What biotech startups have to know about Freedom to Operate (FTO)
As your biotech startup moves from science to commercialization, at some point an investor, partner or accelerator is going to ask: “Have you done an FTO?”
To help you answer that question, we held a webinar with Dr. Philipp Marchand from Vossius & Partner.
Read on and learn what founders need to understand about the IP fundamentals, the mechanics of an FTO analysis, how courts actually interpret patent claims and what to do when the analysis turns up a risk.
Meet BaseLaunch
Our mission is to further grow the biotech ecosystem in the Basel Area, one of the world’s premier life sciences hubs.
We provide groundbreaking startups with the funding, expertise and infrastructure they need to transform their ideas into industry-shaping solutions. So far, we’ve supported companies that have collectively raised over $1 billion in follow-on financing.
We also collaborate with industry leaders, domain experts and organizations to create opportunities for knowledge exchange and partnerships. Events like this are a key part of that vision, bringing together thought leaders to tackle the challenges and opportunities shaping the future of biotech.
Meet the speakers
Meet Dr. Philipp Marchand
Dr. Philipp Marchand is a patent attorney and partner at Vossius & Partner, one of Europe’s largest firms specializing in IP law, and our exclusive IP partner.
IP basics: what all founders need to know
- Patents protect technical innovations and are the primary focus of any FTO analysis in biotech.
- Copyrights protect original works, including software code, which doesn’t need to be registered.
- Trademarks identify the commercial origin of a product.
- Designs protect the aesthetic appearance of a product or packaging.
- Trade secrets (formulas, processes or data you choose not to publish) are also legally protected in most jurisdictions, including under the EU Trade Secrets Directive.
Today’s focus is on patents, but keep other IP rights in mind as well.
For example, if your software stack uses code protected by a third-party copyright, that’s an FTO issue as much as a conflicting patent would be.
A granted patent comes with significant strategic advantages for the holder, but to get one, you must fulfill all patentability requirements.
To learn more about all forms of IP in biotech, discover BaseLaunch Perspectives.
Two claim categories (and one important special case)
- Physical entity claims cover products: devices, molecules, cells, chemical compounds and pharmaceutical compositions.
- Activity claims cover methods and uses, such as a process for making something or a method of treating a disease.
The special case worth knowing in biotech is the purpose-limited product claim, sometimes called a second medical use patent.
These look like product claims (“compound X for use in the treatment of disease Y”), but their protection is limited to that specific purpose. They’re extremely common in pharma, because they allow new indications for known compounds to be patented.
Question from the audience
In most cases, yes. If disease A and disease B don't overlap, a patent covering compound X for disease A doesn't prevent you from pursuing disease B. You'd conduct your own development, file for your own patent on the new indication and not infringe the existing one. This is exactly the kind of situation purpose-limited product claims were designed for.
FTO explained in detail
FTO means Freedom to Operate.
It describes a legal assessment of whether a specific product, process or service can be commercialized without infringing a valid third-party patent or other IP right. In biotech, this almost always means patent rights, though other IP types can also be relevant.
The purpose is straightforward: understand your legal exposure before you enter the market.
Owning a patent doesn’t mean you have FTO
Holding a granted patent doesn’t mean you’re free to commercialize.
Your product can meet every patentability requirement and still fall within the scope of a broader patent held by someone else. A patent grants you the right to exclude others from your specific invention but doesn’t clear the path to market.
This is why FTO is an entirely separate question from patentability, and why it matters so much before you bring anything to market.
If a competitor or patent holder finds that your product infringes their patent, they can seek a preliminary injunction: a court order that stops you from selling immediately, often within days.
When should a startup actually conduct an FTO analysis?
The intuitive answer “as early as possible” turns out to be wrong.
At the very early stages of a biotech venture, you typically don’t yet have a well-defined product, which means many potentially relevant patents show up and the results will almost certainly be a sea of orange and red flags.
That can work against you.
In fact, an early FTO analysis will almost certainly be outdated by the time you get to market. As such, negative results may cause decisions that later turn out to have been made prematurely, because patents considered relevant in the FTO have been discontinued, invalidated or simply expired.
The alternative is a patent landscape search.
It’s a strategic map of the IP environment around your technology area: who the competitors are, what they’re protecting, how far along they are and where the gaps and opportunities lie.
That kind of intelligence is often far more actionable at an early stage than a formal FTO verdict and costs less than half as much (around CHF 10,000 compared to CHF 25,000).
Three ways to infringe a patent
When an FTO analysis identifies a potentially relevant patent, the question is whether your product actually infringes it.
Courts recognize three distinct types of infringement.
Direct infringement
Courts conduct a feature-by-feature comparison: the claims of the patent on one side, the technical details of your product on the other. If all claim elements are present, the patent is infringed.
Equivalent infringement
If you replace an element of a patented invention with something that performs the same function in the same way with the same result, a court may find infringement even if your product doesn’t literally match every word of the claim.
Question from the audience
Not necessarily. In most cases, the answer depends on whether the change is functionally meaningful. If it isn't, the doctrine of equivalents can still bring you within the claim.
Indirect (contributory) infringement
Suppose a US patent covers a method of treatment using an antibody (not the antibody itself, but its use in treating a disease). Switzerland has no equivalent patent. You manufacture the antibody and ship it to the US, where it’s administered.
That could make you liable in the US for contributory infringement: supplying a component for a use that directly infringes a patent in that jurisdiction.
That’s why an FTO analysis should cover the markets where the product will ultimately be sold, not just the country where it’s developed.
The 5 steps of a Freedom to Operate analysis
Step 1: Define your product
An FTO search requires a specific, well-defined embodiment: the actual product that might infringe. If that definition doesn’t exist yet, the resulting search will be broad, the patent list will be enormous and the analysis will be inconclusive.
