Italy: Block Exemption Regulation on Technology Transfer Agreements

Last Updated: 29 October 1996
I.HISTORY

Two exemption regulations have operated in the past for Patent Licensing Agreements (no. 2349/84) O.J. 1984 L 219/15. and for Know-How Licensing Agreements (no. 556/89) O.J. 1989 L 61/1.

The block exemption for patent licences covered not only agreements for technology that was the subject of a registered patent but included coverage for ancillary unregistered technology. This regulation was due to expire in 1994 but its operation has been extended to the end of 1995.

The patent regulation has come to be used almost exclusively only when there is no qualifying know-how included in the licence - usually where a patent dispute between competitors is resolved by the granting of a licence (see V. KORAH "EC Competition Law and Practice", London, Sweet & Maxwell, 1994).

The block exemption for know-how licences covered know-how that was secret, substantial and identified. This regulation arose following the decision in the Boussois/Interplane Case Boussois/Interplane Case, 15 December 1986, O.J. 1987 L 50/30. wherein the Commission held the block exemption for patent licence agreements could not apply to mixed agreements where know-how was the dominant factor.

These Regulations were amended by Regulation (EEC) No. 151/93 O.J. 1993 L 21/8.

II. THE NEW DRAFT

As the preamble to the published draft regulation indicates, the Commission considered that a single regulation replacing both previous block exemptions ought to achieve, inter alia, the objectives of - harmonisation and simplification of the rules governing patent and know-how licensing agreements;

  • encouraging dissemination of technical knowledge in the Community;
  • promoting manufacture of technically more sophisticated goods;
  • covering "pure" patent licences, "pure" know-how licences and "mixed" agreements;
  • harmonising the scope of the regulation to include additional licensing for intellectual property rights other than patents (i.e., trademarks, software and design rights) where the same are only ancillary and contribute to the objects of the licensed patent or know-how technology; however, such agreements will only be exempted when patents are necessary for the achievement of the object of the licensed technology or know-how is secret, substantial and identified;
  • ensuring that the regulation applies to agreements containing obligations that relate to:

(i)   common market territories and non-member countries
(ii)  non-member countries or territories extending beyond the 
      Community which nonetheless have effects within the common 
      market that may fall within the scope of Article 85(1)
(iii) one Member State but are capable of affecting trade between 
      Member States

  • ensuring the regulation applies only to manufacturing by or for the licensee and does not apply to

(i)   agreements solely for the  purpose of sale such as exclusive 
      distribution agreements or franchising agreements; the word 
      "solely" is emphasised because an exception is made for a 
      preliminary period when the licensor provides goods for sale to 
      the licensee until the licensee commences manufacture. 
(ii)  licensing agreements in connection with joint venture or patent 
      pool or other arrangements where a licence is granted in 
      exchange for other licences not related to the improvements or 
      applications of the licensed technology.

  • ensuring the regulation applies to agreements concerning the assignment and acquisition of patents or know-how where the risk associated with exploitation remains with the assignor. This avoids the danger of persons trying to bypass the Regulation by presenting as an assignment what is really in fact an exclusive licence restrictive of competition. Similarly, the regulation will apply to licensors who are not owners of the technology but only authorised to grant the licence.

If one turns to the specific scheme of the draft regulation, the white list of exempted clauses has been extended, the black list of prohibited clauses has been reduced and a market share threshold has been introduced for agreements between competing manufacturers.

III. ARTICLE 1 - EXEMPTED CLAUSES

Article 1 now sets out the exempted clauses taken from both prior regulations but in a combined form. The content is essentially the same but the structure is revised so that it is not useful to try and indicate which clauses are new, but rather what aspects are new.

IV. THE MARKET SHARE TEST

One of the changes in the published draft regulation is the adoption of a market share percentage threshold test to determine the operation of the exemption. Article 1 paragraphs 5 and 6 provide that:

Art. 1.5 When the parties are competing manufacturers, the exemption in paragraph 1.1.(1) of the obligation of the licensor not to grant other licences shall apply only provided that the licencee's market share shall not exceed 40%.

Art. 1.6 When the parties are competing manufacturers, the exemption of the obligations referred to in paragraph 1.1.(2) - 1.1.(6) shall apply only where the party which is protected by such obligations holds a market share of no more than 40%.

The definition of the relevant market is regrettably not easy, as has been shown from experience in the application of the competition rules. One needs to consider not only the extent of the geographical area but also what equivalent competing products fall to be considered in any assessment. It is not clear if the market share is based on production or sales. The definition of "market share" in Article 9(8) uses the words "products (...) provided by the licensor/licensee" which would seem to indicate an assessment based on supply.

As recital (11) indicates the new licensed technology remains out of the assessment of market share, and the assessment is made at the time of conclusion of the agreement. The Commission considers that this maximises the dissemination of new technology into the marketplace, by reducing the problem of finding licensees prepared to invest in tooling up and developing markets, and furthermore, it will prevent the imposition of the cap later, should the technology prove to be successful enough to prohibit competition.

