Freedom to Operate and Risk Management

Abstract: Freedom to operate (FTO) is—first and foremost—a strategic management tool. It is the synthesis of scientific, legal, and business expertise coupled with strategic planning. Strictly speaking, however, FTO is a legal concept. It is a legal opinion by patent counsel on whether the making, using, selling, or importing of a specified product, in a given geographic market, at a given time, is free from the potential infringement of third-party intellectual property (IP) or tangible property rights. As such, it is one type of input among many that managers use to make strategic risk-management decisions in relation to R&D and product launch. For academic and public research institutions, bringing products to market is often not a main goal. However, as a portion of their research moves downstream into product development, FTO becomes—or should become—an integral component of their endeavors. This is particularly relevant for product-development partnerships (PDPs) in health and for various public–private partnerships (PPPs) in agriculture, as well as for the Consultative Group on International Agricultural Research (CGIAR) and national agricultural research systems (NARS), all of which are concerned about global access.

Research exemptions exist in many jurisdictions, so most university research does not generally need to be concerned with FTO unless product development takes place. But PDPs, such as the Malaria Vaccine Initiative or the TB Alliance, are in a different category since their purpose is directly related to the distribution of products in the developing world. This chapter discusses three main categories of options that are available to reduce risk and obtain a manageable level of FTO. In practice, a combination of two or more options will often be pursued concurrently. These are:

• Legal/IP management strategies: license-in, cross-license, oppose third-party patents, seek nonassert covenant, seek compulsory license
• R&D strategies: modify product, or invent around
• Business strategies: merge and/or acquire, wait and see, abandon project

Each option presents its own risks and opportunities. Any action—including the decision not to take action—carries risk. Delaying the licensing of third-party intellectual property, for example, could lead eventually to expensive licensing terms, the inability to obtain a license, or the possibility of being sued for patent infringement. But for some organizations, such as those developing genetically modified crops, the reverse may be the case. For the public sector, the challenge will be to balance the various types of risks that each option presents.

The chapter concludes by urging the public sector to judiciously evaluate whether and when FTO concerns should be considered, and to build in-house capacity to conduct patent searches and cursory FTO analysis (as opposed to legal opinions). This will lead to benefits like better competitive intelligence and culture change in public sector organizations engaged in product development. An FTO strategy, therefore, is a plan that begins with research and evolves into an attitude throughout a product’s R&D and commercialization/distribution cycle.

Abstract: In the fields of health and agriculture, it has become increasingly important to understand the role of patent infringement in research, development, and commercial production. If a patented technology is used without permission, the patent holder may have the right to sue the researcher for patent infringement. Many companies routinely analyze the freedom to operate (FTO) of a research project or product, assessing whether it is likely to infringe existing patents or other types of IP rights. Private companies more routinely engage in FTO analysis than public sector research institutions because the infringement risks they face must be directly considered in the calculus of profitability. Public and not-for-profit private institutions also are becoming increasingly aware of the need for better FTO information, but FTO analysis is expensive, and its benefits must be weighed against its costs. This chapter provides an overview of the process, including considerations of when to invest in FTO analysis, and particularly focuses on the law firm’s role and perspective.

Abstract: Freedom to Operate (FTO) is the ability to proceed with the research, development and/or commercial production of a new product or process with a minimal risk of infringing the unlicensed intellectual property (IP) rights or tangible property (TP) rights of third parties. The procedure for assessing whether the product or process possesses FTO is called the FTO analysis, performed by meticulously dissecting the product or process into its fundamental components and then scrutinizing each for any attached IP or TP rights. The early preparations for an FTO analysis are crucial, because they will influence all that follows and hence determine the quality of the work product. Thorough preparation will lay a solid foundation, supporting a credible and reliable FTO analysis. This chapter explains these preparations through an example.

Abstract: Emphasizing patents and patent searching, this chapter will put readers on the initial path to understanding and protecting intellectual property (IP). By exploring patent information on the Web site of the European Patent Office and other Web sites listed in this chapter, the reader can begin to learn by doing and quickly gain experience that should improve his or her searching skills. Other resources dealing with IP in general are described. This collection is by no means exhaustive, given the vast amount of information on IP that is present on the Web, but the sites listed here should be valuable in accessing unbiased, useful information about the IP landscape, especially for key areas of technological interest. The value of IP searches for a typical technology transfer office is also discussed.

Abstract: Recent years have seen intense global debate about whether or not agricultural biotechnology—particularly genetically modified organisms (GMOs) and genetically modified crops (GM crops)—should be covered by a specially designed liability regime. This chapter examines common and statutory law theories of liability, various attempts at the national and international levels to design liability regimes for GMOs, and liability risk-mitigation measures.

