Our panel session at Startup Boston Week 2023, “Navigating the Path to Market with Freedom to Operate and Other IP Strategies,” took a deep dive into what Freedom to Operate (FTO) means, when and how to proceed with FTO, the purposes that FTO may serve throughout the growth of a company, and stories from inside and outside counsel and founders who have been there.
First, what is FTO and why did we make it the focus of this panel discussion?
FTO is the ability to make, sell, and use your product or process without infringing valid intellectual property (IP) rights of others.
An FTO analysis is a critical step in IP due diligence for inventors, entrepreneurs, and businesses looking to develop, produce, or commercialize a new product, process, or service. By identifying and mitigating potential infringement risks, an FTO analysis can help safeguard investments, reduce legal uncertainties, and position innovations for success in the marketplace. It is important for companies of all sizes, at all stages of the business lifecycle, to understand their competitive landscape. Furthermore, FTO may look different depending on the industry sector and growth stage.
Here are 6 key takeaways from the discussion:
An FTO analysis can be useful to “map” the patent landscape related to your technology.
It can show you where your potential roadblocks may be and how to navigate around them (or through them, if necessary). The related patents plotted on your map may be “no-go” zones, but the “white space” in between is the free space—the potential territories that provide opportunities to consider if a fit for your strategy.
It is advisable to initiate an FTO analysis early in the innovation process.
The ideal stage for initiating FTO analysis is before significant time and resources have been invested into developing and commercializing your innovation. An early FTO analysis can help you design a market entry strategy that considers any potential obstacles posed by existing patents or IP rights. Identification of such risks can inform your decision-making and lead to the development of alternative approaches, design-arounds, or opportunities for licensing.
There is business value—not just legal value—in performing an FTO analysis.
There will be IP due diligence expectations at each funding stage. Expect that larger angels and institutional investors will conduct their own FTO search, and don’t be caught off-guard by an investor who wants to know of any risks to a future investment. Show your credibility and preparedness by identifying to your investors a broad understanding of your major competitors and their IP positions, the pace of innovation and trends in the market, and any potential obstacles. This is all information that can be learned from an FTO analysis.
FTO is not actually “freedom” to DO anything—it’s a bit of a misnomer.
While FTO is not legally required to enter the market, and it does not preclude you from being sued, proceeding without any kind of FTO analysis could expose you to legal risks. If your invention is found to infringe upon existing IP rights, you could face legal action that may lead to expensive litigation, damages, and injunctions.
An FTO analysis should be an exercise with no finite end.
Developments should be monitored and the FTO periodically updated as technology advances and the intellectual property landscape evolves. If you make significant changes to your invention or its features, you should consider performing a new FTO analysis to capture such features. Also, keeping in mind that the term of a U.S. patent is generally 20 years from earliest filing dates, it’s important to understand when your competitors’ patents may expire. This information can inform your product development cycle and open new paths for your technology.
An FTO analysis may not be the same as a clearance opinion.
An opinion is a formal document created by an IP attorney that can be used to substantiate your FTO analysis. This can be costly and that scares a lot of startups away from doing FTO. Most FTO is search and analysis of the competitive landscape surrounding a technology, with findings memorialized in attorney/client verbal or written communications, reports, and other privileged information. Patent searches and much of the initial research can be started by the client and that can make FTO analysis more cost effective and a beneficial exercise for a company to undertake.
A recording of the full panel discussion will be made available in the coming weeks. Watch LALaw.com and our LinkedIn page for that announcement. In the meantime, you can find our newest IP Essentials Q&A on Freedom to Operate—and 15 more Q&As on key IP topics—in our Entrepreneurship Center. Please reach out to us if you have any questions about FTO or another IP topic, or if you’d like to speak to an IP attorney about how L&A can help protect your innovations.