Businesses today must adopt proactive strategies like Freedom-to-Operate searches and patent liability insurance to mitigate risks and protect their innovations
In November 2024, a US jury ruled in favour of Netlist, a company specialising in computer memory and storage solutions, ordering Samsung to pay $118 million in damages for willfully infringing Netlist’s patented technology. This follows an earlier verdict in April 2024, where another jury found Samsung guilty of similar patent infringements, awarding $303 million to Netlist. Together, these penalties amount to $421 million-an extraordinary sum that could destabilise even the most established organisations.
In India, the Delhi High Court recently delivered a landmark judgment favoring the plaintiff, Antenna Inc., in a patent infringement case against Mobi Antenna Technologies. The court issued a permanent injunction against the defendant and ordered them to pay damages of USD 26.04 million (INR 216 crores) to compensate for the plaintiff’s loss of profits due to the infringement.
Protecting Intellectual Property: A recent American survey highlights the substantial financial commitment of research-based organisations in the pharmaceutical sector. The annual R&D budget in this industry often runs into hundreds of millions or even billions of dollars. The cost of developing a new drug ranges from $314 million to $4.46 billion, depending on the therapeutic area and assumptions used in data modeling. These figures emphasise the immense investments required in R&D, making intellectual property (IP) protection and preemptive strategies essential.
In contrast, R&D expenditures in non-pharmaceutical sectors are generally lower. However, extensive patenting is increasingly common, posing risks for companies introducing new processes or products without adequate precautions. A company might unknowingly infringe on a competitor’s patent, leading to unforeseen and costly litigation. Patent disputes can result in significant delays, financial losses, and reputational damage, even when unintentional.
Escalating Costs of Patent Litigation: The median cost of litigating a patent lawsuit through trial ranges from $600,000 for cases with less than $1 million at stake to $3.625 million for cases involving over $25 million. Similar trends are observed in India, where litigation and settlement costs are substantial.
Sometimes, defendants find themselves embroiled in patent litigation due to unintentional or inadvertent infringement. In such cases, the defendants are essentially victims, underscoring the need for safeguards to prevent unnecessary legal disputes.
Tools to Mitigate Patent Infringement Risks:
Patent Liability Insurance
One effective safeguard against the financial risks of unintended patent infringement is patent liability insurance. This insurance, provided by specialised firms, helps cover legal expenses and damages arising from unintentional infringement. While popular in several countries, its adoption is steadily growing in India.
Freedom-to-Operate (FTO)
Another cost-effective tool to minimise patent infringement risks is a Freedom-to-Operate (FTO) search. This process evaluates whether a new product or process infringes on existing patents, enabling informed business decisions and reducing the likelihood of legal disputes. Many companies conduct FTO searches before initiating new R&D projects to mitigate financial and reputational risks.
An FTO search involves analyzing granted and pending patents to form a techno-legal opinion on whether a product, process, or service infringes existing IP rights. These searches can be conducted using free databases provided by intellectual property offices, with directories available on the World Intellectual Property Organization (WIPO) website.
When Patents Block Freedom to Operate
If an FTO search reveals conflicting patents, companies have several options:
1.Licensing Agreements: Companies can negotiate in-licensing or purchase patent rights to gain access to the necessary technology.
2.Patent Pools: Collaborative agreements among companies in the same technological field allow shared access to patents, resolving disputes and controlling costs, especially for essential products like medicines.
3.Designing Around: Companies can modify existing processes or products to avoid infringement.
Steps to Minimise Litigation Risks: Regardless of the strategy chosen, it is crucial for companies to address patent infringement risks early in the research and commercialization process. Proactive measures such as in-licensing, cross-licensing, patent pooling, and designing around can help avoid future disputes.
A systematic FTO search before launching a new product is indispensable for minimizing infringement risks. While an FTO search cannot completely eliminate the possibility of litigation due to limitations in patent databases and search expertise, it significantly reduces potential threats.
(The writer is deputy controller of patents and designs, Kolkata. ; views are personal)
