Freedom to Operate (FTO) analysis

A Freedom to Operate (FTO) analysis assesses whether intellectual property rights held by third parties, patents foremost among them, stand in the way of developing, manufacturing, distributing or commercialising a given product or service.

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This analysis differs from a patentability review, which concerns the novelty and inventiveness of an invention itself: FTO is concerned exclusively with the risk of infringing rights held by others, regardless of the validity of any rights the company itself seeks to register, including where the invention at stake is itself a Computer-Implemented Invention (CII).

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Skipping an FTO analysis before launching a product creates an asymmetric risk: a startup may hold a perfectly valid patent on its own innovation while unknowingly infringing an earlier third-party patent on a related component or process, which does nothing to shield it from a later infringement action, potentially long after the funding round that financed the launch.

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For a technology startup preparing to launch a product, and for the buyer evaluating it, an FTO analysis carried out before launch, or ahead of acquisition financial due diligence, identifies an intellectual property litigation risk before it turns into a costly dispute, an issue covered in our article on patent valuation.