Freedom to Operate (FTO) Search: Identification of Potential Patent Barriers to Product Commercialization

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Freedom to Operate (FTO) Search: Identification of Potential Patent Barriers to Product Commercialization

OEMs generally launch their products in their native market or other countries without knowing about the fact that they might be unknowingly jumping into an infringement lawsuit. We welcome you to the world of Freedom to Operate, a costly but necessary service that every company should avail before launching a new product into market.

After reading this article, the readers will find answers to the following questions:

  1. What is a Freedom to Operate Search?
  2. Why do we perform a Freedom to Operate Search?
  3. How a Freedom to Operate Search is performed?
  4. What are the benefits of a Freedom to Operate Search report?
  5. What to do after getting a Freedom to Operate Search opinion?

Freedom to Operate Search – Let’s know each other first

A Freedom to Operate Search is also known as Infringement Analysis or Clearance Search or Right to use search or Freedom to practice search and more often is abbreviated as the single word – FTO. A Freedom to Operate (FTO) analysis is performed by searching patent literature for issued and pending published patent applications claiming important features of a product, process or service to be launched, and obtaining a legal opinion as to whether a product, process or service is infringing any patent(s) or patent pending application (s) owned by other party in the country or jurisdiction where the product is intended to be launched. Freedom to Operate Search helps in the identification of potential patent barriers in a particular jurisdiction of interest, for commercializing any product, process or service or technologies of interest to reduce the risk of costly and time-consuming future litigation.

The search can be performed by an experienced team of patent analysts and includes relevant granted patents, published patent pending applications and sometimes, expired patents as potential clearing documents. An FTO report usually contains the relevant search results, analysis, and opinion. It can be a valuable resource for a company, especially for the product or process development.

WHY DO YOU NEED ME (Freedom To Operate Search)?

Patent litigation is a highly expensive affair and hence, no entity or company would like to be a part of it as a defendant. It is always a safer approach to be prepared in advance without any fear of future litigation cases, With the advancement of technology, availability of paid databases for patent search and highly qualified patent searchers, it is possible to search and understand chances of patent infringement through FTO searches prior to product development. It is really needful doing FTO searches right at the beginning of the new project launch. A proper FTO analysis not only reduces the chances of having to go through patent infringement litigation, but it might also open up new business prospects by showing variety of possibilities and void spaces of technologies present in the marketplace and also minimizing risk of infringement for third parties. A complete, exhaustive search and professionally analysed FTO opinion strengthens the organization’s confidence.

There are many examples, where even big companies had to pay or were told to pay a huge amount in patent infringement suits. In a patent litigation case held in 2019, Indian chemical giant United Phosphorous (UPL) was defeated in court in by a Philadelphia Agrotech company, AgroFresh that sued it for infringing its patent on a technology that keeps apples fresh in storage after harvest. A federal jury in Wilmington, Delaware, told UPL and its Decco unit to pay AgroFresh Solutions Inc. $31 million. Similarly, in 2018 another giant Samsung Electronics was told by a jury that it should pay $539 million to Apple for copying patented smartphone features, according to court documents. In an another infringement verdict, Apple paid $2 billion to Nokia as part of the settlement. Nokia alleged Apple of 32 patent infringements related to display, user interface, software, antenna, chip-set, and video encoding in 2016. This could have been avoided if United Phosphorous (UPL), Samsung Electronics and Apple would have obtained a Freedom to Operate opinion before using the technologies of respective plaintiffs.

Are You Convinced To Use Me? So, How Should You Do Freedom to Operate Search

A Freedom to Operate (FTO) analysis includes searching patent literature for issued or pending patents, and obtaining a legal opinion as to whether a product, process or service may be considered to infringe any patent(s) owned by others. We at ANS offer such analyses as a part of our patent related services to our clients.

