FREEDOM TO OPERATE
“ENORMOUS WASTED TOOLING COSTS CAN BE AVOIDED BY CONDUCTING AN FTO SEARCH AND ANALYSIS THAT IS DIRECTED TO A PROPOSED PRODUCT DESIGN, RATHER THAN WAITING UNTIL IT HAS BEEN TOOLED.”
of opportunity, he or she may have to either acquire an expensive licence from a patent owner or discontinue the commercialisation of a new product.
Start-ups FTOs become ripe topics of discussion when a party is considering investing in a relatively young company. Oſt en, there is excitement about the novelty of a start-up’s product design, as well as its having received a favourable patentability opinion. Clearly,
an investor
will be more attracted to a company whose core product line is proprietary in nature and whose IP can be protected. T at said, what good will a novel product be if it can never be commercialised without the risks associated with patent infringement? None. For this reason alone, investors will oſt en
ask early on whether a targeted company has obtained a favourable FTO opinion directed to its core product. If such an opinion has never been requested or obtained, not only will such an investor be risking his/her investment, but situations arise that may lead to litigation between the company and its founders and the investor. T e same can be said to be true where a
company is seeking to acquire another company or its technology. T e absence of a favourable patent FTO opinion may erect a roadblock to a successful acquisition. It is not unusual for the purchase agreement between such companies to include provisions for monies to be set aside, either to cover the costs of obtaining an FTO opinion or to indemnify the acquirer. If an FTO analysis fi nds that the claims of
one or more patents will be infringed by the commercialisation of a new product off ering,
this should not be the end of the line. An unexpired patent claim that would be infringed by the sale of a product may or may not be valid and enforceable. Patents, when granted by the USPTO, are presumptively valid from their date of grant. However,
that presumption is
rebuttable by evidence to the contrary. T e person conducting the FTO analysis
will want to conduct a validity study directed to such patent claims covering a new product. T ere are many grounds for fi nding a patent claim invalid. T ese include fi nding prior art that was never cited or considered by the USPTO examiner who granted the potentially infringed patent. Evidence of a sale of
the
patented invention more than a year before the patent’s fi ling date may invalidate its claims. Linda T ayer, in her ‘When is a FTO opinion
cost-eff ective’ article in the 2013 February/ March issue of Today’s General Counsel magazine, provides us with concise and helpful guidelines for considering the FTO opinion. We are invited to consider the value of the
product in question, as well as the amount of an investment in it. Whether similar products have sparked litigation is a factor. T e competitive community for the product must be examined. T e product’s source(s) is a factor. And perhaps most important, a company’s business objectives and risk tolerance must be carefully considered. A company averse to risk will go the extra mile to obtain a favourable FTO opinion before entering the market with a new product. We therefore see that a company’s developing
of its own patent portfolio represents only the threshold of managing its IP assets and risks. T ere is no sense in accumulating a patent portfolio covering a product line that cannot
70 World Intellectual Property Review Annual 2015 World Intellectual Property Review November/December 2014
be successfully commercialised. Patentability and FTO should be harmonised and viewed as compatible tools to achieve business goals. Spending money for prototypes of products
that cannot be marketed without obtaining a licence from others may amount to wasted eff ort. T e prudent businessman or woman will not play with the danger of waiting until a product line is fully developed and released before examining infringement liability. Such conduct runs the risk of involvement in
patent litigation. Obtaining a favourable FTO opinion may help to protect against a fi nding of willful infringement.
Paul Sutton is a founding partner of IP boutique law firm Sutton Magidoff. As adjunct professor at NYU’s Polytechnic Institute, he teaches the courses of intersections of law; business, engineering and psychology;
engineers and scientists. He
and IP strategies for can be
contacted at:
paul@suttonmagidoff.com
www.worldipreview.com
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