An Executive Voices Blog by Jack Hicks and Cory Schug, Partners at Womble Bond Dickinson LLP

You’ve negotiated the license, finalized the royalty structure, and cleared the trademarks. The product is ready for retail—until your legal team flags a patent that could block the entire launch.

The culprit is almost always the same: insufficient freedom to operate (FTO) analysis.

FTO means confirming that you can manufacture and sell a product without infringing third-party patents. It’s distinct from patentability—you can own a patent and still lack FTO if someone else holds a broader patent covering the underlying technology.

Consider a toy licensee developing an interactive plush with smartphone connectivity. The character design is licensed and trademark-cleared, but the Bluetooth pairing mechanism may infringe patents held by a tech company that’s never made a toy.

Several red flags should prompt immediate attention.

If your manufacturing partner can’t provide FTO documentation or states that nothing in the product is “new,” that’s a due diligence gap. Products combining technologies from multiple sources carry compounded risk because each component may have separate patent exposure. Connected products and consumer electronics sit in particularly dense patent landscapes.

As a result, FTO should be examined early and at each design milestone.

A preliminary landscape analysis at the concept stage identifies major patent holders before you’ve committed resources. During development, detailed patent claim analysis should guide design decisions. Before launch, final clearance confirms no new blocking patents have emerged.

The math is simple—modifying a design while architecture remains flexible costs a fraction of redesigning an approved product or defending an infringement suit averaging $2-5 million through trial.

Assume you’re a beverage company licensing a sports brand for a new hydration product. After finalizing a proprietary dispensing mechanism, you discover a blocking patent held by a packaging competitor. Your options are an expensive redesign that will delay the launch by two quarters or paying a steep licensing premium with no negotiating leverage.

These scenarios play out across industries. A major toy licensee might discover during the design process that a competitor holds patents on the articulated joint mechanism central to its licensed action figure line—forcing a costly redesign that delayed the holiday shipping window. Or an apparel licensee could learn after production began that a fabric treatment used in its licensed athletic wear infringes a third party’s patent, resulting in a settlement that could erase the season’s profits.

Worse, proceeding with knowledge of a valid patent can trigger willful infringement findings, tripling damages. Documented FTO analysis is your best defense.

If blocking patents surface late, options are constrained—this includes targeted design modifications, patent validity challenges through USPTO proceedings, or licensing negotiations if the patent holder prefers revenue to litigation.

When a licensed product infringes a third-party patent, patent owners pursue the deepest pockets—often, this is the licensor. This creates predictable friction: licensees argue the licensor should have flagged potential issues, while licensors maintain they merely licensed a trademark.

Courts have limited the licensor’s exposure in some cases. One court held that merely licensing a trademark on an allegedly infringing product does not demonstrate intent to induce patent infringement and found no vicarious liability where the license indicated only minimal control over the licensee’s activities. These cases establish that licensors who stay in their lane—licensing marks without directing product design—may face only limited patent exposure.

For brand owners, it’s important to structure trademark licenses to reflect minimal control over manufacturing and design decisions. They must also include indemnification clauses requiring the licensee to defend against third-party patent claims. Additionally, licensors should consider requiring licensees to conduct their own FTO analysis. These structural choices reduce the likelihood of being dragged into patent disputes over products you never touched.

Ultimately, it’s necessary to build FTO requirements into your licensing agreements and to specify which party bears responsibility for clearance. You should also integrate FTO checkpoints into stage-gate processes and prioritize based on product value and sector risk—a licensed medical device warrants deeper analysis than a branded t-shirt.

For brand licensing executives, the takeaway is straightforward—FTO isn’t just legal compliance, it’s deal intelligence. Teams that build patent clearance into standard diligence will close deals faster and avoid costly surprises.

Womble Bond Dickinson is a transatlantic law firm with over 1,300 lawyers across 37 offices in the U.S. and U.K., providing comprehensive legal services to clients worldwide. The company’s global reach is matched by deep local knowledge, allowing it to support clients in key licensing sectors such as entertainment/character, sports, fashion (apparel and footwear), consumer packaged goods, food and beverage, publishing, collegiate, celebrity, music, art, pet, home furnishings, fitness and wellness, outdoor products, heritage brands, and corporate and non-profit branding. Womble Bond Dickinson is a recognized leader in intellectual property, trademark, and licensing, with a dedicated team of over 240 IP lawyers, patent agents, and technical advisors. Its expertise spans patent, trademark, copyright, and design protection, as well as complex IP transactions, licensing, and strategic alliances. The team helps clients protect, enforce, and monetize their most valuable IP assets across jurisdictions.