To perform a Freedom to Operate (FTO) analysis, following points should be considered by an analyst or searcher:

  • Jurisdiction restriction: Patent protection is territorial, so while a certain product is patented in a particular jurisdiction only, and the client is launching the same product in other jurisdiction or countries, no permission (or license) is needed from the patent owner in order to commercialize the product. So before starting the search, analyst may collect the information from the client about his/her jurisdiction of interest.
  • Date restriction: Patents have a definite term duration. Patent protection lasts for a maximum period of 20 years and sometimes may extend to additional few years as in case of Supplementary Protection Certificate (SPC) and Patent term extension (PTE). Thereafter, a patent is considered to be in the public domain and may be freely used by anyone. Therefore, a date restriction should always be applied on patent databases to analyse only active patents and pending applications. PCT applications filed in last 31 months are also screened in conduction a Freedom to Operate (FTO) analysis.
  • Which part of the patent to be focused? The claims section in a patent document determines the scope of the patent protection. Any aspect of an invention not covered by the claims is not considered to be protected. Therefore, focus should be given to claimed features in any patent. It requires considerable experience in interpreting the claims of a patent document.
  • Legal status of a patent or patent application: Legal status refers to the status of an application or Intellectual Property Right according to the applicable law of the prosecuting Intellectual Property Office and is determined based on preceding events. The status of a patent or patent application may be: filed, granted, denied, withdrawn, re-examined, reissued or expired. Expired, denied, withdrawn, rejected or revoked applications or patent document serve as potential clearing documents.  Therefore, active patents and active applications should be given priority while searching.
  • Doctrine of equivalents: The doctrine of equivalents is a legal rule in many jurisdictions that make a party liable for patent infringement even though the infringing device or process does not cover the exact features of a patent claim, but is equivalent to the claimed invention. A claim may be infringed under the doctrine of equivalents if it falls under the triple test, i.e. equivalence device or process holds when the equivalent component performs substantially the same function in substantially the same way to obtain the same result. Therefore, active patents and active applications claiming equivalents should also be checked while searching.
  • Easy to interpret report: The final report presented to the client should include easily understandable matter in a professional way. The report should contain the relevant result and additional result with bibliographic details and mapped features in a way that client can get the insight in easiest way possible. Each result should be provided with latest legal status which should be obtained from country specific patent office sites.
  • International application, or PCT application: An international application, or PCT application is a patent application filed under the Patent Cooperation Treaty (PCT), which is an international patent law treaty, providing a unified procedure for filing patent applications to protect inventions in each of its contracting states. When PCT applications are screened for a Freedom to operate search, it is possible for such applications to enter the regional/national phase within 31 months from the earliest priority date, therefore a date restriction of 31 months should be considered.
  • A patent database with comprehensive coverage: Freedom to Operate searches are very sensitive to the database one use to screen patent. Not even a single relevant result should be missed while searching and screening, therefore a patent database which is comprehensive in searching patents in any jurisdiction should be used. There are a lot of paid and unpaid patent databases available which can solve this purpose. Examples of such databases include Derwent Innovation, Orbit, PatSnap, PatSeer, Patentcloud, Google patent, Espacenet, and USPTO etc

Methodology to conduct a Freedom to operate search include:

  1. Understanding the technology/Product feature provided by client: When the searcher receives a request for Freedom to operate for a product or technology, the searcher develop an understanding for the same and discusses more with the client to clear all the doubts and queries.
  2. Designing search terms: Designing search terms includes collecting all possible synonyms for all important features of the provided product or technology, finding the IPC/CPC classes for the technology and formulating a string which can be run on a database using operators to obtain a set of patents and pending applications to be screened.
  3. Screening the patent documents: Next step is to screen the exported set of patents and patent applications based on claims and shortlisting relevant results.
  4. In depth analysis: The shortlisted results are mapped for the relevant features of the product and claimed components to make the inclusion of such results clearer. Legal status is essential in case of Freedom to Operate and should be recent.
  5. Formulating Report: Final step is report making, which includes Freedom to Operate opinion, Relevant results and legal status as main parts.

Effective utilization of a Freedom to Operate opinion:

A Freedom to Operate analysis, based on the search of granted patents, published patent pending applications and expired patent literature is just the initial step. If the Freedom to Operate analysis comes with an outcome that one or more granted patents and/or published patent pending applications can be potential barrier in freedom to operate for a product, process or service or technologies of interest, the company must decide the next steps favouring the safe launch of the product, process or service or technologies. The company can opt for following steps:

a) Buying the Patent rights;

b) Licensing;

c) Cross-licensing;

d) Design around or Invent around; and

e) Patent pooling

  • Patent buying can be considered as the most effective way to overcome infringement chances. For buying a patent, few things should be considered like the expiry date of patent, cost of patent and jurisdictions covered under patent right.

