Freedom to Operate – A Practical Guide.


A granted patent is a powerful monopoly that allows the rights holder to control exploitation of the invention as claimed in the patent claims. Conversely, being on the receiving end of an allegation of patent infringement is not only disruptive, but potentially costly.

As such, a crucial part of any commercialisation plan is an understanding of whether the planned commercial activity infringes the intellectual property rights of others. This is also known as a freedom to operate (FTO) analysis. The prudent approach is to understand the FTO landscape prior to substantial investment into product development, marketing, and manufacture.

An FTO analysis typically starts with a search of a patent office database of pending or granted patents in the jurisdiction of interest. In the first instance, the search should be date-filtered since a granted standard patent has a 20-year term. A patent term can be extended for pharmaceutical patents only, but only for a limited time period. For some products, a search of the design registration database may also be required. In addition to limiting a search by subject matter, other search terms that may be useful include name searches directed to applicants or inventors that are active in the technology field.

Due to the complexity of an FTO analysis, a patent attorney should be involved in formulating the search strategy, reviewing the results, and assessing whether there is an FTO obstacle.

If the FTO analysis identifies potential obstacles to commercialisation of the product or method, there are options available to remove these obstacles. It may be cost and time effective to design around the monopoly carved out by the patent claims to avoid infringement. The scope of the design-around may vary from minor changes to significant modifications that may result in an improvement worthy of being the subject of a patent application. The design-around option may be advantageous if the FTO analysis is conducted early in commercial development where any changes to the product or method will not result in substantial delays or financial losses.

Entering into a licensing agreement with the patent owner, or purchasing the patent outright, may be the most time-effective avenue for clearing a path to commercialisation. Of course, such commercial arrangements are linked with license fees, on-going royalty payments, or when a granted patent is acquired, a one-off purchase fee. Furthermore, a licensing agreement may result in constraints on how the commercial product or method is exploited. If your product is also protected by a granted patent, a cross-licensing deal may be available.

Although it is assumed that a granted patent is valid, there may be scope to challenge the validity of a granted patent to either (i) reduce the claim scope; or (ii) remove the patent from the Register. In Australia, it is possible to file a request to re-examine a granted patent on certain grounds. Re-examination may be particularly useful if there is prior art that was not considered by the Examiner during initial prosecution.

In light of the potential commercial and financial disruptions that a patent infringement action may have on a company, it is advisable to include an FTO analysis as part of a risk management strategy. Your patent attorney can assist with formulating an approach to suit your budget and commercial needs.