[MUSIC] Hi, this next part of the course carries a type of freedom to operate and licensing deals. In this part of the course, it's divided into three parts. What is freedom to operate? How to assess freedom to operate? and how to overcome lack of freedom to operate? And each of these parts have short parts, which I will go through later. So first, in this first part of the session, I'm going to be focusing on what freedom to operate is. And also, the relationship between freedom to operate and patenting, defining freedom to operate, and also explaining why freedom to operate is so important for many firms. So first of all, let's just recap why patenting is important. Most of you probably, by now, understand why firms apply for patents before they launch new products. Obtaining patents can help in a number of ways. And I highlight four of these reasons here in four different categories. So first of all, it can be revenue generating. By using the patent to exclude others from using a certain technology, it can generate revenue. It can also help in cross-licencing where firm share IP, and it can also help by providing litigation bargaining power. Secondly, it's also helpful for cost reduction. And this is in relation to, for example, sales, licensing, market penetration, and it can also help increase the speed to market. Third, a patent can also be helpful in conflict avoidance and conflict resolution. It is because the patent is codified, and therefore, it's possible for other parties to identify which technologies that others have patent-protected. Also, patents can be very helpful in strategic positioning. It can create a reputation and create an image for firm. If you want to be the leading innovator within the field, you do take out patents in the technology. It can help competitive blocking, and also, it can create barriers to competition. But one thing that's very important is that it does not automatically give you the freedom to operate your invention. So one thing is that patents can help in all these issues, but you cannot be sure that you can actually operate the patent that you applied for. So what does this mean? It means that having a patent does not give you the right to practice an invention. It is a common misconception that if you have a patent, you're also free to practice it. That is not true. It's not necessarily true, at least. So a patent gives you the right to exclude others from using or selling or conducting R&D on a certain patented invention. But it does not give you the right to practice it yourself. Let me give you an example. For example, you want to obtain a patent for a percutaneously deliverable aortic valve as you invented a unique geometry, which led to several advantages over other products available. Such a device might infringe prior intellectual property rights on certain biomaterial or of the deploying method. So even though you created something that is patentable because it meets the requirements for patentability, which is novelty, industrial applicability, and inventive step, it does not give you the right to actually put this in the market and let the cardiologist use the device. So freedom to operate is different from patentability, and it's a separate question that you need to handle in a separate way. So the definition to give you that, of freedom to operate, I put up here. Freedom to operate is the ability to proceed with research, development, and commercialization of a product while fully accounting for any potential risk of infringing activity. Whether a product can be made, used, sold, offered for sale, or exported with a minimal risk of infringing the unlicensed in selected property rights or tangible property rights of others. So why think about freedom to operate? Why is it that freedom to operate is important? There are four main reasons that I highlighted here. First of all, R&D spending. If you do not have freedom to operate, you might be investing in R&D that you in the end, even though you've been successful in your R&D, cannot commercialize. It is therefore quite often that it's early in the R&D that you look for the freedom to operate, and you consider this. I will get back to when to do it in the R&D process later. So freedom to operate is conducted to ensure that you can actually launch the new idea that you came up with. Secondly, reputation matters. Also, introducing products to the market that infringes other firms might not be the best thing and might be harmful for the reputation of your firm. If the firm would like to be acknowledged as the lead innovator in the field, infringing others can be harmful. Third, introducing a product on the market, which infringes other IP, they might file a litigation against you. So research shows that firms that are part of litigations loses on average 2 to 3.1% of their market value. So merely by filing the litigation. So it matters a lot for the market value. And last, also, patent litigation is very expensive. As you see down here, the table, it shows the average cost of having a patent litigation in different countries. As you can see, the average low in the United States is $1 million US and the average high is %10,000 US. Other countries in Europe, you can see United Kingdom as also having an average low cost of $159,000, and then over a million, 1.5 million in average high cost. So engaging in patent litigation is very expensive, and it's something that most firms would like to refrain from doing. Good, so that was a bit of an introduction to FTO. Next, I would like to introduce you how to assess FTO, and then also, when to do it in the R&D process. First of all, so far in this course, we've showed you how to search on patents. And that has been in order to identify