In an earlier draft of this regulation there was no exemption also for agreements where the licensee was operating in an oligopolistic market.

The criticism of this phraseology led to a redrafting in which, the reference to oligopolies was deleted.

The setting of the market share limit at 40% is an increase from the previous limits set at 20%, and thereby theoretically increased the possibility of the benefit of an exclusion.

It is probably worth noting here that licensing agreements relating to the activities of joint-ventures between competing undertakings are treated in Article 5 as a specific exclusion, unless the licensed products or substitutable products represent not more than 20% of the market in the case of a production licence Ä or not more than 10% of the market in the case of a production and distribution licence.

V. THE CALCULATION OF TIME PERIODS

The calculation of the time period for the duration of the exemption, for all the types of agreements, pure patent, pure know-how or mixed, has been altered from the time of the agreement to the time that the licencee has first put the products on the market. See Articles 1.2 and 1.3.

The structure of paragraphs 1.2, 1.3 and 1.4 of Article 1, is that they respectively deal with the different types of agreement and impose time limitations of 5 or 10 years for each type of agreement, depending on the subject matter of the agreement and the type of obligation exempted.

VI. ARTICLE 2 - THE WHITE LIST

The list of obligations that are normally not regarded to be restrictive of competition has been extended. It covers all of the previous obligations such as

  • obligation on the licensee not to divulge the know-how communicated by the licensor, even after the expiration of the agreement
  • obligation of the licensee not to grant sublicences or to assign the licence
  • obligation on the licensee not to exploit the licensed know-how or patents after the termination of the agreement in as far as the know-how is still secret or the patent is still in force
  • obligation on the licensee to grant to the licensor a licence in respect of his own improvements to or his new applications of the licensed technology, subject to the conditions in article 2.1.(4)
  • obligation on the licensee to observe minimum quality specifications or to procure good or services from the licensor
  • obligation to inform the licensor of misappropriation of the know-how or infringement of the licensed patents and to take or assist the licensor in taking legal action
  • obligation on the licensee to continue paying the royalties until the end of the agreement in the event of the know-how becoming publicly known or the patents prematurely losing their validity
  • obligation on the licensee to restrict his exploitation of the licensed technology to one or more field of use
  • obligation on the licensee to pay a minimum royalty or to produce a minimum quantity of the licensed product
  • obligation on the licensor to grant the licensee any more favourable terms that the licensor may grant to another undertaking
  • obligation on the licensee to mark the licensed product with the licensor's name or patent
  • obligation on the licensee not to use the licensor's Know-how to construct facilities for third parties.

It also adds new paragraphs 2.1.(13) to 2.1.(15) which I have transcribed below.

Article 2.1.(13): an obligation on the licensee to supply only a limited quantity of the licensed product to a particular customer, where the licence was granted so that the licensee might have a second supplier inside the licensed territory.

Article 2.1.(14): a reservation by the licensor of the right to exercise the rights conferred by the patent to oppose the exploitation of the technology by the licensee outside the licensed territory.

Article 2.1.(15): a reservation by the licensor of the right to terminate the agreement if the licensee contests the secrecy of the licensed know-how or challenges the validit of the licensed patents (previously covered under art. 3.1.(1) Pat. Reg. and art. 3.1.(4) Know-How Reg.)

VII. ARTICLE 3 - THE BLACK LIST

The black list has been shortened on the basis that territorial protection will not be exempted when there is market power.

The list now covers prohibitions on:

  • restriction on the determination of prices;
  • restriction on competition between the parties to the agreement in relation to research and development, production, use or distribution of competing products;
  • restriction on sale to resellers, in order to protect the respective licensed territories;
  • restriction on allocation of customers between competing manufacturers;
  • restriction as to quantities of licensed products to be manufactured or sold;
  • an obligation on the licensee to assign back improvements of the licensed technology;
  • a prohibition on the licensor not to license other undertakings to exploit or on a party not to exploit the same technology in the licensed territory for periods exceeding the duration permitted under article 1.

Where the parties are competitors or potential competitors, a non competition clause in a licence in relation to other competing products which might restrict competition is also prohibited.

However a "best endeavours" obligation is not regarded to be inconsistent with the group exemption. It is not clear if the "without prejudice" clause is treated as not being restrictive of competition and not requiring an individual exemption.

VIII. Article 4

It will be possible for the Commission to rapidly establish whether agreements which are not automatically covered by the exemption may be eligible for the application of the block exemption by way of the opposition procedure provided for in article 4.

Such agreements will be exempted if they are notified to the Commission and the Commission does not oppose the application of the exemption within a period of four months.

The opposition procedure has been reintroduced in the last version of the draft at the request of the interested parties. The Commission has a wide discretion but at least the uncertainty about the applicability or not of the block exemption can be determined within the short time period of four months. Furthermore, the procedure is such that the mere passage of time is sufficient for the application of the exemption, compared with the normal procedure of a decision or comfort letter from the Commission.

IX. ARTICLE 5

Some agreements are totally excluded from the block exemption benefit:

  • when the parties are members of a patent or know-how pool and the agreement relate to the pooled techno

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions