Home > IP Topics Index > Freedom to Operate and Risk Management > Freedom to Operate, Public Sector Research, and Product-Development Partnerships: Strategies and Risk-Management Options > Editor's Summary, Implications and Best Practices

Partly because of the patents surrounding golden rice, published in the year 2000, the agricultural community has begun to pay more attention to Freedom to Operate (FTO). That study on the intellectual property of golden rice demonstrated that inventions from many scientists around the world enabled—if not accelerated—its development and that a number of manageable licenses were needed for golden rice to be transferred to developing countries. With the leadership of the Rockefeller Foundation and Syngenta, the relevant intellectual property was quickly assembled (or in-licensed) into a package that could easily be licensed (or sub-licensed), largely royalty-free, to public sector institutions in the developing world. This, in essence, represents FTO.

From an IP perspective, FTO simply means to have assembled all intellectual property relevant to a particular product for a particular market. The path leading to FTO, however, is not always so straightforward. In fact, companies usually undertake a cursory FTO analysis when planning an R&D program so that strategic decisions about intellectual property can be made early. FTO is never conclusively established but remains an ongoing activity since the patent landscape is changing, new patents are issued, revoked, or abandoned, and new competitors emerge that may interpret patent claims differently.

But how much attention should the public sector pay to FTO? Since most public-sector research is not directly intended for commercial use, the answer is usually “not much.” But as the Consultative Group on International Agricultural Research (CGIAR) and many national agricultural research systems have discovered, their work requires the information and strategic leverage that an FTO analysis provides. They, together with the health-related product-development partnerships (PDPs), have as their ultimate goals the development of products that are used by consumers (either in hospitals, clinics, or pharmacies in the case of health products, or by farmers in the case of improved seeds). The need for FTO analysis will certainly continue to grow as more institutions participate in health or agricultural PDPs.

In the narrow sense, FTO is strictly a legal concept. However, in the broader view, FTO analysis and assessment represent a critically important strategic management tool. FTO is a multidisciplinary synthesis of scientific, business and legal expertise and is thus one factor, among many, that product managers will carefully consider in order to make strategic risk management decisions regarding R&D and product launch. An FTO analysis dissects a planned or existing product into its component parts and searches for any intellectual or tangible property rights that may be attached to these parts. The result is an FTO opinion that discusses the likelihood of infringement. The opinion usually distinguishes between three kinds of third-party intellectual property:

1. Patents that have a high likelihood of being infringed and therefore require a license
2. Patents that may be infringed, depending on how claims are interpreted
3. Patents that are clearly outside the field of the product and require no license

This information is critical for planning the development, production, and distribution of new products resulting from companies and equally those resulting from PDPs or other public sector efforts that seek to use and/or disseminate new technologies. For public sector research institutions, FTO concerns will become an increasingly integral component of their operations as more research leads to product development.

This chapter discusses the ten strategies available for managing potential IP infringement and discusses their relevance to public-sector institutions. The strategies can be broken down into three groups as follows:

• Legal/IP Management Strategies
  1. License in
  2. Cross-license
  3. Oppose third party patents
  4. Seek nonassertion covenant
  5. Seek compulsory license
• R&D Strategies
  6. Modify product
  7. Invent around
• Business Strategies
  8. Wait and see
  9. Abandon project
  10. Merge and/or acquire

In practice, a combination of these are adopted and the mix of strategies will vary as a function of how advanced the product is. Evidently, for the public sector, certain options are not available (such as mergers and acquisition) but in any case, FTO warrants careful consideration by those whose work in the public sector and who deal increasingly with the complex interface of proprietary science and the public domain. Exceptions to this are discussed and include many university programs where technology transfer/licensing professionals neither have a mandate to commercialize finished products nor the power to influence research strategies and scientists’ priorities.

Key Implications and Best Practices

Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.

For Government Policymakers

• As IP rights become more prevalent in health and agriculture, public and not-for-profit institutions also need to consider the intellectual property of third parties. This may require the assembly of IP which, in turn, requires the knowledge of who owns what. This is a freedom to operate (FTO) analysis.
• Translating such an analysis into an effective strategy requires some shifts in thinking by those public sector institutions that are engaged in the development of products. Taking FTO into consideration as one element of any product development strategy allows for more judicious use of resources and can often lead to stronger and more effective partnerships.
• Governmental policies and programs that support capacity building in IP management should include the training of senior management in FTO strategies, including institutional Boards. A dialogue between Boards responsible for policy and senior management more concerned with implementation is essential since FTO is a risk management tool. Although a legal opinion may form the basis of an FTO, the use of an FTO is strategic.

For Senior Management (university president, R&D manager, etc)

• As public sector research institutions increasingly move in the direction of product development, whether they do so themselves, through spinout companies or in partnerships with other organizations freedom to operate (FTO) will increasingly become important and should be an integral part of an institutional policy and strategy.
• Public sector research institutions, in their quest to deliver products, should not assume that, due to their nonprofit (or governmental or parastatal status), they are exempt from IP infringement liability. Although governmental institutions per se may be shielded from liabilities, FTO rarely ends with them. Other institutions take on the products and may need to be able to deal with FTO. FTO then becomes just one tool by the public sector as it expands its mission into product development and distribution.
• FTO is a process that goes from analysis, to opinion, to status, to strategy. Hence, it should be viewed and managed as an interdisciplinary endeavor and considered within the context of business, scientific and legal options. As such, FTO is a management tool for assessing risks and benefits in order to arrive at informed and sound decisions.
• Institutional programs that support capacity building in IP management should include the training of senior management in FTO strategies, including institutional Boards. A dialogue between Boards responsible for policy and senior management more concerned with implementation is essential since FTO is a risk management tool. Although a legal opinion may form the basis of an FTO, the use of an FTO is strategic.

For Scientists

• In the course of a freedom to operate (FTO) analysis, your role is important. You will need to provide the essential information that will subsequently be analyzed. This will then inform decisions about how to proceed with potential products or processes arising from your research programs.
• Similarly, the results of FTO analysis may provide you with useful information on how to avoid IP complications further down the road.

For Technology Transfer Officers

• Management of the risks associated with freedom to operate (FTO) assessment requires a thorough understanding of the strategic options available. These options include legal/licensing, business strategies, and R&D strategies.
• Unlike in a company where business/legal/finance and so forth often determine R&D strategies, licensing officers in public sector institutions rarely have an influence over research projects and institutional policy. Your role of communicator in this area is thus so much more important.
• FTO is an interdisciplinary endeavor. Build FTO teams within your institution. These teams, made up of legal, business and scientific professionals, will integrate their respective capabilities and expertise so as to coordinate and facilitate FTO analyses. Such teams in themselves are useful mechanisms to strengthen internal dialogue and communications.