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“Freedom to Operate,” abbreviated as “FTO,” and also known as “clearance search,” is a type of patent search used to determine whether a company can carry out a specific action, such as manufacturing, testing, or commercializing a product, without infringing on others’ valid intellectual property rights. Or, to put it another way, whether or not a company is “Free to Operate” without fear of patent infringement. Freedom to operate, in its broadest sense, refers to the ability to continue with the research, development, commercial manufacturing, marketing, or use of a novel product or process with a minimal risk of infringing on others’ IP rights.
In simpler terms, Freedom to operate (FTO) is a careful examination of existing patents in the field of a new invention in a certain jurisdiction within a specific time frame that results in an estimate of infringement liability.
Despite the fact that most corporations employ analysts, researchers, and attorneys to prevent patent infringement, the rate of patent infringement continues to rise.
The case of Polaroid vs. Kodak, in which Eastman Kodak was found responsible for infringing on Polaroid’s 7 patents on instant camera technology on October 12, 1990, is a well-known example of the importance of doing a thorough FTO search. Kodak was obliged to pay Polaroid $909,457,567 and withdraw all of the instant cameras and films it had already sold from the market.
In addition, Kodak had to close its $1.5 billion production factory and spent roughly $500 million buying back the 16 million cameras it had sold between 1976 to 1985. A total of $873 million in damages were paid to Polaroid at the conclusion of a 14-year legal battle that ended in 1990. For the next 15 years, Kodak was out of the instant photography business.
When a case of patent infringement is brought before the courts, one of the elements that the judge evaluate is whether the infringer performed a risk analysis or an FTO search beforehand. Willful/deliberate infringement is a significant factor in deciding the amount of damages paid to the patent holder. The damages may be decreased by the court if a thorough FTO has been performed.
According to Polaroid, no experienced attorney would have advised Kodak that the patents at issue were invalid or unlikely to be infringed by Kodak’s instant film and cameras. Following that, Kodak stated that as it worked on its integrated instant photography system, it obtained validity and infringement opinions from Francis T. Carr, a patent clearance specialist. Mr. Carr examined approximately 250 Polaroid and non-Polaroid patents (many claims) and provided innumerable oral and written judgments on the entire range of Kodak’s instant photography products. In the end, the Court decided that Kodak’s patent infringement was not willful or deliberate.
Ranbaxy, an Indian pharmaceutical company, came across a patent number (5,847,118) owned by a Canadian pharmaceutical corporation called Apotex while planning to launch an antibiotic medicine called cefuroxime axetil in the United States. The manufacturing procedure was the same as Apotex claimed in the patent. Ranbaxy, on the other hand, was successful in finding one difference in the manufacturing process after conducting a complete FTO investigation. While Ranbaxy used acetic acid as a polar organic solvent, the word was defined in the patent as sulfoxides, amides, and formic acids. On November 26, 2003, the United States Court of Appeal, Federal Circuit (CAFC) granted Ranbaxy a declaratory judgement and freedom-to-operate based on the conclusions of the detail.
Ranbaxy succeeded to protect its commercial interests with the help of a rigorous FTO analysis and the follow-up exercise. Ranbaxy further continued to the tablet and suspension dosage forms of cefuroxime axetil in the market with the approval of US-FDA, the drug regulatory body of US.
The above case highlights the importance of FTO search and thorough analysis, which may assist other corporations or enterprises, such as Ranbaxy, in marketing their products in different countries without concern of infringing on any valid patent or patent application under prosecution.
An FTO search is a critical component of an impeccable business plan. One can execute plan with complete confidence based on the findings of the Freedom to Operate search (positive or negative).
From the above discussion, we can confidently state that lack of Freedom to operate search can pose financial and business repercussions and has the potential to disrupt the very foundations of your company by diluting your brand beyond repair. Hence, organizations with a long-term perspective must see the expense of Freedom to Operate search as an investment.
The search can be performed in-house (with skilled resources) or outsourced to a reputable third party like Wissen Research Freedom to Operate Search is designed to provide cost-effective and exact analysis in a timely manner.