In the age of time and technology, it is increasingly getting difficult to stay ahead of the curve. There is so much IP out there that you face the risk of infringing on someone’s IP rights one way or another.
To mitigate such risks, the Freedom to Operate Search and Analysis is performed. We also call it Right to Use Search, Clearance Search, and Infringement Analysis.
So, what is an FTO search?
A Freedom to Operate (FTO) search allows business owners to ensure that their products and processes do not infringe on any existing intellectual property(IP) right, such as patent, trade secret, trademark, or copyright by identifying potential IP conflicts that may affect the development and sale of their product or process.
Although an FTO search can be conducted to identify potential IP issues involving patent, trademark, copyright, and trade secret, mainly when we talk about FTO search, we refer to it in respect of patents.
What is Freedom to Operate (FTO)?
As we have seen, if you are a business owner looking to protect and grow your business; develop and commercialize new products or processes, you need to perform an FTO search and analysis. By doing so, you identify potential IP issues and assess the risk of infringing the IP rights of someone else.
Basically, FTO search and analysis allows you to know about existing intellectual property that can affect your business so as to prepare in advance.
As a result, you ensure the success of your products or processes while also protecting your company from legal action.
Here are a few scenarios, for example, in which you might need to conduct an FTO search and analysis to protect and grow your business.
1. Imagine you are a company looking to develop a medicine that uses a particular process. In that case, you need to perform an FTO search to determine whether the technology involved in the process is covered by an existing patent held by another company.
This way, FTO helps you identify whether your process will infringe on the existing patent and, if so, whether it is possible to design around the patent or obtain a license to use or acquire the patented technology.
2. If you are a company planning to manufacture and sell a product that incorporates a new design,
In such a case, you would be conducting the FTO search to determine whether your product would infringe on the existing patented or registered design and, if so, whether it is necessary to obtain a license to use the patented or registered design, or whether you can simply design around it.
Note: In some countries like India designs are registered and in some countries like USA, designs are awarded patents.
3. Imagine that you, as a company, are considering acquiring another company that holds a number of patents related to a particular technology.
In such a case, you would be conducting the FTO search to review the patents held by the target company to ensure that they are relevant to the company’s business and that they do not pose any potential risks or liabilities (for example, another company holding strong patents on similar technology).
4. If you are a company belonging to United States and entering a new market like India and launching your products, you may want to make sure that you have the right to launch (i.e. operate) those products in India.
Because it is possible that you have patent and other intellectual property rights in the United States but not in India.
Since IP rights, including patents, are territorial in nature, you should ensure that you are free to launch your products in India without violating the IP rights of others.
To find out, what patents you might infringe on in India by launching your products, you need to conduct an FTO search and analysis to identify existing patents of interest.
In the event that you infringe on an existing patent or patents, you may want to acquire, license, or design around them in order to protect yourself legally and ultimately financially.
Who Can Benefit from FTO Search and Analysis?
Unless you know who would want to conduct an FTO search and why, you will not feel connected to the topic of this article. So, we have tried to list many such beneficiaries who can benefit from conducting an FTO search and analysis.
- Company looking to launch a new product or process: If you are a company looking to launch a new product in a market then you may consider conducting an FTO search and analysis to see if you can legally manufacture and sell the product without infringing on any existing patents. The same is true for a company planning to introduce a new process.
- Company looking to license or acquire: If you are a company looking to license or acquire technology may conduct an FTO search and analysis to determine whether you can legally use the technology without infringing on any other existing patents.
- Investor looking to invest safely: If you are an investor then may consider conducting an FTO search and analysis to evaluate the risk associated with investing in a particular company or technology.
- Lawyers and patent professionals: If you happen to be a lawyer or patent professional, you may conduct an FTO search and analysis as part of your work advising clients on patent-related matters.
- Universities and research institutions: if you belong to a university or research institution, then you may consider conducting an FTO search and analysis to determine whether you can legally use a particular technology or product in your research and development activities.
