IP Insights

There are many factors to be considered for a project developing a new brand, product, or process, but Freedom to Operate should not be overlooked. It is a critical element you should be undertaking when working with a brand consultant as all that work can become a nightmare later.

What is Freedom to Operate?

Freedom to Operate, or “FTO”, is the ability to carry out commercial plans without infringing third-party Intellectual Property (IP) rights. The term is most commonly used in relation to patents, but can also apply to trade marks and designs.

The Risks of Infringement

IP litigation can result in a damages award (a payment to the IP right owner to compensate them for losses due to the infringement) PLUS an injunction (a court order stopping further infringing activities) which may block access to a market for a technology, or prevent the use of a particular trade mark. These actions are usually taken by a plaintiff raising a claim for misleading and deceptive conduct under s18 of the Australian Consumer Law, and given such claims are heard by the federal court it’s going to come at a high cost to raise a defense. If the infringement has been ongoing for many years, a damages award and/or loss of access to an important market can have a very significant impact on the infringing company.

As the consequences of being found to infringe an IP right can be so serious, being accused of infringement in a court action can be stressful. In some cases, it may be possible to successfully defend against any such action, for example by arguing that the right is invalid. If the court action is unexpected, and preparations have not been made, the stress is likely to be significantly greater.

Many companies take the view that it is important to understand, and where possible reduce, FTO risks before incurring the costs of developing and launching a new product, or using a new trade mark. Some companies may allow a project to proceed without assessing FTO risk and this can be a valid option, but this should be the result of a considered decision to accept the risk, rather than the result of a failure to consider the risk.

Freedom to Operate Analysis

To understand FTO risks, searches can be performed and reviewed to find IP rights that could be infringed. These searches are often referred to as FTO, or clearance, searches. The more detailed the search and review, the greater the understanding of the risk, but the cost of conducting and reviewing these searches varies greatly depending upon the rights involved, and the level of detail requested.

Trade Mark Search Strategy for Freedom to Operate

The biggest FTO risk for a project developing a new brand is trade mark infringement. A cost-effective strategy can be to conduct detailed searches near the start of a project. First, you will want to define what class of goods or services you will be participating in. This is important because you will need to know when conducting a search on possible conflicting marks that any similar mark out there could be competing in a similar class of goods.

Next you will want to undertake your search using formal platforms for expired or registered trade marks this includes searches of the WIPO global brand database & the IP Australia Trade Mark Search. Then you will move to a generic search of Google, and Social media, this will uncover any use of unregistered marks that could file an opposition to your trade mark registration claiming priority.

Managing the Risks

If a risk is identified, it is a commercial decision whether the project should proceed or not, but it may be possible to reduce, or at least manage, that risk.

Change the Plan

A planned name or logo can be changed, so that the risk posed by the IP right is reduced or avoided. However, depending upon the project changing the plan may not possible, practical, or desirable if the project is to proceed.

Challenge the Right

The validity of the problematic right can be assessed to determine the chances of it surviving a challenge during litigation. To clarify the risk posed to the project, the validity of the right can be directly challenged in court or at the relevant intellectual property office to ‘clear the way’ before a particular project step, for example before a commercial launch. In some cases, additional searches could be carried out to find publications to support any validity challenge.

Commercial Deal

Another option to remove the risk, while potentially benefitting from the protection, is to obtain a license to, or purchase, the IP right.

Indemnity

If the identified risk is primarily financial, the company may consider ensuring that it has adequate indemnities from a well-financed business partner.

In general, more options are available if a potential risk is found early in a project.

Want to know more?

Legum ILP can assist with  FTO Projects by working with your brand consultant. This way you and your brand consultant have a clear legal pathway when developing a new brand. Reach out to our team at info@legum.au