Do you have the freedom to operate?

Manufacturers are advised to check all intellectual property (IP) rights before signing any trade deal. Susanne Hantos writes. 

If the relevant IP rights are not taken into account, the consequences can be severe.  

For companies that manufacture, import and/or export goods, there is the risk that third party intellectual property (IP) rights might be infringed. The same is true in relation to how goods and services are branded and presented to the market.  

If the relevant IP rights are not taken into account, the consequences can be severe.   

Companies can face writing-off investment and, worse still, become embroiled in expensive legal proceedings for infringement of IP rights.   

To illustrate this, take the case of Company A that wants to import and sell in Australia a product that is manufactured overseas.   

Company A receives assurances from the overseas manufacturer that these activities are not precluded by any Australian IP rights.  

Company A buys and starts importing and selling the product in Australia.   

However, it comes to light that Company B has a granted and in-force Australian patent that can be used to put a halt to what Company A is doing.  

Company A is effectively shut out of the market and cannot proceed unless Company B consents. If Company B is aggressive, a lawsuit for patent infringement might eventuate.  

Moreover, if Company A unwittingly sells the product under a trade mark that is registered in Australia by someone else, there may be issues of trade mark infringement to deal with. 

So, how does Company A avoid these kinds of pitfalls? The answer is to identify and understand any IP rights that are relevant to the proposed activities.  

This means undertaking a Freedom to Operate (FTO) check. This check is an assessment of IP infringement risk and should be done before engaging in the proposed activities.  

So how do you go about performing a FTO check? 

To carry out an effective FTO check, you firstly need a clear understanding of what IP rights might be applicable to a given situation.  

There are different types of IP rights and the ones relevant to most manufacturers, importers or exporters will be patents, industrial designs and trade marks (see breakout).  

Then you need to carry out searching to identify potentially relevant rights and quantify the risk that those rights will be infringed. This is not a straight forward process and it should not be taken lightly given the potentially adverse consequences of getting it wrong.  

In particular, searching to identify relevant IP rights can be involved and difficult. Each country offering IP protection has some form of a register that records IP rights.   

Depending on the country, the register might be included on a searchable database or it may be available only in paper form that can only be inspected in person at a government office. 

Even when a database of IP rights exists, searching is an art that requires significant expertise and experience. A well thought out search strategy might involve various layers and various approaches.   

And you are not looking for the tip of the iceberg! There is significant skill required in analysing and interpreting results. Needless to say, performing FTO checks is work best left to professional searchers.  


Susanne Hantos is Manager of Davies Collison Cave's Patent Intelligence Services Group. 

Patent Intelligence Services Group 

02 9293 1000 



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