Example of patent buying: The AT&T patent acquisition showed Uber a portfolio of patents having priority dates before Uber’s formation in 2009. The patents and applications of AT&T covered various technologies related to messaging, call handling, routing network traffic, VoIP, and billing. Five of the AT&T patents were specifically related to ridesharing. This deal was named the LES USA-Canada’s High-Tech Sector’s Deal of Distinction for 2017, and received an award at the LES Annual Meeting in Chicago.

  • Patent licensing is a process in which the current assignee/owner (Licensor) of the patent or patent application gives permission to another party (Licensee) to make, use, sell and subsequently earn profit from the licensed patent. Usually license agreement contains some terms and conditions agreed by both the parties involved. The convenience of such an agreement will depend mainly on the terms and conditions of the proposed license. The licensor demands the licensee a royalty bearing non-exclusive rights. A license may be granted exclusive, sole or non-exclusive rights to a patent. An exclusive licence provides that only the licensee and the party permitted by the licensee may exploit the rights licensed under the agreement and even the patent holder is prevented from exploiting such rights. A sole licence permits both the licensor and a licensee to exploit a patented invention, but prevents the patent holder from licensing the rights to a third party. A non-exclusive licence allows the licensor to license some or all of the rights under a patent to an unlimited number of third parties, and also to retain the right to exploit a patented invention itself.

Example of patent licensing: Recently, Gilead has signed non-exclusive voluntary licensing agreements with five generic pharmaceutical manufacturers Cipla Ltd., Ferozsons Laboratories, Hetero Labs Ltd., Jubilant Lifesciences and Mylan to expand supply of remdesivir, a drug for treating COVID-19. The agreements allow the licensee companies to manufacture remdesivir for distribution in 127 countries.

  • Cross-licensing. Cross-licensing agreement is a contract between two or more separate entities where each entity grants rights to their intellectual property to the other parties.

Example of patent Cross-licensing: Google, the owner of the Android operating system and Samsung Electronics, world’s largest smartphone manufacturer signed broad cross-licensing agreement that covers existing patents as well as those patents filed next ten years.

  • Design around: Design around or invent around includes making changes to the product or process in order to avoid infringing on the patent(s) owned by others. For example, if a freedom to operate opinion is limited by a process patent, then a company can develop an alternative process for similar outcome and thus be able to commercialize the invention without the need to pay a licensing fee to someone else.
  • Patent pools: This is a mechanism in which two or more parties practicing related technologies put their patents in a pool to establish a clearinghouse for patent rights.

Example of Patent pools: A well-known example of a patent pool was by Sony, Philips and Pioneer for inventions that were essential to comply with certain DVD-Video and DVD-ROM standard specifications.

Benefits of a Freedom to Operate (FTO) search:

From the above discussion, the benefits of conducting a Freedom to Operate (FTO) analysis are clear. However, in a summarized way, the main benefits include:

  1.  A Freedom to Operate (FTO) search can eliminate the risk of costly and time consuming litigation that might arise due to an infringement suit.
  2. A positive Freedom to Operate (FTO) opinion allowing clearance provides confidence to investors about the safe launch of products.
  3. With the use of relevant results enlisted in a Freedom to Operate (FTO) search report, one can easily find a valid party for buying/licensing/cross licensing or patent pool opportunities.
  4. A Freedom to Operate (FTO) search is also useful in detecting the exact component of target product to invent around to make it safe against infringement.
  5. A positive Freedom to Operate (FTO) opinion can also be used as a precautionary measure prior to acquisition of a business entity or specific product segment of a company.
  6. A Freedom to Operate (FTO) search if performed with no date restriction, will also evaluate patents, which have expired or are about to expire. Therefore, many similar useful technologies can be used from these expired patents.

Conclusion:

In conclusion, a Freedom to Operate (FTO) search is a crucial step every technology company should opt prior to commercialization of their product, process, or service to avoid expensive law suits. A Freedom to Operate (FTO) search helps ensure the safe launch of the product, process, or service by identifying whether or not there is a risk of infringing any intellectual property rights of a third party. Based on the Freedom to Operate (FTO) search opinion, the company can take precautionary measures such as, not going forward with the product/buying/licensing/cross licensing/invent around or patent pool opportunities.

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