Freedom to Operate and Risk Management
Topic Guide for Technology Transfer Managers

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.