Step 2: Commission a patent search
Patent searches are conducted by specialist providers. The Swiss Federal Institute of Intellectual Property runs a private search branch that’s considered a benchmark in the field, though expensive.
Costs typically run CHF 6,000 to 7,000 for the search alone. Other providers offer comparable searches at lower cost (CHF 3,000 to 4,000).
Step 3: Screen and filter the results
The first pass filters for technical relevance, dropping patents that are conceptually unrelated to your product. The remaining documents are checked for their legal status.
What’s left is the list of patents that are technically relevant and legally active. These are the ones that get analyzed in depth.
Step 4: Analyze infringement claim by claim
The core of the analysis is a feature-by-feature comparison of each relevant patent claim against your product, conducted as if a court were evaluating the case.
Claim interpretation is governed by Article 69 of the European Patent Convention, which establishes that the extent of protection is determined by the claims, interpreted in light of the description and drawings.
Courts and law firms don’t interpret claims in isolation; they ask what a term means to a professional in the field, using the concept of a skilled person: a legal construct representing someone with around 10 to 20 years of relevant technical experience reading the claim in its functional and technical context.
The mushroom case: sequence identity and the skilled person
Amycel’s business is selling mushroom spawn, the spores farmers use to grow champignon mushrooms.
- At its peak, 60 to 70 percent of European supermarket champignons came from their proprietary strain, protected by a patent. Rather than describing the strain in words, they deposited a physical sample with a certified repository, making that organism the reference point for the claim.
- A competitor started cultivating what appeared to be the same strain independently, building a multi-million euro business. Amycel brought proceedings to stop them.
- In the proceedings, it needed to be shown that the strain offered by the potential infringer falls within the patented claim relating to the deposited strain. Accordingly, it needed to be shown that the offered strain is genetically identical to the deposited strain.
- In this regard, whole-genome sequencing is never a perfect match and the method itself can introduce errors. The competitor argued the differences proved their strain was genetically distinct.
But the court looked at the case through the eyes of a skilled person.
Champignon strains mutate slowly, so natural genetic drift couldn’t explain the differences of 0.1% between the two sequences. The only other explanation was sequencing errors, which are expected and well-documented. The court also asked what the invention was fundamentally about: a champignon with superior shelf life. The competitor’s strain had the same characteristics, and the court found infringement.
A minor substitution that doesn’t change function is unlikely to get you outside a patent’s scope.
Step 5: Assess enforcement potential
The final step examines whether a patent that appears to cover your product would actually hold up in court.
A granted patent isn’t automatically a valid patent!
If a patent was granted despite prior art that should have prevented it, or because the claims were drafted more broadly than the invention merited, it may be possible to invalidate it.
The enforcement potential assessment gives a preliminary read on how likely it is that this patent would survive a challenge.
What if you find a risk?
A negative or partial FTO result isn’t the end of the road. There are four main responses, and experienced IP counsel will usually recommend a combination.
- Design around. Modify your product or process to fall outside both the literal and equivalent scope of the problematic claim. The modification needs to be functionally meaningful and clearly distinguishable from the patented invention.
- License. Approach the patent holder and negotiate a license. Royalty arrangements in biotech often run at 1% to 2% of your sales. A license is usually faster and cheaper than litigation, and many patent holders prefer a commercial arrangement to a legal dispute.
- Challenge the patent. If the patent shouldn’t have been granted, oppose it at the patent office or seek invalidation through court proceedings. Opposition procedures at the European Patent Office are a relatively cost-effective route, more accessible than full litigation and sometimes faster.
- Wait and see. In some cases, particularly where the blocking patent covers an early-stage area with no commercial product behind it, the most pragmatic approach is to monitor the situation. Patent holders pay escalating maintenance fees over a patent’s lifetime, and without a commercial product, there’s a meaningful probability they’ll let the patent lapse before the 20-year term ends.
Questions from the audience
One of the most valuable parts of any BaseLaunch event is the chance to ask our speakers questions to gain insights from industry thought leaders.
Here are some of this event’s highlights.
An FTO opinion is a legal opinion issued by a qualified attorney, and it carries legal weight. If a law firm conducts an FTO search, identifies a relevant patent and fails to analyze it, and you later infringe that patent, the firm can be held liable for the resulting damages.
For most companies, the starting point is the major markets: the US, Europe (via the European Patent Office, which covers EU member states and more), Japan, China and South Korea. The vast majority of commercially relevant patents are filed as PCT applications: worldwide filings that are later nationalized in individual territories. The underlying documents are usually the same across markets.
Technically, an FTO is outdated the day after it's written. Patents are filed, published, granted, assigned and abandoned on an ongoing basis, and an opinion based on the state of the landscape at a given moment doesn't account for anything that happens afterward. In practice, companies approaching the market typically update their FTO every 12 months.
If the investor wants an FTO to inform their investment decision, the investor should pay for it, or at least commit to covering the cost if they proceed with the investment. Redirecting funds from the research budget to satisfy an investor's diligence requirement shifts the cost onto the party with less financial flexibility.
No. Courts in Europe, the US and other major jurisdictions have consistently held that an AI system can't be named as an inventor. Inventorship requires a natural person.
The more practically relevant question is whether an AI-assisted discovery is patentable at all. If a founder uses a publicly available AI tool, entering a reference compound and asking the system to generate superior variants, the resulting compound may not meet the inventive step requirement. If anyone with access to the same public tool and the same public data could arrive at the same result, the invention is arguably obvious.
Although, if the AI tool is proprietary or has been modified (for example, by adjusting weighting algorithms), or if it was trained on non-public data, the combination of non-public input with the AI's output may support an inventive step argument.
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