- Government and public agency: if you belong to Government or public agency, you may consider conducting an FTO search and analysis to determine whether you can legally use a particular technology or product in your operations.
- Entrepreneurs and start-ups: if you are an entrepreneur or a start-up then may consider conducting an FTO search and analysis to determine whether you can legally use a particular technology or product in your business.
- Product development teams and engineers: if you belong to a product development team or you are an engineer, you may consider conducting an FTO search and analysis to determine whether you can legally use a particular technology or product in your work.
- Marketing and sales teams: if you belong to a marketing and sales team, you may consider conducting an FTO search and analysis to determine whether you can legally promote and sell a particular product.
- Financial analyst and consultants: if you are a financial analyst or consultant, you may consider conducting an FTO search and analysis to evaluate the financial risks and opportunities associated with a particular company or technology.
FTO Search is Not Limited To Patents Only
Mainly, we conduct an FTO study to check whether there is any patent or patent application that can pose a risk to our product or process, and ultimately to our business.
However, it is not just the patents that can pose a risk to our business. There are other IP-related issues as well, which we need to consider and eventually address. For example,
If you are a company planning to use a brand name that is similar to an existing trademark, then you could land yourself and your business in trouble. To avoid such a scenario, you may consider conducting a freedom-to-operate (FTO) search for trademarks.
In an FTO Search you would need to determine whether the proposed brand name is likely to cause confusion with the existing trademark for the public. Because that is how you determine a trademark infringement.
Based on the FTO search and analysis for trademark infringement, you would have to assess whether it is necessary to choose a different brand name or if you have a way out of this with available options.
Trade Secret Misappropriation
If you are a company planning to use formulas, patterns, compilations, programs, devices, methods, techniques, or production processes that are similar to trade secrets used by another company, then you may face a risk of infringement or trade secret misappropriation.
Trade secret misappropriation occurs when someone improperly acquires or uses another person’s or company’s trade secret.
Trade secret misappropriation can occur in a variety of ways, such as through theft, espionage, bribery, or breach of a confidentiality or non-disclosure agreement. It can also occur through accidental or innocent means, such as through the receipt of information that was unknowingly disclosed in violation of a duty to maintain its secrecy.
How does trade secret misappropriation occur? Trade secret misappropriation occurs when someone improperly acquires or uses another person's or company's trade secret. Trade secret misappropriation can occur in a variety of ways, such as through theft, espionage, bribery, or breach of a confidentiality or non-disclosure agreement. It can also occur through accidental or innocent means, such as through the receipt of information that was unknowingly disclosed in violation of a duty to maintain its secrecy.
By conducting an FTO search and analysis, you would need to determine whether the proposed formulas, patterns, compilations, programs, devices, methods, techniques, or production process is likely to misappropriate a trade secret of another entity and, if so, whether it is necessary to modify them or obtain a license to use the trade secret.
Moreover, you can assess your defense options, should the need arise to defend yourself. For example, you could argue and prove that you independently developed or reverse-engineered to arrive at the alleged trade secret or that there was no trade secret at all.
Overall it is better to stay prepared in advance with your options and a thorough FTO search and analysis can help you achieve that.
Suppose you are a company or business considering using a copyrighted work (for example, a photograph or a piece of music) in its marketing materials.
In such a case, you may consider conducting the FTO search. It helps determine whether the proposed use of the work by you is likely to infringe on the copyright. If that is the case, then is it necessary to obtain permission from the copyright holder or use a different work?
Note: As a business owner, you have to consider many factors to operate in a particular jurisdiction like India, USA. These factors may include relevant legal considerations, such as potential non-patent barriers to market entry, local regulatory requirements, or other intellectual property rights that your business may infringe on.
Examples of FTO Issue Involving Patents
Understanding any topic is incomplete without real-life examples. So, we decided to include some of them for clarity. Here are a few real-life examples of freedom to operate (FTO) issues involving patents:
1. Apple vs. Smartflash LLC
The case of Smartflash v. Apple was all about a dispute between a company called Smartflash and Apple over patent infringement. The United States Court of Appeals for the Federal Circuit was the one to decide the case in the end.
