made. Publication cannot make an existing situation better, but may prevent future applicants from obtaining problematic IP rights.
We recommend discussing the options for FTO risk assessments with an IP attorney. Contact Alex Bone (amtb@aathornton.com) if you would like further information or to discuss options for a particular project.
Category: Latest Insights | Author: Alex Bone | Published: | Read more
