By Ana Herrera Arroyo, Director of Patents, Technology Development and Innovation, PONS IP
In the world of technological innovation, there is a widely held belief that if a company obtains a patent for its invention, it automatically has the right to manufacture, market and exploit it without restriction. However, this assumption is incorrect and can create significant risks for start-ups and deeptech companies whose value is largely based on their industrial property assets.
When I give talks on the importance of protecting innovation outcomes to institutions such as universities, technology centres and, above all, companies, I frequently find that the concept of Freedom to Operate (FTO) is entirely unfamiliar, as is its importance. It is also quite often confused with the rights conferred by a patent itself. For this reason, I always try to distinguish clearly between the two concepts and explain the scope of each.
The reality is that a “patent” and “freedom to operate in the market” are two different concepts. A patent grants its owner the right to prevent third parties from exploiting a particular invention. It is therefore what we call a “negative right”, in the sense that it allows the patent owner to exclude third parties from the market where their technology falls within the scope of patent protection. However, it does not guarantee that the patent owner can automatically exploit the invention without infringing prior rights held by other companies or institutions. This is precisely why Freedom to Operate (FTO) analysis has become an essential strategic tool for any organisation seeking to bring a technology to market.
An FTO study aims to identify and assess third-party patents that could pose an obstacle to the manufacture, use, marketing, import or export of a particular product or process. Unlike a patentability search, whose purpose is to determine whether an invention is novel and capable of patent protection, an FTO analysis focuses on a different question: whether the intended commercial activity may interfere with existing industrial property rights held by third parties. The question therefore shifts from “Can I patent this?” to “Can I commercialise this without exposing myself to the risk of infringing third-party rights?”.
This distinction is relevant in any industry and for any company or organisation intending to launch a product or process onto the market, regardless of whether or not it has been patented. However, it is particularly important in technology-intensive sectors such as biotechnology, artificial intelligence, energy, advanced materials, medical devices and quantum technologies, where an innovative solution often relies on multiple pre-existing technological developments protected by different rights holders.
Consider a start-up that has developed a new artificial intelligence-based diagnostic system and succeeds in protecting certain aspects of its technology through patents. Those patents may prevent others from copying the protected innovation, but some essential components of the system, such as specific sensors or even certain processing methods used by the solution, may already be covered by earlier third-party patents that remain in force. In this scenario, the start-up could own a perfectly valid patent and yet encounter difficulties in commercialising its product without obtaining additional licences or modifying the specific technology being brought to market.
Situations of this kind are more common than many companies realise. Indeed, in highly innovative sectors such as those mentioned above, it is common for a single technological solution to be subject to a complex web of industrial property rights owned by different market players.
A paradigmatic example is CRISPR-Cas9 gene-editing technology. Even if a company develops a new therapeutic or agricultural application based on CRISPR and obtains patents covering its own innovation, the commercial exploitation of the resulting product may require access to multiple third-party industrial property rights. For years, ownership of fundamental CRISPR patents has been disputed between entities such as the University of California (CVC) and the Broad Institute, alongside other players holding patents covering nuclease variants, delivery systems, specific applications or methods of use.
As a result, a company wishing to commercialise a CRISPR-based therapy may need to analyse a complex web of rights and, in certain cases, negotiate several licences in order to operate on the market with legal certainty. The CRISPR-Cas9 case is just one example that clearly illustrates how the commercialisation of products based on a particular technology can be affected by a complex patent landscape involving universities, research centres and companies. A company may therefore own patents covering its own application of a particular system while still requiring licences from third parties in order to exploit its product commercially.
For this reason, Freedom to Operate analysis should be approached as a preventive tool rather than as a response to a potential dispute, because by the time it is treated as the latter, it may already be too late. The earlier the analysis is carried out, the greater the scope for adapting the technological, commercial and, ultimately, business strategy. Identifying a potentially problematic patent while a product is still under development will often make it possible to introduce relatively straightforward design modifications to avoid falling within the scope of protection conferred on a third party. Discovering the same risk after significant investment has already been made in production, marketing or international expansion can, however, have far more serious financial consequences.
Although every project has its own particular circumstances, there are certain stages at which an FTO analysis becomes particularly important. One is prior to industrialisation. When a company is preparing to make significant investments in facilities, machinery, production or industrial scale-up, it is essential to confirm that the technology can be exploited without significant legal conflicts.
It is also highly advisable to conduct an FTO analysis before embarking on international expansion. Patents are territorial rights, which means that the legal position surrounding a technology can vary substantially from one country to another. A solution that can be freely exploited in Spain may face restrictions in the United States, Germany, Japan or China. For this reason, the geographical scope of the study must be carefully aligned with the markets in which the company intends to manufacture, commercialise or license its technology.
Another particularly sensitive stage is fundraising, as investors are increasingly scrutinising the risks associated with industrial property. A strong patent portfolio creates value, but the existence of potential barriers to exploitation arising from third-party rights can create uncertainty and affect a company’s valuation. In many cases, a well-designed FTO analysis can become a differentiating factor that demonstrates maturity, robustness and sound risk management, all of which investors will undoubtedly take into account.
Likewise, licensing transactions, technology acquisitions, mergers and due diligence processes often, and should, incorporate specific Freedom to Operate reviews to identify potential contingencies before a transaction is completed. It is not uncommon for a technically excellent technology to lose some of its commercial appeal when significant infringement or litigation risks emerge.
The primary objective of an FTO study is therefore to anticipate problems before they develop into actual disputes. Identifying these situations sufficiently early allows a company to make informed decisions in good time and define an appropriate strategy. In some cases, it may be possible to redesign certain elements of the product; in others, to negotiate licensing agreements, explore opportunities for technological collaboration or even reconsider the market-entry strategy for particular territories.
Although FTO is therefore often perceived as a purely legal exercise, as we have seen, its business implications are far-reaching. A properly conducted analysis of this kind provides valuable insight into the competitive landscape, helps identify relevant players, highlights particularly crowded areas of technology and identifies less congested areas of the market from an industrial property perspective.
It also contributes to better strategic planning by helping to direct R&D efforts towards solutions with greater prospects for commercial exploitation and lower exposure to conflicts with third parties. For start-ups and deeptech companies, where company value is often closely linked to technological assets, having a Freedom to Operate strategy can be just as important as having strong patent protection.
Patent protection remains a fundamental tool for defending innovation and creating competitive advantages. However, as noted at the outset, protecting a technology and having the ability to exploit it are separate matters that must be assessed independently. This is why companies with a more mature approach to industrial property no longer view the filing of a patent application as the end of the process, but rather as one component of a broader strategy that includes technology monitoring, risk management and Freedom to Operate analysis.
In an environment in which investment, scaling and internationalisation decisions increasingly require greater levels of assurance, Freedom to Operate has become a key element in turning promising innovation into a genuinely viable business opportunity. A technology may be excellent, patented and even have a market, but without freedom to operate, its commercial potential can be seriously compromised.
