European Union: EU Antitrust Law: European Commission Adopts Revised Regime For Licenses And Other Technology Transfer Agreements

Last Updated: 1 August 2014
Article by Tobias Wuttke

I. A new set of rules

EU antitrust law plays a key role in the field of intellectual property licensing agreements which have an impact on the EU territory. This is oftentimes ignored by the parties to these agreements, in particular if they are non- European companies. For two reasons such ignorance is risky: in the first place, EU antitrust law is compulsory law which cannot be circumvented by choice of law provisions. In addition, every violation of EU antitrust law can have severe consequences, i.e. invalidity of the agreement in part or in total, administrative fines (up to 10% of the yearly turnover) and potential damage claims of third parties who are affected by the antitrust violation.

On March 28, 2014, the European Commission adopted a revised set of rules for the assessment of license agreements under EU antitrust law. This revised set of rules replaces and sharpens the current set of rules, namely EU Regulation 772/2004 and the corresponding Guidelines 2004C101/2.

The revised set of rules consists of

  • Commission Regulation (EU) No 316/2014 on the application of Article 101 (3) of the Treaty of the Functioning of the European Union to categories of technology transfer agreements ('TT-BER'); and
  • Commission Guidelines (2014/ C89/03) on the application of Article 101 (3) of the Treaty of the Functioning of the European Union to of Technology Transfer Agreements ('Guidelines').

The effective date of these new rules is 1 May 2014. It is noteworthy that the new rules not only apply to license agreements entered into from 1 May 2014 onwards, but – as of 1 May 2015 – also to agreements entered into under the regime of the current rules. In other words, the parties to existing license agreements have one year to ensure that their agreements are in conformity with the new rules. As well be detailed below, there is some homework to be done.

II. The legal context

The starting point for the legal analysis of a license agreement under EU antitrust law is Article 101 of the Treaty on the Functioning of the European Union ('TFEU').

Article 101 (1) TFEU prohibits agreements which may affect trade between EU Member States and which have as their object or effect the prevention, restriction or distortion of competition within the EU market. Therefore, it is for instance prohibited if two competitors in a license agreement divide markets between them instead of competing with each other. Another example would be a license agreement that forces a licensee to pay royalties for EU countries in which no intellectual property rights of the licensor exist.

Article 101 (3) TFEU provides for an exemption to this prohibition under Article 101 (1) TFEU if four exemption requirements are met. In practice, these four exemption requirements set a high hurdle and produce legal insecurity. The importance of the TTBER lies in the fact that it creates a 'safe harbor' for license agreements if these agreements respect the conditions provided in the TT-BER. In this case it is assumed that these agreements are in conformity with Article 101 (3) TFEU. Thus, every license agreement should make sure that it is covered by the 'safe harbor' of the TT-BER. Otherwise, at least the validity of the license could be at stake.

III. What changes?

The new regime contains in particular the following important changes to the TT-BER and to the Guidelines:

1. Important changes to the TTBER

a) Non-challenge clauses

Many license agreements contain clauses that obligate the licensee not to challenge the validity of the licensed intellectual property rights during the lifetime of the license agreement. Under the new regime, in non-exclusive license agreements these clauses are now considered as an 'excluded restriction' pursuant to Article 5 TTBER. Consequently, these clauses are no longer automatically exempted from Article 101 (1) TFEU. Now, it must be analyzed on a case-by-case basis if these clauses fall under Article 101 (1) TFEU and if so, whether they meet the high hurdles set by the four exemption requirements of Article 101 (3) TFEU.

b) Grant back obligations

In addition, the new regime takes a more prudent approach on clauses that force a licensee to exclusively license or assign to the licensor any improvements or new applications conceived by the licensee with respect to the licensed technology. Under the new regime, these clauses are now also considered as an 'excluded restriction' pursuant to Article 5 TT-BER (with the consequences described above for nonchallenge clauses in non-exclusive license agreements).

2. Important changes to the Guidelines

a) Settlements

In the Guidelines it is now explicitly stated that licensing in the context of settlement agreements is treated in the same way as other license agreements (cf. margin no. 237). Of course, the Guidelines are theoretically without prejudice to the interpretation of Article 101 TFEU and the TT-BER that may be given by the EU courts and the national courts. Nevertheless, in practice, it is most unlikely that these courts would disregard the Guidelines.

b) Technology Pools

In addition, the Guidelines give new guidance on "technology pools", i.e. arrangements in which two and more companies assemble a package of technology which is subsequently licensed to the members of the pool and third parties. The Guidelines acknowledge the often pro-competitive nature of patent pools (in particular in the telecom sector) and offer now a 'safe harbor' for these pools under the conditions set forth in margin no. 244 et seq. of the Guidelines.

IV. Practical impact

The new regime has a real practical impact, since most license agreements contain non-challenge clauses and/or grant-back obligations. It is definitely recommendable to avoid for new licenses any non-challenge clauses or grant-back obligations which conflict with the new regime. Otherwise, the validity of these licenses would be prejudiced. Given the fact that, as of 1 May 2015, the new regime will also apply to license agreements existing today, it is furthermore advisable to make sure between the contracting parties in the upcoming months that any conflicting obligations are removed from the existing agreements. In a nutshell, every license with an impact on the territory of the EU should make sure that it is covered by the 'safe harbor' of the TT-BER.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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