FTO analysis in India: a strategic guide to assessing IP compliance

Businesses in technology and R&D-intensive fields such as electronics, the automotive industry, pharmaceuticals, AI, or the internet of things (IOT) often face the risk of unintentionally infringing on patents when developing new products or technology. For example, an automotive company working on an automated driver assistance system might wonder if a similar feature is already patented. A freedom-to-operate (FTO) analysis helps to mitigate this risk and protects businesses from potential infringement.

FTO signifies the legal capacity of an entity to engage in commercial activities – such as manufacturing, utilising, or marketing a product or service – without infringing upon the patent rights of third parties. These rights encompass patents, trademarks, copyrights, and trade secrets. Unlike a simple patent search to broadly identify relevant existing patents, an FTO search involves a focused analysis determining the infringement risks for a specific product or process.

Within the framework of the Indian Patents Act, 1970, an FTO analysis primarily focuses on ensuring compliance with Section 48. This section grants patentees exclusive rights to prevent third parties from making, using, offering for sale, selling, or importing the patented invention without their consent.

In technology-driven sectors with high patent activity, a significant risk for companies developing new products is the potential for their commercialisation to be blocked by patents held by competitors. Many companies prioritise securing FTO early in the development process to ensure their innovations do not infringe on others’ patent rights.

An FTO opinion should be sought in the following instances:

• Before launching a new product or service in India;

• When entering highly patent-sensitive industries such as electronics, the IOT, or pharmaceuticals;

• During mergers and acquisitions, to assess potential intellectual property (IP) liabilities; and

• Before licensing or investing in a technology.

The following are the main benefits of FTO:

• Legal risk mitigation – it prevents costly litigation due to unintentional patent infringement;

• Market entry assurance – it clears potential IP roadblocks, enabling smooth commercialisation;

• Cost savings – it reduces the financial burden of infringement lawsuits and redesigns;

• Time savings – it reduces the time spent on redesign or redevelopment in the event of infringement; and

• Strategic advantage – it helps businesses to negotiate licences or modify products to avoid conflicts.

The following actions should be undertaken to obtain an FTO opinion:

• Patent search – conduct a detailed search of the Indian Patent Office (IPO) database for relevant and valid patents;

• Analyse patent claims – review the claims of identified patents to assess overlaps, and carefully review patent claims to determine their scope and the potential impact on your R&D;

• Seek legal expertise – consult Indian IP attorneys to evaluate the findings; and

• Obtain an FTO opinion – a document outlining an accurate risk assessment and recommended actions.

An FTO analysis evaluates the patent ecosystem to avoid infringement risks, and is essential for businesses entering new markets or launching innovative products. The steps involved are as follows:

• Define the scope – identify the jurisdiction (India) and specific products or processes for analysis;

• Conduct a patent search – search through databases such as those of the IPO, the WIPO, and commercial platforms;

• Review the legal status – check whether patents are active, expired, or pending;

• Prepare a claim analysis – evaluate patent claims for potential conflicts;

• Conduct a risk assessment – determine the likelihood and severity of infringement; and

• Create an action plan – develop strategies to modify the product, secure licences, or proceed.

Electronics, networking, and the IOT:

• Patent landscape analysis – identify existing patents related to electronic components, software, or systems;

• Standard-essential patents – consider patents related to industry standards, such as wireless communication protocols; and

• Component-level FTO – analyse patents related to specific electronic components, such as semiconductors or display technologies.

The automotive and mechanical industry:

• Patent landscape analysis – examine patents related to vehicle systems, safety features, and autonomous driving technologies;

• Industry collaborations – consider patents resulting from collaborations between automotive companies and technology providers; and

• Component-level FTO – analyse patents related to specific automotive components, such as engine management systems or infotainment systems.

Pharmaceuticals and biotechnology:

• Patent landscape analysis – identify patents related to pharmaceutical compounds, formulations, and manufacturing processes;

• Patent evergreening – be aware of patent extensions or modifications that affect FTO; and

• Biosimilars and generics – consider patents related to biosimilars or generic versions of existing pharmaceuticals.

The following challenges may arise in FTO searches:

• Patent ambiguities – overlapping claims and unclear patent scopes can complicate searches and results;

• Incomplete data – patent applications may still be under review or unpublished;

• Jurisdictional complexity – Indian law has unique patentability provisions, such as those in Section 3 of the Indian Patents Act, 1970, which can pose additional challenges; and

• Resource intensity – conducting a comprehensive patent search and FTO analysis requires time and expertise.

The following options are available in the event of identification of a patent that could limit a company’s FTO:

• Redesign products – modify the product or process to avoid infringement;

• Negotiate licences – engage patent holders and enter licensing agreements;

• Challenge patent validity – file for revocation under Section 64 of the Indian Patents Act, 1970; and/or

• Seek legal remedies – in some cases, explore compulsory licensing provisions.

In the case of Bajaj Auto Limited v TVS Motor Company Ltd (civil suit No. 1111 of 2007 and civil suit No. 979 of 2007), the High Court of Madras imposed an injunction and issued directions to TVS Motor Company to stop the production and selling of vehicles with a disputed engine design. The matter was only resolved after a protracted legal battle. Significant time and legal expenses could have been avoided if an FTO analysis were conducted prior to the production of the disputed engine.

In the case of Telefonktiebolaget Lm Ericsson vs Lava International Ltd, the High Court of Delhi passed an order dated March 28 2024 in favour of Ericsson for the recovery of damages amounting to INR2.44 billion. An FTO analysis before the commencement of the technology would have saved the huge costs.

From an R&D perspective, FTO is crucial for driving innovation while mitigating legal risks. It ensures that research efforts align with existing IP rights, avoiding patent infringement that can lead to costly litigation or halted projects. Industries heavily reliant on R&D – such as electronics, pharmaceuticals, and biotechnology – particularly benefit from FTO analyses to identify potential IP conflicts early in the development cycle.

FTO is a cornerstone of patent strategy in India, safeguarding businesses from potential legal and financial risks. By understanding Indian patent law, conducting thorough analyses, and learning from landmark cases, companies can navigate the complex IP landscape with confidence. A proactive FTO approach ensures compliance and empowers innovation and market growth.