Generalized Freedom to Operate
MegaReg Forum Paper 2016/3, Institute for International Law and Justice | NYU School of Law
5 Pages Posted: 26 Nov 2016 Last revised: 30 Aug 2017
Date Written: December 7, 2016
The term “freedom to operate” (FTO) describes a situation where commercial activity can be undertaken without infringing on intellectual property rights held by other parties. In current practice, FTO is established through an opinion based on patent search that a course of action is non-infringing on third party intellectual property rights, through a cross-licensing agreement between parties holding patent portfolios that might trigger infringement depending on the precise nature of a prospective commercial undertaking, acquiring patent rights, or a similar but less costly stratagem of defensive publishing (which in theory prevents others from acquiring patents). The risk of being sued for infringement of intellectual property is, however, only one of many risks faced by firms whose value depends on their intangible assets when they enter products into domestic and international markets. Trade and investment agreements like the Trans-Pacific Partnership seek to put in place broad protections for firms’ intangible assets. This expands their freedom to operate in a commensurately broader sense. This note explores this generalization of the concept of freedom to operate and shows how it is at the heart of the negotiating interests of the TPP parties and central to understanding how it affects the net benefits of the various parties.
Keywords: Freedom to Operate, Intellectual Property, Innovation, Trans-Pacific Partnership, TPP
JEL Classification: F13, F15, O30
Suggested Citation: Suggested Citation