Giorgos Skampoulos LL.M Senior Associate
It is often observed that start-ups that innovate tend to focus more on product development and the market. However, intellectual property (IP) is equally important. Legally speaking, a robust patent portfolio can provide a market monopoly and a competitive advantage. From a practical standpoint, a robust portfolio increases the likelihood of securing funding from investors.
However, the mere existence of a granted patent does not mean that a company can automatically introduce its product to the market without facing obstacles. A patent does not confer the right to commercialise the technology; it only prevents others from doing so. A third party may hold a broader patent covering part of the technology, thus limiting absolute freedom of action. This is where the concept of freedom to operate (FTO) comes into play.
In simple terms, freedom to operate (FTO) means commercial freedom: the ability of a company to manufacture and sell a product without infringing the patent rights of others. Without FTO, a company may face legal disputes or even be prevented from bringing a product to market. For this reason, prior to the commercial exploitation of a patent, a specialised and thorough FTO analysis must be conducted to identify any existing patents that could affect the product. If conducted early on, an FTO analysis provides the opportunity to make product adjustments or explore alternative solutions.
Despite its importance, intellectual property is often overlooked in the early stages of a start-up, as highlighted above. One of the biggest mistakes start-ups make is disclosing an invention in presentations, pitches, reports or on websites before filing a patent application, thereby jeopardising its novelty. Furthermore, many start-ups act in a fragmented manner, securing patents haphazardly without an overarching strategy. A comprehensive intellectual property strategy involves monitoring competitors, conducting freedom-to-operate (FTO) analyses, making well-informed business decisions and, of course, drafting contractual agreements that properly govern relationships between parties in terms of intellectual property. This is particularly important when the invention is conceived by researchers employed at universities.
To sum up, effective management of intellectual property can make a start-up highly attractive from a business perspective. A robust IP portfolio comprising patents, trademarks and trade secrets is essential for building business value. Securing a patent demonstrates that the technology is innovative, enhancing credibility. Conducting a Freedom-to-Operate (FTO) review reduces the risk of legal obstacles derailing the business plan. Well-structured agreements, such as MTAs, NDAs, partnership contracts and licensing agreements, protect the company from future disputes and demonstrate regulatory compliance.