whether the technology you invented was possible to patent. A freedom to operate search, or also what's called a patent clearance search, is something different from a patentability search. Even though you often use the same databases, for example, in more particular, during the FTO, you search mainly on issued and pending patterns. So the FTO opinion, which is also the search, can never guarantee you a clear pass to the market commercialization, unfortunately. And that is of course the case because pattern applications, as you already learned, are not publicly available before after 18 month. So you have to live with this insecurity, but the approach to conducting an FTO is that you deconstruct the product. You figure out, you identify each of the essential components in the product, and then you also look at the processes. And on top of that, you have to look into which research tools that I used to generate the product. So let me give you an example. Here's an example of such a product deconstruction. The example is the case of fall down disease vaccine development, the production and deployment of a vaccine from transgenic sorghum. And that would entail a number of components and technologies. And here I show examples of what this FTO search would consist of. It would look into monkey cell culture. It would look at the antibodies against the viral proteins, the viral genome, individual viral genes, research tools used to clone the viral genes. Plants transformation techniques, plant genetic transformation constructs, plant cells culture techniques and cell lines. Sorghum germ plasm used for genetic transformation, procedures for harvesting and purifying expressed antigens. And also formulation, production, and deliverable of the actual vaccine. So there are many areas, and one FTO search can be very resource demanding. So in terms of the practicalities, the search strategies of a search and FTO search might include keywords, inventors, assignees, citations, classifications. Both using the international patent classifications, but also the new patent classifications, corporate patent classifications. So when you've conducted the search within these different parts of your product. They're important things that you need to consider when you consider what patents you'll find. First of all, in which countries is the problematic patent applied? So for example, only 2% of the Chinese patents are applied in the US. So identifying a patent that's problematic in China might not be so in the United States. Second, have the maintenance fee been paid or is the IP expired? So it's a safe harbor or has it been lost in court cases? 20% of US patents are not renewed after three years, and roughly half of all litigated patents are found to be invalid. So there are some considerations you should look into even though you identify some patents that could be problematic for FTO. They might be it in the end. So however, right now and due to the last ten years of increasing patent applications world wide it is much more difficult to conduct FTOs. There is excessive data out there. There is roughly 2.5 million patents being applied each year. This is a 2013 measures, but also we have seen patent applications doubling since 2003 and up to 2013. So it's very much an exercise that is time and resource demanding. Now, I would like to present you when to consider an FTO during the innovation process. Up here, I show a stage gate model and this stage gate model depicts the different stages at firms, that a firm passes through and development process. So you have the discovery stage, the scoping stage, the building business case, development, testing, validation and launch. So these different stages are the stages that a firm goes through in an innovation process. At each gate, it represents a point in time when the process team should stop. And ensure that issues raised at the particular point in time or at the gate has been considered. So when is FTO important? So of course, there's many things that firms consider. But here, we only look at the FTO first. Already here, very early just after the discovery process, we would in firms conduct an FTO search. Not an in depth FTO search because the product is not entirely yet. But to help identify whether there are paths that you wouldn't go down. Secondly, quite a lot of discovery goes on in collaborations. And if that is so, in your case as well, there would be issues that you should consider in terms of the FTO. First of all, you should ensure data of noble idea and the original idea, who invented the idea, where did the knowledge come from, and so on. Those are important questions to ask. Secondly, it's very important to examine who is the rightful owner of the IP. There might be other rightful owners of the IP than you imagined. And thirdly, if there's scare resources needed for any parts of the further process is very important to identify. For example, The university scientist have access to programs, substances, assays, compounds, measuring instruments and medical tools that only universities can use for non commercial purposes. So if you are using this research in an innovation process that is intended to be commercial in the end. You have to transform this into a commercial setting and take care of these issues up front. So that's the initial part of process. Then you go forward the next stage which is really scooping the product. In stage one, the firm will get a clear idea and distinctive definition of the product. They will have to find the value proposition of the product. And they also would have been doing extensive analysis of competing products and so on. So at this point in time at gate 2, it's time to do the in depth FTO. So here you would