1. Build a routine free-to-operate (FTO) mechanism

Nowadays most companies understand the value of applying for patents on inventions before launching a new product. Obtaining patents on your inventions can effectively secure your rights and stop others from making or using your invention without permission. However, not so many companies have recognized the benefits that come with product clearance, also known as “freedom to operate” (FTO) or “right to use” analysis.

Freedom to operate (FTO) is the ability of your company to develop, manufacture, and market products without legal liabilities to third parties (e.g., other patent holders). Technically, FTO analysis refers to whether it is commercially “safe” for you to manufacture or sell your product in the country in which you wish to do so, without infringing existing third-party rights. For example, if your company has developed a new ice-cream machine and intends to make and sell it in China, the first question that pops up in your mind might be “can we sell it in China without someone coming after us for patent infringement when we release it commercially?”

In this situation, if there are no third-party patent rights which are in effective in China, you may be clear to make and sell the new machine here without any FTO barriers. However, if there are existing in-force patent rights, you run the risk of having to stop selling, paying damages/royalties or potentially being sued and becoming embroiled in infringement proceedings. Such risk at this stage also comes from the currently pending patent applications that are probably to be granted in the future.

Conducting a FTO search is generally the best approach you can take to help minimize the risks of infringing patent rights. However, due to the possibility that some pending patent applications have not been published yet at the time of conducting FTO searching, it seems to be a mission impossible to completely remove such risks by FTO searching and analysis in reality.

For the past decades, the Chinese government has been striving to propel the development of intellectual property, especially patents, by enhancing patent protection through legislation and establishment of various policies. For example, in order to encourage entities to devote more efforts and energy to R&D and apply for more patents, as an incitement, those companies owning more patents would be awarded to get more tax reductions and even receive more funds from the government. On the other hand, with the growing awareness of the importance of safeguarding with patent rights, even small Chinese entities with less innovation are trying to seek patent protection. Under the patent system in China, utility model and design patents do not go through substantive examination and thus provide such entities having less creative ideas with cost effective and comparatively low-standard patent protection, making a contribution for the huge patent application quantity in China. Thus, the presently huge number of patents/applications in China has raised the risks of patent infringement.

In view of the circumstances in China, it would be advisable to carry out FTO searching and analysis before launching new products so as to minimize patent infringing risks and foresee any potential risks in the future.

With the above being said, the amount of FTO work we carry out should depend on a number of factors. For example, one critical factor we should consider is the cost of developing a new product and bringing it to market. For the projects on which you are making a significant investment, a routine FTO mechanism conducted at an early stage is always highly recommended. Whereas, for the projects of less importance to you, we could do a tailored FTO search with less inputs and efforts.

2. Strategies conducted after FTO analysis

The FTO search and analysis set a good start for commercializing your new product in the territory in which you wish to do so. On the condition that there are no third-party patent rights in-force in the target territory, you may be clear to make and sell the new product there without any FTO barriers. In such case, nevertheless, it is always advisable to obtain your own patent right on the new product.

On the contrary, if the new product is likely covered by any existing patents that are in force or any published patent applications that are pending (hereinafter referred to as “target patent”), the following strategies are to be considered.

2.1 Design around

If we complete the FTO search and analysis at a quite early stage and it would not be problematic or costly, designing around the target patent would be the best approach.

Due to the doctrine of equivalent, the patent attorneys and the engineers shall work together to see how the product could be modified and make sure that the modified product will be outside the patent protection scope and thus be “safe” from patent infringing.

2.2 Patent invalidation & Third party opinion

If it is difficult to design around the target patent, we may consider initiating patent invalidation against the target patent (if it is an existing in-force patent) or filing third party opinion against the target patent (if it is a published patent application that is pending).

When it comes to patent invalidation or third party opinion, it is recommended that another prior art search shall be initiated to find prior arts that can destroy the patentability and stability of the target patent.

2.3 License & Other business options

In some cases, the above two approaches (2.1 Design around and2.2 Patent invalidation & Third party opinion) might not be feasible in view of the cost or chance of success. Under such circumstances, obtaining a license from the target patent owner could nevertheless become a compromised option.

In addition, it is also possible to continue the new product development through other business options such as cooperation or even merge with the target patent owner.