Ensuring technology transfer agreements respect competition rules

Licensing agreements that restrict competition are contrary to European Union (EU) competition rules. However, such agreements may also have positive effects that outweigh their restrictive effects on competition. A new ‘block exemption’* regulation and guidelines relating to technology transfer agreements* create an area of certainty for many licensing agreements.

ACT

Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements.

SUMMARY

Under intellectual property law, holders of intellectual property rights are granted certain exclusive rights. These permit them to prevent unauthorised use of their intellectual property as well as to exploit their property, in particular by licensing it to third parties. Technology transfer agreements concern the licensing of technology and may be bilateral or multilateral (‘patent pools’*).

In March 2014, the European Commission adopted a Technology Transfer Block Exemption Regulation (TTBER), replacing a 2004 text. It clarifies how EU competition law (in this case, Article 101 of the Treaty on the Functioning of the EU) applies to certain categories of licensing agreements and the criteria used to assess these agreements. Like its predecessors, it is accompanied by guidelines which provide guidance on the application of the rules.

Scope and exemptions

The TTBER exempts licensing agreements between companies that have limited market power (i.e. market share of under 20 % for agreements between competitors and 30 % for agreements between non-competitors), and that fulfil certain conditions. These are deemed to have no anti-competitive effects or that, if they do, the positive effects outweigh the negative ones and thus do not contravene EU antitrust rules.

The TTBER only applies to research and development (R & D) agreements if the specific block exemption regulations (BERs) on R & D agreements and on specialisation agreements* are not applicable.

The TTBER applies only to bilateral agreements; the guidelines also cover patent pools.

Main changes introduced:

• a new test to determine whether certain clauses in a technology transfer agreement (in particular concerning purchases of raw material or equipment from a licensor or the use of the licensor’s trademark) are exempted from Article 101 of the TFEU, together with the technology transfer agreement itself;
• passive sales restrictions* between licensees are added to the list of ‘hardcore’ restrictions listed in Article 4 (practices deemed so serious that they, together with the rest of the agreement in which they are found, are excluded from the safe harbour of a BER) and can never be exempted by the TTBER;
• all exclusive grant-back obligations* will fall outside the TTBER safe harbour (non-exclusive grant-back obligations however remain covered);
• termination clauses allowing the licensor to terminate the license agreement if the other party challenges the validity of the licensed technology will fall outside the TTBER safe harbour.

Application

The new rules apply not only to agreements concluded after its entry into force (1 May 2014). Agreements under the previous regime had to be adapted to the new rules by 30 April 2015.

KEY TERMS

*Technology transfer agreement: an agreement governing the transfer of skills, technology and techniques between two or more parties.

* Block exemption: under these regulations, the European Commission can declare specific categories of State aid compatible with the Treaty on the Functioning of the EU if they fulfil certain conditions. This exempts them from the requirement of prior notification and Commission approval.

* Patent pools: an agreement between two or more patent owners to license one or more of their patents to one another or to third parties.

* Specialisation agreements: these aim to promote cooperation between firms in the area of specialisation in the production of goods and the supply of services.

* Passive sales restrictions: passive selling is when a party responds to unsolicited requests from individual customers.

* Grant-back obligations: in a licensing agreement, a licensee may be required to disclose and transfer all improvements made (including related know-how acquired) in the licensed technology during the licensing period.

RELATED ACTS

Communication from the Commission - Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements (Official Journal C 89 of 28.3.2014, pp. 3-50).

last update 29.07.2015