For startups in the drug discovery space, innovation is only part of the equation. Equally critical, but often overlooked, is ensuring that the path to market is clear of third-party intellectual property (IP) barriers. This concept, known as Freedom-to-Operate (FTO), refers to the ability to develop, manufacture, and commercialize a product without infringing on the valid patent rights of others. Failing to address FTO early can expose startups to costly litigation, stalled development, and investor hesitation.
Why is FTO so important for drug discovery startups?
The pharmaceutical sector is one of the most densely patented industries, particularly in high-value areas such as oncology, biologics and biosimilars, and drug delivery systems. This crowded landscape creates a minefield of potential infringement risks for startups, many of which lack the legal resources to navigate it effectively.
Unintentional infringement is a common pitfall. Even if a startup holds its own patents, it may still be blocked from commercializing its products due to overlapping third-party rights. The consequences can be severe. Patent litigation is notoriously expensive and time-consuming, and the mere perception of FTO risk can deter investors or derail acquisition discussions.
What are 5 strategic ways to reduce FTO risks?
There are practical steps startups can take to mitigate FTO risk and build a defensible IP position:
1) Conduct a professional FTO search early. Engaging a patent attorney to perform a comprehensive FTO search can identify potential risk before significant resources are committed. Focus areas should include composition of matter, formulations, methods of use, and manufacturing processes. Repeat (or top-up) the search at key development milestones such as preclinical studies, regulatory submissions, and pre-launch.
2) Design around blocking patents. Where risks are identified, consider modifying the molecule, formulation, or delivery method to avoid infringing third-party patent rights. For example, changing excipients, dosage forms, or administration routes can help preserve product functionality while sidestepping these legal barriers.
3) Negotiate licenses or cross-licenses. If design arounds are not feasible, securing a license to use the patented technology may be the best path forward. Startups with valuable IP of their own may also explore cross-licensing arrangements to create mutual value.
4) Monitor patent expirations and legal status. Not all patent rights remain enforceable. Some may be expired, abandoned, or invalidated. Use patent databases (such as the European Patent Offices’ European Patent Register and national patent registers) to track the legal status of relevant patent rights, especially in jurisdictions where commercialization is planned.
5) Document your development path. Startups may independently develop an invention well before a third-party patent is filed. However, without proper documentation, proving this can be difficult. Keeping detailed, time-stamped records (such as notebooks, version histories, and decision logs) can help establish a clear timeline of development and support claims of independent invention in the face of infringement allegations.
How can startups build a stronger intellectual property position through FTO?
Freedom-to-operate is a strategic necessity. For drug discovery startups, proactively addressing FTO risk can unlock smoother development, stronger investor confidence, and a clear path to market. By integrating FTO analysis into early-stage planning and decision-making, startups can avoid costly surprises and position themselves for long-term success.