do the in depth FTO to assess the crowdedness in terms of third party patent rights to components of technology as I gave the example before. And often, you would already hear, start to thing about whether your invention can also be patented. So you would combine the patentability search with the patentability search of the new invention that you created with the search on FTO. Because this makes sense already here. So that was the innovation process and where to look at FTO. The next thing I would like to highlight is how to overcome FTO. Because now you can identify whether you have a problem. But what to do if you do indeed find problems out there. So in this next part, I would like to look into purchasing a patent, licensing, in-licensing or cross-licensing, invent around and also patent pools. Okay, if search reveals one or more patents that limits your FTO, what to do? The first example here is on buying the patent or purchasing the patent. So this is the first thing you can do, and that means that you get the right transfer from the patent that was problematic for you to yourself. So you have to put down a payment, a lump sum then you get the right transferred. The way to identify who is the owner of the pattern is of course in the patent data. And in the patent data basis where you can identify the assignees for the pattern. So that's the first way of solving problems in the FTO. The second way is in licensing, Licensing involves obtaining written authorization, a licensing contract we also called it, from the patent holder, so you can use the technology. There are certain areas that you may consider when you license a new technology. Either it's to be exclusive or non-exclusive, meaning is it only for you or also for others that can use it, which markets. Certain patent holders only wish to let you have access to certain markets, maybe the US or Europe where they want to use the pattern in their own local part of the world. Things about time, what's the time period the licensing contract is in for? And then also which technological fields? Certain compounds, for example, can be used in a variety of ways, and therefore, the patent holder might use the invention in a different way from what you've intended. And therefore, you only get the license deal for a certain part of the technology. There might be limitations, in terms of your R and D, when you work with licensed technology, where they would like a grant back clause. A grant back clause means that if you invent something new using their technology, that right will be granted back to the licensor. Also, here, payment can be done in many different ways. I put two examples up here. Again, the lump sum where you put a down payment up front, and then secondly, it could also be periodic royalties, which often is counted as a percentage of sales or so on. Second, there's also the opportunity of cross licensing. One important thing about cross licensing is that it involves several parties to share their IP rights. So you give some of your patents to another firm that then will give their patents to you, so you can use each of each other's technology. This one requirement here is, of course, that you have a patent portfolio that is interesting for the other party. So quite often, firms actually also decide to patent, so they have this bargaining chip and can engage in cross licensing deals if it's an area that's very polluted with many patents. Third, there's also the option of inventing around. This essentially means redirecting your research, so you can use or do something else than what the patent covers. For example, is it possible to invent an alternative process with the same end result, but using a different process, meaning that you are not infringing the patent enforced? And if you are capable of redirecting your own R and D, then, of course, you do not have to pay any licenses or down payments for the companies who owns the rights. So, essentially, this is also why you will do conduct the FTO search very early in R and D, so you have the chance to redirect your research activities. The fourth option you have is also patent pools. Patent pools are becoming more often, but it's not that frequently used. But it might be that the area you operate within is influenced by patent pools. A patent pool is when two or more firms practicing related technologies put their patents in a pool to establish a clearing house. Then external firms, or you wanting access to the patent pool, then you must pay for it, often having to access then into the whole patent pool. To exemplify, the AvGFP patent pool was initiated in 2001, and it's a patent pool of green florescent proteins. It is a patent pool by GE Healthcare, BioImage, Invitrogen, and Amersham Biosciences, and Columbia University. So they together put a pool several patents related to green flourescent proteins. Every pore the molecule drawn from bioluminescent marine animals, which allows researchers to visualize cellular proteins without using chemical close dyes. So the purpose of this patent pool was to clear a patent thicket that was restricted for commercial use of the GFP. And also, they had a patent pool that was very geographically very broad, so it was difficult to operate within this field without getting access to this. This patent pool is free for academic, but only for non-commercial use, and so is many other patent pools. But you have to think about this if you want to afterwards use it commercially. So this was the presentation about what FTO is, how to overcome FTO, and also when to conduct FTO in the innovation process. During the slides, there's been different sources, and you're welcome to go and look at any of this literature. Thank you very much. [MUSIC]
