Freedom to Operate: The Basics
Why should start-up entrepreneurs consider Freedom to Operate (FTO)?
The term Freedom to Operate (FTO) refers to whether a start-up may provide its products and services without infringing another’s legitimate intellectual property (IP) rights. The main goal is to prevent lawsuits, as these will likely result in the payment of hefty damages or being issued with an injunction to block the sales and production of your product.
When should a start-up conduct an FTO search?
Start-ups should consider performing an FTO search as early as possible to avoid pricey changes in product/service design at a later stage and reduce the risk of lengthy legal processes.
What is a FTO search and opinion and is it the same as a patent search and opinion?
Unlike a full-blown patent search that considers all publications, including prior arts, inventions worldwide that are publicly disclosed before the date of the patent application, an FTO search focuses on valid and active patents and IP rights. FTO searches may also cover other IP rights, such as industrial design and trademarks, if necessary.
FTO opinions are more complicated than a patentability opinion because the scope of analysis is much more detailed and requires interpretation of patent claims and knowledge of relevant laws and cases.
Should every start-up conduct an FTO analysis?
Yes, although the risk of infringement or the likelihood of being sued depends on the industry. IP rights holders in highly competitive industries, such as pharmaceuticals and mobile phone hardware, that utilize patent rights may be more active in seeking compensation and quash new competitors than other sectors.
How may a startup reduce the risk of a FTO infringement?
Only a licensed legal or IP professional will provide an expert opinion about FTO issues. Nonetheless, startup entrepreneurs may conduct their research about operability to understand their targeted market and competitors:
They may start by searching for any relevant IP from competitors, particularly any active patents, in countries that they desire to offer their products and services.
They should find out whether their innovation infringes such patents or other IP rights. A general rule of thumb is not to offer a product that is substantially similar or identical to the current market offering unless no relevant patent and IP rights are active.
If they discover anything in step 2, startups should utilize the IP documents from the FTO search to design around the competitor’s existing products/services and thus create new IPs for the corporation.
A licensing agreement may be required if the startup’s design is an improvement to the original IP owned by another party.
How much does an FTO search and opinion cost?
The cost is expensive and also depends on the scope of operation. Generally, an FTO search and opinion for operability in North America may range from thousands of Canadian dollars to five-digit numbers, subject to the complexity of the innovation and competitor’s offering.
Does the Technology and Innovation Law Clinic offer FTO searches and analysis?
The Technology and Innovation Law Clinic does not offer FTO searches and analysis as part of our legal services. We will be happy to provide cursory information and connect our clients with licensed professionals who are experienced in FTO issues.
