MegaReg Forum Paper 2016/3

Generalized Freedom to Operate

Dan Ciuriak

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Freedom to operate (FTO) refers to the ability of a company to develop, produce, and market products without legal liabilities for infringement on intellectual property rights (IPRs) held by third parties. Establishing FTO is an integral part of the process of innovation in today’s IPR-rich environment. Prior to committing funds to develop a product, a firm must identify valid third-party IPRs, the infringement-related risk that proceeding with the development of the product entails, and strategies to manage the risk. In current practice, firms establish FTO through an opinion based on patent search (an activity for which an industry has been called into existence because of patent proliferation), through a cross-licensing agreement between parties holding patent portfolios that might trigger infringement depending on the precise nature of a prospective commercial undertaking, by acquiring patent rights, or through a similar but less costly stratagem of defensive publishing (which in theory prevents others from acquiring patents).