Importance Of Freedom To Operate Search For Start-Ups

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Launching a start-up is a complex affair that entails dealing with issues concerning various aspects like finances, sales, human resources, marketing etc. Given the myriad matters that require your attention, it is common for start-ups to overlook the crucial subject of Freedom to Operate while setting up the business. Failure to perform an FTO can result in serious consequences like expensive litigation, ruined reputation, and loss of faith among customers and the market. In order to avoid these problems, a comprehensive understanding of FTO, its benefits and the process is essential. Let’s understand the reasons FTO is important for start-ups. 

Table of Contents

What is FTO?

The purpose of FTO is to ensure that your products or services are not infringing on the Intellectual Property Rights of other businesses. Although IP Rights include trademarks, design rights, and utility models, FTO limits itself to patent search only. Also referred to as Infringement Analysis or Clearance Search, it enables the marketing and creation of a product without infringing on existing patents. 

Freedom to Operate may be acquired by: 

  • Inventing a unique product/tech that does not exist in the market 
  • Licensing an existing tech 
  • Invalidating an existing patent 

An FTO search is beneficial in determining whether there is a patent that is similar to the intended invention/process. Averting time and resource wastage is another reason that conducting an FTO search right at the beginning is advisable for start-ups. The nature of FTO undertaken will rely on the area of jurisdiction as well as the nature of technology. It is also vital to cover both development and manufacturing processes in FTO to ensure both the final product as well as the process of manufacturing are free of any infringement. 

The above image is an example of a mechanical drawing of an aerial machine by Emile Losses (US Patent Specification 996,361). 

Why Should Start-ups Conduct FTO?

Conducting an FTO search is significant for any business, especially a start-up, as it promises commercial success, better funding opportunities and provides security to the product. The benefits of a timely FTO are: 

Patents that have expired in a given dominion also come under the purview of FTO search. Such patents can be a source of inspiration for further product improvements in order to make them more commercially viable.  

Patent infringement lawsuits are a huge burden on time and resources. Royalties, damages, and lawyer fees can amount to a whooping sum and prove counterproductive to the product development processes. If the infringement is proved as ‘wilful’ i.e., the case when an infringer was aware of their IP rights, then the damages awarded by the court can be exponentially high. FTO searches are especially valuable in identifying NPEs (Non-Practicing Entities) and avoiding infringing on their patents. Lately, there has been a surge in cases concerning infringement litigation by these companies. 

The inclination of a company to conduct an FTO reveals their thorough nature and gives investors the confidence to invest. It shows that the business is serious about covering all grounds, especially IP protection. This is an attractive attribute from an investor’s point of view, and they are more likely to invest in a start-up that gives them this assurance. 

Since FTOs are usually not limited to a single country/area, they help companies assess international markets as well. They can identify countries where their invention is most likely to be infringed on, alongside areas where the particular invention already exists.  

Insurances that cover IP infringements make it mandatory for businesses to conduct an FTO Search, failing which the insurance can become invalidated. 

How to Conduct a FTO Search  

While it is common practice to monitor the IP activities of competitors including their inventions and patents, an FTO search runs deeper than that. The following aspects need to be covered for a comprehensive FTO search: 

  1. Both granted and pending patents must be taken into account to widen the search. Knowledge of the patent registration systems is also helpful when studying the databases of national and regional patent offices. 
  2. Time is of the essence when conducting an FTO search. Most patents expire after a term of 20 years. It is critical to review the expiry date of patents to determine if they are still valid. 
  3. The claims of patents must be studied thoroughly to understand the broader coverage they offer. 
  4. Using the right keywords and classifications is central to an effective FTO search. It helps extend the search beyond direct competitors to applications in indirect areas which could be relevant to the business. Such cross-sector searches strengthen the effectiveness of an FTO search. 

Next Steps 

If the FTO search result comes back in your favour, then the path is paved to launch the product. However, in case the FTO search reveals infringement, the following options are available: 

– Inventing around the product to modify elements that infringe existing patents. In order to execute this step, the product will require re-engineering which can also be a bonus as it will lead to more innovation in some cases.  

– The patent can also be licensed by the business that owns it. The patent proprietor may be approached to license a patent at a negotiated price. Licensing a patent gives the licensee the rights to use the technology in their products. Various types of licensing agreements like cross-licensing, exclusive license, compulsory license, non-exclusive license, voluntary license etc. can be negotiated based on the mutual understanding of both parties.   

– Invalidating the patent is also an alternative if one has evidence to the effect. If prior art is proved, the patent can be revoked in court. Prior art implies that the subject matter of the patent was in public knowledge before the filing of the patent. However, this approach entails an expensive litigation fee and can be a very time-consuming process. 

Conclusion

FTO search is a valuable tool for any start-up to lay a solid foundation for their venture. The reasons an FTO is important for start-ups have been discussed above. Once an FTO search is in the green, the next issue to be addressed is safeguarding your invention. Not revealing the innovation publicly and keeping it under wraps is a possibility but not one that endows any legal protection. The best step is to publish it in a renowned journal so that you can establish prior art. By doing so, you can deter other companies from stealing the innovation and secure it till you are ready to file the patent. Whichever way you decide to proceed with the patent filing and other interim steps, an FTO search paves the way for a successful future. 

About TTC

We’ve constantly identified the value of new technology carried out by our pretty skilled executive crew with backgrounds as our professionals. Like the IP professionals we empower, our starvation for development is never-ending. We IMPROVISE, ADAPT, and IMPLEMENT in a strategic manner.

TT Consultants offers a range of efficient, high-quality solutions for your intellectual property management ranging from

and much more. We provide both law firms and corporations in many industries with turnkey solutions.

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