India: Freedom To Operate

Last Updated: 15 May 2018
Article by Monika Shailesh

Most Read Contributor in India, July 2018

Just as the number of patent fillings and grants are increasing, so is the number of patent frays. Regardless of the substantial efforts in the form of patent reform bills, industry conferences, and risk management business models, patent infringement law suits have been rising at an exceptionally high rate. Resolving disputes through litigation is highly cost intensive and may take years to get resolved. In addition, patent trolls and non-practicing entities also file patent infringement law suits to threaten the business and product owners and to generate quick money by offering out of the court settlements.

The IP games are being played by all sides which result in demon dialogues, negative patterns, and quick escalation to legal actions. For any business, to be caught in an IP tussle, it spells a bad situation. Investing in new products or in new technology attracts risks of patent law suits that not only cost a fortune to the organization but also delays the launch of the product. It is often seen that technology upgrades are held hostage and are delayed or prevented from being launched in the market by existing business houses by frivolous patent infringement law suits; resulting in huge losses or even failure of the business. Although businesses should be cautious that if they undertake any technology or product development without performing Patent Landscape analysis, such developments may attract genuine infringement law suits. And it is because of the above reasons that Freedom to Operate (FTO) analysis of the technology and market segment is of utmost importance.

FTO refers to the degree of freedom with which a business house or an individual can operate in a particular territory, in a particular technology space without any infringement on intellectual property rights owned by others. FTO is used to ensure if a particular action like testing or commercializing a product can be carried on without infringing upon a valid and enforceable intellectual property right. As prevention is better than cure, an advance study and analysis of all the patents granted or filled that could affect freedom to operate or commercialization of a product or technology minimizes the risk of a business entering a new segment/territory. Defining the degree of freedom to operate is not a simple task. There is an enormous amount of data and patents in existence. Thousands of new patents are granted every week. Many patents are hidden as the patents get published on an average only after eighteen months of filing, therefore, there may be a patent being filled that can affect the even legitimacy of FTO.

FTO Opinions

FTO opinions are generally provided by legal counsels to their clients, which enables the latter to identify the potential risk of patent infringement on an unexpired, valid and enforceable patent. Based on these opinions, the client can formulate a plan towards risk mitigation.

There are broadly two types of opinions that are sought to determine the degree of freedom to operate in any marketplace or technology space - Non-Infringement Opinion and FTO Opinion. The two are distinct from each other yet have a very delicate relationship between them. The non-infringement opinion is directed towards a particular patent or patents about which, the client is already aware of. The Non-Infringement opinion gives an assurance that the product, process or technology to be developed will not fall under the ambit of patent infringement. Whereas, the FTO is more comprehensive in its approach as it addresses the potential of infringement upon any intellectual property, known or unknown to the client.

A Non-Infringement opinion by a legal counsel is required when a company contemplates to bring forward a product or technology upgrade for an existing patented product or technology in the market. FTO is generally sought when a company requires a very comprehensive study of all the available patents granted or non-granted, published or not published that could potentially pose a risk to a project on developing a new product or technology.

Technique for Conducting FTO

Identify the region: Patents are territorial; this means that the validity as well as enforceability of the patent is restricted to the physical boundaries of the region where the patent has been granted. For example, if a patent for voice recognition is filled with USPTO and is granted by USPTO, this same patent can be enforced in United States only. If the patent owner wants to protect the technology in other countries also then s/he will need to file for the patent in those countries too. Therefore, while conducting the FTO analysis identifying the region is very important.

The definition of novelty also varies from one region to another. It has been observed that some countries like the US are more lenient towards the novelty clause and patents with even slight differences are granted. Some countries like India, are very rigid on the novelty clause. Hence, the FTO analysis in USA becomes more complex and difficult as the number of similar patents to be analysed is very high.

Selection of region is also based on the commercial value of the market; a company may not be interested in low commercial value zones like Africa. Since in such regions the market is not big enough to invest in patents, many big corporate houses and technology leaders do not consider spending money on getting their technology or product patented in Africa. Hence, FTO analysis in low value zones is fairly simple due to less number of patents and lesser chances of a patent infringement case.

Understand the technology: The core of conducting FTO analysis is clear understanding of subject technology. The person conducting the FTO analysis should be well versed in the minute details of the technology under scanner, its underlying principle and its cause and effects. A clear know how should be developed by discussing the technology with the developers and management. The interaction should include face to face discussion and telephonic discussions if so required. If the technology is not clearly understood, it will lead to flawed FTO analysis since the person conducting the FTO analysis may miss some important related patents which might lead to patent infringement litigation or may make the business house fall prey to patent trolls and non-practising entities.

