IP and Business: Launching a New Product: freedom to operate

In September 2003, three pharmaceutical companies, Cambridge Antibody Technology, Micromet AG and Enzon Pharmaceuticals, announced that they had signed a non-exclusive cross-license agreement. In the agreement, all three parties obtained substantial "freedom to operate" authorizing each other to use some of their respective patented technology. This enabled them to conduct research and develop a defined number of therapeutic and diagnostic antibody-based products.

Agreements of this kind have become common practice in certain sectors, as companies seek to ensure that their products, processes and services do not infringe on patent rights of others. Patent litigation can be an expensive, uncertain and risky affair and, as the saying goes, prevention is better than cure. This article explores different strategies which businesses can consider as a means of reducing such risks and maximizing their freedom to operate.

Whenever a company is planning to develop and launch a new product, a major risk, particularly in technology sectors where there is extensive patenting, is that commercialization may be blocked by a competitor who holds a patent for a technology incorporated within that product. This is why many companies, at an early stage, seek to secure their "freedom to operate," i.e. to ensure that the commercial production, marketing and use of their new product, process or service does not infringe the IP rights of others.

While an absolute guarantee of freedom to operate will never be attainable, there are ways of minimizing the risks that can save a company significant resources.

Searching patent documents

A Freedom to Operate (FTO) analysis invariably begins by 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. Many private law or IP firms offer such analyses as part of their legal services to clients. Some national IP offices (for example the Swiss Federal Institute for Intellectual Property also offer such services for a fee).

Spotting Opportunities in Patent Limitations

In conducting an FTO search and analysis, it is worth bearing in mind that some of the limitations on patents...