Patent Freedom to Operate Part 1: Why Analyzing Patent Freedom to Operate is Important
You’ve come up with an idea for the next big thing, and you want to start your own business. You know that intellectual property protection will be key in the success of your company. What should you do now?
Startups face two separate intellectual property (IP) questions. First, can I obtain IP protection to provide a competitive advantage for some aspect of my business? (Can I get a patent, copyright, or trademark?) Second, do I have freedom to operate? (Can I provide my product or service without infringing somebody else’s patent, copyright, or trademark?)
This 2-part blog post will discuss how and when you should consider hiring an attorney to perform a patent freedom to operate analysis. The first part will discuss what is freedom to operate and why a startup would want to get a freedom to operate analysis. The second part will discuss reasons that a freedom to operate analysis might not be right for your startup at this time. Although these posts will focus on freedom to operate assessments regarding patents, it is important to remember that freedom to operate will be an issue for other aspects of IP as well.
What is Freedom to Operate?
A freedom to operate (“FTO”) search (often called a “risk analysis”) aims to answer the following question: do your actions infringe somebody else’s IP rights? In a patent FTO search, the searcher assesses your product or service, then identifies claims within existing patents or patent applications that your product or service may infringe.
As an initial matter, let’s clear up a common misconception concerning patents. Owning a patent does not provide freedom to operate. Patents only provide negative rights—they allow the patentee to stop others from making, using, selling, or offering to sell your patented invention. Patents do not, however, give you any affirmative right to make, use, sell, or offer to sell your invention. Especially because there are so many issued patents in a given area of technology, Company A, B, and C may each hold overlapping patents. In this situation, each of the three companies may be unable to make and sell their products (they lack freedom to operate) unless they are able to negotiate a licensing agreement. Accordingly, freedom to operate can be a major concern for startups.
Why Analyze your Freedom to Operate?
Discovering late in the game that your new product infringes a competitor’s patents can be devastating. A startup may independently develop a new technology completely unique when compared to anything else on the market. However, somebody still may have a patent whose claims cover part or all of the invention. That person can then stop you from making or selling your product or service. Additionally, you might be liable for patent damages. Merely receiving a cease and desist letter from that competitor can scare away your potential investors.
A FTO analysis can help you determine whether you need to alter your product design before the costs of changing get too high. Performing a patent freedom to operate search gives startups an opportunity to identify paths for further development.
Additionally, an FTO opinion can help you understand your competitors’ patent portfolios or develop knowledge for future licensing negotiations. A freedom to operate search will uncover some inventions that are similar to yours, which may help you understand competing products in the marketplace. However, interpreting the limits of patent claims is very different from looking at marketed products. Accordingly, this benefit may be limited. Nevertheless, when engaging in future licensing negotiations, potential collaborators will want to know that your product has solid IP protection. A FTO opinion can help reassure these potential collaborators and encourage the negotiations.
Furthermore, for companies with the resources to defend a patent infringement suit, a written FTO opinion from an attorney can help avoid willful infringement penalties if your product is ultimately found to infringe another’s patent. It is important to note that an FTO opinion will not prevent a company from being sued for infringement. However, the opinion will help prevent the court from finding that you willfully infringed the patent, which may lead to increased damages (up to three times the value otherwise).