Abstract: IP (intellectual property) rights can reward innovators and encourage investment in developing new products and services. However, the exclusionary power of IP rights can sometimes have negative effects, making technologies less accessible and, thereby, potentially impeding innovation. To make informed decisions about how to balance access and protection requires an understanding of both the traditional IP rights system (patents, copyrights, trademarks, and trade secrets) and alternative mechanisms for preserving access to technologies. This chapter provides a brief introduction to the public domain and defensive publishing and examines issues concerning the choice behind the choice of whether to publicly disclose or to patent an innovation. Discussing the strategic use of defensive publishing in IP management, the chapter considers both the utility of defensive publishing and its limitations for supporting broad innovation. After an examination of the public domain and how it relates to other open-access concepts, such as open source and the commons, the chapter focuses on the practical considerations involved when using public-domain technologies and defensive publishing to manage intellectual property.

Abstract: This chapter reviews different forms of IP (intellectual property) “assembly” mechanisms (royalty-collection agencies, information clearinghouses, technology clearinghouses, open-source innovation clearinghouses, honest brokers, and other forms of facilitators, IP management services, IP commercialization agents, the services of merchant banks and venture capital enterprises, and patent pools). Emphasis is placed on patent pools, which are voluntary agreements between two or more patent owners to license one or more of their patents to one another or to third parties. Although there are many forms of patent pools, such arrangements fundamentally consist of the interchange (cross-licensing) of rights to essential patents by a number of entities, as well as an agreed framework for out-licensing the pooled intellectual property to each other and/or to third parties, including an agreed-pricing and royalty-sharing scheme.

There are both benefits and risks associated with patent pools. Benefits include greater ease with respect to resolving patent conflicts, making assembled patents in the pool available to others, and resolving disputes over blocking patents. Risks include antitrust liability. Under certain circumstances, patent pools have application in the area of humanitarian licensing as instruments of assembly of intellectual property.

Abstract: Fundación Chile is a private, non-profit organization active in developing applications of biotechnology that can improve productivity and add value to existing agricultural and natural resource products of Chile. Fundación Chile seeks to create technology-based companies that would have significant economic and social impact in Chile. This case study details Fundación Chile’s initiative in grape biotechnology: globally assessing the availability and priority of different technological components and initiating efforts to access, license, and transfer those key technologies for the initiative.

Abstract: Plant breeders and research managers need to understand how intellectual property (IP) restrictions on germplasm and traits affect freedom to operate for a breeding program. Access to patented germplasm and traits is restricted and can only be used under some form of material transfer agreement or similar contract. Patented materials have to be maintained under strict provisions of the contract. This adds to the cost of breeding, parent seed, and production programs. Moreover, maintaining separate versions and precise records of patented materials increases the number of seed lots that a program must maintain. For example, different versions of inbred lines of maize must be maintained for each patented trait. Otherwise, stacking two or more traits produces lines with each trait and also lines with every combination of those traits.

Abstract: In the late 1990s, a consortium of public sector organizations commercialized the first and still-major food biotechnology product developed by public sector organizations. The author represented the Papaya Administrative Committee, an organization of papaya growers in Hawaii, in obtaining patent licenses necessary for the commercial introduction of a disease-resistant transgenic papaya. This chapter describes the approach taken in deciding what patents needed to be licensed, how the licenses were obtained, and how they were administered.

Abstract: The management of intellectual property is all about managing innovation with the procedures and processes that are required to turn that innovation into valuable patent rights. A truly strategic approach to IP management will span conception to product market release. Integrating IP management into the R&D, advance development, and product development cycles seamlessly provides opportunities to gain and enhance IP protection while offering the potential to reduce risk and lower costs. The following chapter discusses some of the key elements of IP portfolio management and how the combination of the right IP tools, procedural know-how, and organizational attributes and behaviors can contribute to successful implementation.

Abstract: This chapter shares the results of a project that analyzed the potential for consolidating patents in the malaria vaccine field. Goals include streamlining access to critical patents, advancing the development of products, and providing equitable access to the innovations. The study assessed the current status of the relevant patents and surveyed the holders of key patents to determine the availability for licensing. Other key activities included prioritizing patents with respect to a vaccine’s potential for success, identifying potential patent roadblocks by discussing the issue with patent holders, and proposing a mechanism for accessing key patents in the field of malaria vaccines. The potential role for some form of patent consolidation or technology trust, including pooling patents and technology, was explored. This chapter does not recommend developing a broad-based technology trust for existing malaria-antigen patents. Instead, several other steps are recommended to consolidate available rights and improve access for future patent families.

Abstract: Research tools encompass a wide range of resources, including genes/gene fragments, cell lines, monoclonal antibodies, reagents, animal models, growth factors, combinatorial chemistry and DNA libraries, clones and cloning tools such as polymerase chain reaction, methods, laboratory equipment and machines, databases and computer software. Access to research tools is integral to advancing progress in biotechnological R&D, in both the biomedical and agricultural sciences. However, a complex web of research tool patents has arisen as a result of the revolution in molecular biology and coincident changes in public policy and patent law. These patents can pose a potential block to accessing research tools. For developing countries, several approaches can be formulated and then implemented in order to overcome potential problems associated with research tools. These include changes in patenting policies, research exemptions in patent law to reduce the risk of infringement in R&D, compulsory licensing to allow access to upstream technologies, and institutional adaptations to facilitate access to needed technologies, such as guidelines intended to promote more appropriate behavior by participants in the system. With carefully formulated, multitiered approaches, research tool patenting and licensing (and its possible impact on innovation in health and agricultural research) may be effectively managed.

