Patentability and Freedom-to-Operate

Patents play a major role for technology-based, emerging ventures[1]. The manner of handling of patent affairs may often make the difference between unheralded success and colossal failure! Patent protection and hence question of patentability of inventions generated by the ventures are one important aspect. Freedom-to-operate (FTO) versus third parties’ patents is another, independent and often unrelated, important aspect. These issues will be discussed in this paper.

Patentability of inventions generated by the venture for the purpose of protecting innovations; and FTO for the purpose of avoiding third party patents and ensuring freedom-to-operate (FTO) are important considerations in the handling of patent affairs for a technology venture. These are independent aspects, having different purposes, that may be performed at different timings and necessitate different searches. In other words, a patent search conducted for assessing patentability may be of no significance to FTO issues and vice versa.

This paper is intended as a brief and high level eye opener and is certainly not a comprehensive review of these issues[2].

Patentability

It is critically important for a technology-based venture to obtain patent protection to cover its innovations. In almost all cases, a proprietary position that would present a bar to competitors is critical in building and maintaining value in a new technology. While, for some ventures, such a proprietary position may be maintained through reliance on trade secrets; for the vast majority of ventures, patents, at times in combination with trade secrets, are essential.

Without patents there is often little bar for competitors to make use of the innovator’s innovations, sometimes by simply copying critical elements. The importance of patents in the modern business environment is manifested, among others, in investment and other technology-based deals: without strong and enforceable patents (or at least the prospects for having such patents), a venture is less likely to pass the scrutiny of a patent due diligence which is, in most cases, a critical element to closing a deal.

The importance of patents necessitates a carefully thought-out strategy that, among others, focuses on patenting the critical and value-generating elements of the innovation. One of the key considerations for patenting is the question of patentability of the innovation. The basic requirements for patentability are novelty and inventive step. Novelty means that the invention be distinct from anything previously known in the art; and inventive step requires that the invention not be obvious vis-à-vis the prior art[3].

The basis for a patentability evaluation is a prior art search, the purpose of which is to gain an understanding of what is known in the relevant field. The results of  such a search serve as a basis for evaluating whether an invention is novel and involves an inventive step. Relevant prior art that needs to be considered includes the general knowledge in the field, patent literature (namely prior patents and published patent applications[4]), non-patent literature (e.g. scientific papers, industry reports, etc.) and public disclosure of any nature (internet websites, trade shows, lectures, dissertations, etc.).

It is to be emphasized that in such a search patents are reviewed for their content, as any other technological literature, and not for the scope of protection they provide[5]. More on this below.

Freedom-to Operate (FTO)

Patents entitle their owners to exclusive use of the invention thereby protected and, as such, have the purpose of blocking third parties from using the new technology developed by the venture. However, even when the invention is sufficiently protected by patents  it must be taken into consideration that there may be third parties’ patents that may block commercial activity of the innovative technology or product developed by the venture. By way of example, a new technology of a medical device where the innovation is embodied in the sensors may be blocked by patents that cover hardware, signal processing technologies, or special materials or chemicals used for such sensing. It is thus critically important for a technology-based venture to perform a study at a suitable time, in an effort to locate patents that may present an FTO bar for products and services embodying the innovative technology developed by the venture. FTO issues arising from third party patents may be dealt with in various ways which are outside the scope of this review[6].

Here again, the basis for an FTO study is a search, albeit a very different search than that carried out in the context of a patentability study. Patents end with claims and the focus of an FTO study is on the claims of prior patents to understand whether they encompass the products developed by the venture or elements thereof. It should be noted that gaining an understanding of the scope of claims (or what is often referred to as “claims construction”) is not always an easy task and often requires a deep professional study[7].

This is in distinction to a search conducted within the context of a patentability study in which a prior patent or patent application is reviewed as a technological literature.        

Furthermore, it should be noted that patents are applicable only for the specific territory in which they have been registered, FTO studies are territorial in nature. There may be different patents in different territories and even patents belonging to the same patent family may have claims which determine the scope of protection, that are different in different countries.

Timing

The timing of the performance of these two studies may be different: while a patentability study should typically be performed in the very early stages, as part of formulating a patent strategy for a venture; an FTO study is typically performed later, after the details of the developed product have been better determined[8].

Conclusions

Patentability and FTO evaluation are critically important for a technology-based venture. The studies are different requiring different searches[9] and the timing for performance of such studies may be different.

A patent attorney should be consulted for specific cases and circumstances.