India: Freedom To Operate And Business

Last Updated: 2 September 2019
Article by Namrata Shinde

Prior art search for the development and/or commercial production, marketing or use of a new product or process is commonly termed as a freedom to operate (FTO) search. Prior Art Search is a mandatory information gathering task where patent examiners, search for published literature to determine whether the claimed invention in a patent application is novel.

Freedom to Operate Search is also known as Infringement Analysis or Clearance Search. This due diligence process examines the claims language of enforcing patents as a means of assessing the risk of potential infringement. The purpose of searching for freedom to operate is to find any published patent applications or approved patents that include claims covering the product, process you plan to target. FTO search requests originate directly or indirectly from a commercial manager, management usually asks about FTO when the business is considering commercializing new products or processes. This could be early in the research process or close to the time of pending commercialization. It could also be in support of merger and acquisition decisions. If the product is at an early stage where modifications are possible then an FTO search may be a wise investment. By identifying key patents early on, it may be possible to find ways to design around the claims of the patents that present the highest risk of infringement. The participants involved in these FTO studies are Attorneys for giving legal decision, technical experts for providing technical assistance and business managers who define the parameters and are the ultimate clients. If an FTO search can provide a greater than 50% assessment that the product would not be infringing, then it may be worthwhile to invest in the same.

FTO Analysis: Methodology

A systematic FTO analysis may adopt the following sequential steps:

Recognizing Chances in Patent Limitations:-

  1. Patent protection is territorial
  2. Patents have a limited duration
  3. Patents have limits of scope as decided by claims

Benefits of FTO Analysis: Case Study

TVS Motor Company Ltd. wants to launch a motorcycle in the market with a new engine, for which they have filed several patents The Company did not conduct a freedom to operate study considering that positive patentability study (It is a type of patent search that gives you valuable information about whether your invention will qualify for a patent) was sufficient for proceeding with the launch. It was later sued by a company Bajaj Auto Limited as one of its patent had a broad claim, which found to be infringed by an essential component of the TVS motorcycle engine, and the court instructed TVS to stop their launch and motorcycle manufacturing, due to which TVS suffered heavy losses. If TVS have done FTO analysis before manufacturing and launching the product, they would have saved huge time and money lost in the litigation. The loss suffered by TVS during the period when the interlocutory order passed by the Madras High Court proved the fact that a thorough and early FTO must be done by businesses before diversifying into new markets or using new technologies.

Ranbaxy wished to launch cefuroxime axetil in USA. Ranbaxy came across a US Patent No. 5,847,118 owned by Apotex. Ranbaxy had used the same process for manufacturing cefuroxime axetil as was claimed in the Apotex patent. However, in a thorough FTO analysis, Ranbaxy noticed one critical variation in the process of preparation. Ranbaxy's process involves the use of acetic acid as highly polar organic solvent. The claim 1 of US patent also recited the terms 'highly polar organic solvent' but, in the description, acetic acid was not mentioned. Further, when Ranbaxy evaluated the prosecution history of this patent, it was revealed that the examiner during prosecution had raised an objection over the term 'highly polar organic solvent' as indefinite. In order to overcome this rejection, Apotex defined sulfoxides, amides and formic acid as highly polar organic solvents. Apotex has surrendered coverage for acetic acid in the claims to invoke patentability bar. Therefore, Ranbaxy filed for a declaratory judgment (a lawsuit filed to declare that the plaintiff is not infringing the patent) that its process for manufacturing cefuroxime axetil does not infringe Apotex patent US5847118. Ranbaxy was able to prove the absence of literal infringement and infringement under doctrine of equivalence. In view of the properly carried out FTO analysis, Ranbaxy could put forth its claims and counter claims to the arguments of Apotex and was granted a declaratory judgment by the United States Court of Appeals, Federal Circuit as case decided on November 26, 2003. 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 its thorough analysis, which may help other companies or other enterprises, like the Ranbaxy, to market their products in other countries without any fear of infringement of any valid patent or patent application under prosecution, of third party.

Conclusion: - Patent litigation can be an extremely expensive and a risky affair and hence, prevention is always better than cure. Since it is possible to assess chances of patent infringement through FTO exercise in advance, it is worth doing this right at the stage of initiating the new project. A proper FTO analysis cannot only reduce the chances of having to go through patent infringement litigation, but it might also open up new business prospects by showing variety of possibilities and void spaces of technologies present in the marketplace and also minimizing risk of infringement for third parties. A thorough search and critically analysed FTO opinion strengthens the organization's confidence.

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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