Abstract:

Abstract: Recent national and international changes in intellectual property (IP) legislative frameworks are likely to have profound effects on the ways in which health and agricultural innovations reach the poor and on how public and private research and development institutions pursue their work. Whereas IP rights are sometimes viewed as creating barriers to access to innovations in health and agriculture, we argue that it is not intellectual property, per se, that raises barriers, but rather how intellectual property is used and managed, particularly by public sector institutions. Above all, we argue that intellectual property is only one of six components of innovation. It is rarely the most important component.

The chapter reviews recent dramatic developments in institutional aspects of intellectual property, as well as global policy shifts and international studies that, among other outcomes, affected the environment for the creation of MIHR and PIPRA. In the field of health, changes have been particularly pronounced with the founding of a new form of institution for innovation: product-development partnerships (PDPs). As a result, we make the case for a fundamental shift in the way in which IP management in health and agricultural innovation is viewed and conducted. In addition, we argue that IP management should be seen as an important element in developing countries’ strategies to become more innovative in addressing diseases of poverty, the alleviation of poverty, and malnutrition. The public sector can employ new ways to achieve its goals within the evolving IP framework. These new ways can help it better mobilize the resources to take a product through the process of innovation. These new ways should include, a) creative licensing practices that ensure global access and affordability, b) improved institutional IP management capabilities, c) the formulation of comprehensive national IP policies, and d) the strengthening of IP court systems and patent offices.

These are what best practices in IP management are all about, and what this Handbook seeks to help bring about and promote.

Abstract: The public sector is making substantially increased investments in health technology innovation through public/private partnerships to bring improved health technologies to underserved people in developing countries. These product-development partnerships, however, face a common problem: how to manage intellectual property (IP). Such management involves many issues. In relation to a case study, presented in this chapter, of plant-derived hepatitis B virus vaccine, the challenges involve obtaining freedom to operate, securing new intellectual property, and deploying intellectual property to developing countries. We conclude that while challenges abound, the IP issues are fairly clear and can be addressed with straightforward IP management approaches. The cost of managing the intellectual property is expected to be minimal on the price of the finished vaccine. In the medium term, an IP protection strategy might offset costs and generate modest income. Most important for the partnerships is to develop a clear, transparent IP policy, with emphasis on the licensing principles, so that products can be made available to developing countries at affordable prices.

Abstract: In the health and agricultural sciences, biological materials were once freely and widely exchanged. But more and more, these materials have gained commercial value. Public sector institutions, as well as private companies, have recognized, therefore, that proprietary protection of these materials may be necessary. Material transfer agreements (MTAs) are legal instruments that define terms for the transfer of tangible biological materials between or among two or more parties. MTAs are bailments that transfer possession but not title: the party who transfers the materials retains full ownership; the party who receives the materials holds them in trust. Transfer is governed by contract, ideally specifying the term of the transfer, how the materials may and may not be used, and other related issues, such as confidentiality. In addition, an MTA may contain licensing provisions for the transfer of embedded intellectual property (IP) rights (patent rights). Hence, an MTA can be a hybrid instrument, covering the transfer of both tangible property (via bailment and contract) and intangible property (via licensing of patent rights). Biological materials transferred using MTAs include reagents, cell lines, antibodies, research tools, insertional mutant populations, genome sequence databases, novel vectors, and plant genetic resources. Due to divergent institutional priorities, material transfers between the private and public sectors are generally more complex than those between public sector institutions.

Abstract: Nonassertion covenants (nonasserts for short) grant permission to third parties to practice a patent they would otherwise infringe. Legally, nonasserts are patent-infringement settlement agreements that are designed and drafted with the purpose of preemptively resolving future infringement disputes. Nonasserts can take three forms: (1) an agreement between two parties, (2) an agreement among several parties, or (3) a public statement. A non-assert can specify the release of only certain patent rights or fields of use, or it can be broad and specify release for entire patent families, including future inventions in a certain area. Public statements effectively place rights to patents, or elements thereof, into the public domain. Nonasserts nevertheless need to specify, precisely, which rights are granted in order to avoid ambiguity that could lead to equitable estoppel.

Nonasserts can have wide-ranging implications in terms of enhancing public sector R&D. One application could be with patent rights covering research tools that are critical for accelerating the development of essential biotechnological applications. Specifically targeted non-asserts can also be effective instruments for industry to permit the use of patented inventions anywhere in the world, provided such use is for the express purposes of addressing specific humanitarian needs in developing countries. This could have broad-ranging and significant positive impact, as this approach reduces transaction costs, encourages innovation to help the poor, and accomplishes this without any loss of commercial opportunities.