Exemption for research and development agreements

SUMMARY OF:

Regulation (EU) No 1217/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreements

WHAT IS THE AIM OF THE REGULATION?

Article 101 of the Treaty on the Functioning of the European Union (TFEU) sets out the rules concerning concerted practices and agreements between companies. As a general rule, such concerted practices and agreements are banned unless they fall within the scope of Article 101(3) when they are exceptions to the rule.
Regulation (EU) No 1217/2010 states that Article 101 does not apply to research and development (R&D) agreements* when the parties either pursue joint R&D of products or processes and joint exploitation of the results of that R&D, or pursue either of those activities in isolation.

KEY POINTS

Article 101(1) TFEU is not applicable to R&D agreements. Regulation (EEC) No 2821/71, however, provides an exemption for R&D agreements which contain rules relating to the assignment or licensing of intellectual property rights in order to carry out the joint R&D, paid-for R&D or joint exploitation, so long as those provisions are not the primary object of such agreements, but are instead directly related to and necessary for their implementation.
The regulation also block exempts the joint exploitation of the results of R&D carried out by the parties under the regulation. This regulation replaces Regulation (EC) No 2659/2000, which expired on 31 December 2010.

Conditions for exemption

To be exempted, the agreement must state that all the parties have full access to the final results of the R&D, including any resulting intellectual property rights and know-how, for the purposes of further R&D and exploitation. If the parties limit their rights of exploitation, access to the results for the purposes of exploitation may be limited accordingly.
Where the agreement only provides for joint R&D or paid-for R&D, each party must have access to any pre-existing know-how of the other parties concerned, if this know-how is indispensable for the exploitation of the results. This exchange of pre-existing know-how may be compensated, but the compensation must not be so high as to effectively prevent such access.
Any joint exploitation may only concern results which are protected by intellectual property rights or which constitute know-how, and which are indispensable for the manufacture of the contract products or the application of the contract technologies.

Market share threshold and duration of exemption

Where the parties to the R&D agreement are not competing undertakings, the exemption provided for by this regulation is applicable for the duration of the R&D. Where the results are jointly exploited, the exemption continues to apply for 7 years after the contract products or contract technologies are first put on the European Union (EU) market.
Where the parties are competing undertakings at the time the R&D agreement is entered into, the exemption is applicable only if:
- in the case of joint R&D agreements, the combined market share of the parties does not exceed 25% on the relevant product and technology markets;
- in the case of paid-for R&D agreements, the combined market share of the financing party and all the parties with which the financing party has entered into R&D agreements, relating to the same contract products or contract technologies, does not exceed 25% on the relevant product and technology markets.
At the end of the 7-year period, the exemption shall continue to apply as long as the combined market share of the parties does not exceed 25% on the relevant markets.

Hardcore restrictions

The exemption does not apply to R&D agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object:
- the restriction of the freedom of the parties to carry out R&D in an unrelated field;
- the restriction of the freedom of the parties to pursue R&D in a related field after the completion of the R&D agreement concerned;
- the limitation of output or sales, with certain exceptions.

Excluded restrictions

The exemption does not apply to the following obligations contained in R&D agreements:
- the obligation not to challenge the validity of related intellectual property rights after completion of the R&D;
- the obligation not to grant licences to third parties to manufacture the contract products or to apply to contract technologies, unless the agreement provides for the exploitation of the results by at least one of the parties and this exploitation takes place on the internal market vis-à-vis third parties.

European Commission guidelines

In 2011, the European Commission adopted guidelines on the interpretation and applicability of Article 101 TFEU to horizontal cooperation agreements*, which include R&D agreements (see summary).

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 1 January 2011 and expires on 30 June 2023.

BACKGROUND

In 2019, the Commission embarked on an evaluation to examine whether to let the EU regulations dealing with horizontal agreements lapse when they expire in December 2022, or whether to extend or amend them (and the guidelines on how to interpret them). The results of its evaluation were published in July 2021 (see press release). The evaluation concluded that certain issues would need to be addressed in order to improve legal certainty. The Commission will launch the impact assessment phase of the review to look into the issues identified during the evaluation, with a view to having revised rules in place by 31 December 2022, when the current rules expire.

KEY TERMS

Research and development (R&D) agreement. An agreement entered into by two or more parties, relating to the conditions under which the parties pursue:

joint R&D of contract products or contract technologies and joint exploitation of the results of that R&D;
joint exploitation of the results of R&D of contract products or contract technologies jointly carried out pursuant to a prior agreement between the same parties;
joint R&D of contract products or contract technologies excluding joint exploitation of the results;
paid-for R&D of contract products or contract technologies and joint exploitation of the results of that R&D;
joint exploitation of the results of paid-for R&D of contract products or contract technologies pursuant to a prior agreement between the same parties;
paid-for R&D of contract products or contract technologies excluding joint exploitation of the results.

Horizontal agreements. Agreements entered into between two or more undertakings operating at the same level in the market. Horizontal cooperation relates, in most cases, to cooperation between actual or potential competitors in areas such as R&D, production, purchasing, commercialisation or standardisation. It can also involve information exchange, either as a self-standing agreement or in the context of another type of horizontal cooperation agreement.

MAIN DOCUMENT

Commission Regulation (EU) No 1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreements (OJ L 335, 18.12.2010, pp. 36–42).

Successive amendments to Commission Regulation (EU) No 1217/2010 have been incorporated in the original text. This consolidated version is of documentary value only.