Conducting clearance search: Once the FTO analyst become conversant with the subject technology, clearance search is carried on, which is possible to be done in a number of ways. The approach towards the clearance search methodology is dependent on the amount of time and money that the business or product developer wants to invest. The clearance searches are performed by professional data mining experts and specialized data analytics tools. The professionals scan the public search facility of the relevant patent offices, patent collections available at various depository libraries for the information available on the subject technology. There are a number of data bases available on the internet that provide reliable detailed information. The website of USPTO (www.uspto.gov), Espacenet website (www.ep.esp@cenet.com) of European patent office and WIPO (www.wipo.int/patentscope/en) offer some of the most trusted data bases.

'PAIR' or patent application information retrieval system, is one facility available on the USPTO website that allows users to conduct full text and image search. It provides information on both issued as well as published patents. Identifying the most relevant search engine saves time and money while also strengthening the validity of the FTO analysis. There are many commercially available data bases also that can be used to conduct clearance search. A well-performed search is based on perfect keywords/classification that defines the technology in the most immaculate way. The keyword must include comprehensive and specific terms to define the boundary and core of the technology. Keywords should also define synonyms or alternate terminology that is generally used to define various aspects of the product or technology.

Listed below websites from patent offices of few countries and some commercially available patent databases. A patent search strategy should be formulated before conducting clearance search. A well-defined strategy is very useful in optimizing the usage of resources like time and money.

Knowing the law of the land: A good FTO analysis and opinion takes into consideration the Law of the land. The FTO and non-infringement opinion should include a discussion on the laws, i.e. legal standards on infringement and legal principles for infringement or the statute of the region under consideration. Study of doctrines and case laws are also of the same importance, e.g. US doctrine of double patenting and Doctrine of equivalents, the definition of novelty from an Indian perspective and the stand of Indian courts and government towards compulsory licensing. Case laws incorporate courts' decisions from individual cases and encompass courts' interpretation of statutes, constitutional provisions and administrative regulations. Understanding the local law helps the FTO analyst to anticipate the most probable stand of the local courts and administration.

Amalgamate relevant patents: All the relevant patents identified on the basis of granted and active patents, patent application under prosecution and WIPO applications which may enter national phase should be collated together to give an overall picture of patent landscape in the subject technology space. With this process one can easily identify the risks of claims that could arise from the existing patents or literature.

FTO Analysis report and opinions: Once all the above activities are over and a comprehensive study is done, a final report is prepared which provides feedback to the business owner if the technology or product can be taken further or the project should be stopped based on the risks so identified. The analysis report and opinion should provide insights that help the business to take the final decision. There are three possibilities – 1) that no such significant risks of patent infringement law suit has been found present and the business should continue with developing the product or the technology: 2) there are certain definitive risks of infringement lawsuits. In this case the FTO analysis and Opinion should contain suggestions for the actions that can be taken to mitigate the identified risks. The risks can be mitigated by purchasing the patents or by in-licensing, by cross licensing and through compulsory licensing. If the mentioned risk mitigation strategy does not work, the FTO analysis should also provide invalidation grounds of the obstructing patents through validity search. In case any patent, in application phase, is identified as a risk than a search of prior art shall be performed to check if the patent would be granted or the chances of patent being granted; 3) the case arises where the opinion with clarity stating all the risks, should suggest that the business house shall not proceed with technology or product development.

Conclusion

A competent FTO search provides an insight towards risks assessment for patent infringement, to identify the licensing needs and to steer product or technology development in the right direction.

The FTO and non-infringement opinions are precautionary practices and advise companies, well in advance, to consider available options at an early stage. In some cases minor product adaptations or payment of small premiums to gain licenses will increase the freedom of a business to operate and avoid infringement law suits at a later stage. Systematically evaluating a company's freedom to operate prior to launching a new product is, therefore, a way of minimizing the risk of an infringement on the patents owned by others. It will also improve a company's chances of finding business partners and attracting investors to support its business development plans. Tracking patent expirations (legal status analysis) i.e. when the potentially relevant and threatening third party IP rights expire, can also help determine the correct timing of entry into the market. In this competitive world a FTO opinion written with due diligence can safeguard the very existence of the business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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