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What is Freedom to Operate and why you need to know about it

What is Freedom to Operate and why you need to know about it

Innovation in the modern world is exciting. Businesses of all sizes continuously develop and launch new products, processes, or services. Many of us love attending trade shows or read magazines displaying the latest consumer electronics or products of all kinds. Whether it’s a groundbreaking technological advancement or a novel service offering, entrepreneurs and corporations alike continually strive to push the boundaries of what’s possible through the application of ingenuity, science, and financial investments. But amidst the excitement of bringing a new product or service to market, there lurks a potential threat: the risk of unwittingly infringing on existing patents or trademarks. That risk is probably greater in the US than in any other country on the face of the Earth. This is where the concept of conducting a “Freedom to Operate” (FTO) search and obtaining a legal opinion becomes paramount.

An FTO search involves a comprehensive investigation into existing patents, trademarks, and other intellectual property rights that may pose obstacles to the commercialization of a new product or service. While it may seem like a tedious and time-consuming task, the benefits far outweigh the costs. By proactively identifying potential infringement risks early in the development process, businesses can avoid costly litigation, reputational damage, and even the possibility of being forced to cease production altogether. In particular cases, infringement, whether or not intentional, may lead to the disappearance of a company or cause financial ruin to individuals.

One of the primary reasons for conducting an FTO search is to mitigate the risk of patent infringement. Patents grant their owners exclusive rights to exploit their inventions commercially for a limited period. Failure to respect these rights can lead to lawsuits, injunctions, and substantial financial penalties. By thoroughly examining existing patents relevant to their product or service, companies can assess the likelihood of infringement and take appropriate measures to either design around the claims of existing patents or seek licensing agreements. Or in some cases, an FTO search can lead to the conclusion that a particular patent that on its face is being infringed – for example – by the sale of a product or use of a process, is unenforceable of its claims invalid. In such cases the entrepreneur or company may more comfortably launch its new product or service, knowing that there is a solid legal position on which they can count in the event of an accusation of infringement (against them) of that patent.

Trademarks, on the other hand, play an important role in safeguarding brand identity and consumer trust, and the registration of a trademark provides exclusive rights to use a particular name, logo, slogan or even a sound, color, or smell in connection with specific types of goods or services. Before launching a new product or service, it is highly advisable that entrepreneurs and companies ensure that their new branding elements do not infringe on existing trademarks. As in the case with patents, infringement of a registered (or even unregistered) trademark could have dire consequences. Specifically, infringement of a trademark can result in expensive and time-consuming legal disputes, forced rebranding, loss of market share, or in some cases the disappearance of a company altogether – particularly in view of the expensive nature of litigation, more so in the U.S. than in any other jurisdiction.

Turning back to patents, an FTO search can uncover so-called “blocking patents” or “prior art” that may hinder innovation and stifle competition. By identifying these barriers early on, businesses can adjust their strategies, modify their designs, or explore alternative approaches to avoid potential conflicts. In some cases, the results of an FTO investigation may even lead companies to discover opportunities that ultimately strengthen their own intellectual property portfolio through licensing, acquisition, or collaborative partnerships.

Conducting an FTO search – which is something that should be done by an experienced professional dedicated to that art in cooperation with competent Intellectual Property (“IP”) counsel – is only the first step. Equally critical is obtaining a legal opinion from a qualified IP attorney. That type of opinion provides an expert assessment of the FTO search results, offering insights into the potential risks and advising on the best course of action. While it may require an additional investment, the guidance of a knowledgeable and experienced legal professional can provide invaluable peace of mind and help navigate the complex terrain of intellectual property law.

An FTO legal opinion serves as a critical defensive tool in the event of future disputes. By demonstrating that due diligence was conducted, and reasonable efforts were made to avoid infringement, businesses can strengthen their position and mitigate potential damages. Conversely, neglecting to obtain a legal opinion leaves companies vulnerable to accusations of willful infringement, which can significantly increase the severity of legal consequences. Specifically, a finding of willful infringement by a court may significantly increase (e.g., by a factor of 3) the monetary damages awarded to the owner of the infringed patent. FTO opinions are not inexpensive, but their cost more than pales in comparison to the financial and other consequences of patent infringement.

The importance of conducting an FTO search and obtaining a legal opinion before launching a product or service cannot be overstated, particularly in the very litigious United States. It is a proactive measure and a wise investment that demonstrates respect for intellectual property rights, protects businesses from costly legal disputes, and even foster innovation (e.g., by leading to an improved product arising from having to design around an otherwise-infringed patent). By investing time and resources upfront to ensure compliance with patent and trademark laws, companies can lay a solid foundation for sustainable growth and success in the marketplace. The allure of bringing a new product or service to market may be compelling, but it is essential for businesses to proceed with caution, especially in the U.S. Conducting a thorough FTO search and seeking legal guidance are indispensable steps in safeguarding against potential infringement risks. By doing so, companies protect their own interests and, in the process, also uphold the integrity of the intellectual property system. This ultimately contributes to a climate of innovation and fair competition.

If you want to discuss whether (or when) you should secure an FTO search and opinion for an upcoming launch of your product of service, contact the PatentXL Law Firm at info@patentxl.com.