Smartflash claimed that Apple’s iTunes software was utilizing some of its patented technology for keeping and organizing digital media and, however, Apple did not have permission to do so.
Smartflash believed that Apple was violating its intellectual property rights and thus, demanded compensation from Apple.
Apple, on the other hand, believed otherwise, it argued that Smartflash’s patents were invalid and that it hadn’t done anything wrong. Additionally, Apple stated that Smartflash was just a “patent troll” trying to sue companies for money.
The case went to trial and the Texas Federal jury decided in favor of Smartflash and awarded $532.9 million in damages to Smartflash in Feb 2015. The trial judge, in this case, agreed with the jury’s finding that Apple was infringing on the patent of Smartflash. However, the judge disagreed on the damages so, ordered it to get recalculated.
Later, Apple appealed to the Federal Circuit which hears patent cases.
The U.S. Court of Appeals for the Federal Circuit disagreed and overturned the verdict of the jury, dismissing the case entirely, stating that Smartflash’s patents were “abstract” and therefore invalid and Apple had not infringed on them.
Later Smartflash appealed the dismissal to the Federal Circuit, however, the Court upheld the decision stating that the district judge should have found the patents invalid in the first place as they were too “abstract” for an invention. As a result, Apple emerged victorious in the end.
The Federal Circuit followed the guidelines set by the Supreme Court in the Alice Corp. v. CLS Bank International case when determining the validity of the patents under examination. According to U.S. Patent law, any new and useful process, machine, article of manufacture, or composition of matter can be eligible for a patent, except for laws of nature, natural phenomena, and abstract ideas. To identify whether a patent's claims fall under these exceptions, the Supreme Court devised a two-step test, as outlined in the Alice case. The first step is to determine if the claim relates to any of the exceptions aforementioned, if that is the case, then the second step is to examine if the claim's elements provide enough specificity to make it eligible for a patent. In this step, the court must identify an element of uniqueness or novelty, something more than the routine or conventional actions that have already been performed.
It is possible that a giant like Apple may have already known about the existing patents that Apple’s iTunes software could infringe upon through an FTO search.
It is also possible that, after conducting a thorough FTO search and analysis, Apple would have assessed all of its defense options, including the invalidity of those existing patents by Samrtflash, and therefore was confident of using them.– HavingIP’s comment
2. Nest Labs Vs. Honeywell International
Nest Labs and Honeywell were having a legal argument over thermostat technology. Honeywell said that Nest’s product infringed on their patents and should not be sold.
When Nest was founded, Honeywell was the leading manufacturer of thermostats used in homes. However, Nest stood their ground in the litigation despite being a small entity. Nest said that their products do not infringe on any patents.
Both sides had lawyers present evidence in court to prove their points.
Finally, the judge decided that Nest’s product does not infringe on any patents, and they can keep making and selling it. So, in the end, Nest won the case and could continue doing their business.
Nest Labs was a smaller company compared to Honeywell International and could get hit badly if it were to lose the suit. However, before entering the market, Nest Labs did its homework and was confident that its product didn’t infringe on any existing patents.
This highlights the importance of FTO search and analysis before taking major decisions like entry into a market.– HavingIP’s comment
Doing business is always full of risk, so the rewards are also high. However, if we follow proven methods, we can minimize the volatility in our business.
“Freedom to operate” search and analysis doesn’t guarantee that there will be no infringement in the future because there are always chances of a third party coming up and slapping you with an infringement suit.
Anyway, what you can do is stay vigilant and be prepared. For this, you may have to take many steps, and one such step is to conduct FTO at regular intervals.
- This is the best available guide on the internet at no cost to learn search from beginner to pro level, and specifically crafted for you with our experience and journey: Prior Art Search Free Guide 101: Do it Yourself
- We have written a detailed article on how to conduct an FTO search and analysis which you can go through to enhance your understanding and answer your remaining questions including how to go about performing the FTO search.