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Freedom-to-Operate: How Important Is It?

On Behalf of | Dec 1, 2022 | Intellectual Property |

When we think of the term “freedom-to-operate” in the business context, the legal, regulatory, and competitive issues associated with a business expansion quickly come to mind. The situation may be a new product introduction (NPI) or rebranding, expansion into a new territory or marketplace, or the larger scale diversification through acquisition of a business in a relatively new industry.

No matter what the objective, the business and legal teams are tasked with performing the necessary due diligence from an internal and an external perspective to minimize the risks associated with surprise that cause costly setbacks. Generally speaking, an external review includes consideration of the laws, rules and regulations that must be followed, and knowledge of the competitive landscape in the relevant market. An internal review involves a survey of the business resources and capabilities needed to pursue and implement the plan for expansion. Lastly, the marketplace norms established over time, concerns relating to the local culture, business ethics and corporate social responsibility, especially in the international business context when laws, rules, and regulations are murky or unclear, should not be overlooked.

In the context of intellectual property (IP), freedom-to-operate involves owning or having authorized access to IP rights needed to: 1) enable the business to pursue the opportunity and 2) separate itself from the risks associated with competitive threats of others asserting their IP rights in an attempt to thwart the client’s expansion.

While business risks cannot always be eliminated, they should be well understood and tactically managed with best practices. Best practice mandates an assessment of the IP rights owned or accessible, and the IP rights of others for compliance and clearance purposes.

For example, whenever a business plans an NPI or updated product release, or even a rebranding initiative or other market expansion, an investigation to determine the competitive landscape and the enforceable IP rights held by others should be conducted. In the process, the business client will be moved to protect their own IP with patents, trademarks, and copyright registrations, strategic agreements with development partners or even key vendors and customers in the context of establishing reliable supply arrangements. Freedom-to-operate is, therefore, much more than an accounting and clearance of IP rights.

The IP team at Chenoweth Law Group has decades of corporate experience performing freedom-to-operate investigations and providing formal operational opinions to senior management to facilitate successful business expansions around the globe. We can help your business identify and clear a pathway for success, sustained competitive advantage, and continued growth.

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