European Union: New EU Antitrust Rules For Technology Licensing Agreements

Last Updated: 1 April 2014
Article by Matthew Hall

On 21 March 2014, the European Commission (EC) adopted new rules governing technology transfer agreements under the EU antitrust rules. The purpose of such agreements is to enable companies to license the use of patents, know-how or software held by another company for the production of goods and services.

Although the changes are not dramatic as compared with the previous regime, these rules are important for any company active in this area in the EU. They should be reviewed carefully and companies should know how they operate. The new rules take effect on 1 May 2014 and will run until 30 April 2026.

The new regime consists of two instruments. The first is the Technology Transfer Block Exemption Regulation (TTBER), which creates a safe harbour for licensing agreements concluded between companies that have limited market power (measured by market share thresholds, which are unchanged) and that respect certain conditions set out in the TTBER. Such agreements are deemed to have no anticompetitive effect or, if they do, the positive effects outweigh the negative ones. The second instrument is the Technology Transfer Guidelines, which provide guidance on the application of the TTBER as well as on the application of EU antitrust law to technology transfer agreements that fall outside the safe harbour of the TTBER.

Probably the most significant changes introduced by the new rules relate to the particular restrictions which are not included in the TTBER safe harbour. All exclusive grant-back obligations will now fall outside the safe harbour and will require an individual assessment under EU antitrust law. However, the rest of the agreement can still benefit from the safe harbour. This change is designed to ensure that there are sufficient incentives for follow-on inventions. All non-exclusive grant-back obligations are still covered by the TTBER.

In addition, the new TTBER excludes termination clauses in non-exclusive licensing agreements (that allow the licensor to terminate the agreement if the other party challenges the validity of the licensed technology) from its safe harbour. However, again, including such a provision in an agreement does not prevent the rest of the agreement from benefiting from the safe harbour of the TTBER. The TTBER will continue to cover termination clauses in exclusive agreements.

The revised TTBER also introduces a new test for determining whether provisions concerning purchases of raw material or equipment from a licensor or the use of the licensor’s trademark are exempted from EU antitrust law together with the technology transfer agreement itself. The safe harbour of the TTBER now covers such provisions if, and to the extent that, they are directly related to the production or sale of the contract products which are produced with the licensed technology. This means, for example, that even if the input bought from the licensor (and to be used with the licensed technology) is more expensive than the royalties to be paid for the licensed technology, the provisions relating to the purchase are still covered by the exemption of the TTBER.

The Technology Transfer Guidelines, in practice a very important document, have been updated to reflect the changes in the TTBER. In addition, notable changes have been introduced in the guidance on settlement agreements and technology pools (e.g. patent pools), with the latter being of most interest in the Life Sciences sector.

The Guidelines recognise that licensing of technology rights in settlement agreements may serve as a means of settling disputes or avoiding the case of one party exercising its intellectual property rights to prevent the other party from exploiting its own technology rights. Settlement agreements in the context of technology disputes are seen as in principle a legitimate way to find a mutually acceptable compromise to a bona fide legal disagreement, and licensing, including cross licensing, in the context of settlement agreements is generally not, as such, restrictive of competition.

However, the Guidelines indicate that individual terms and conditions of settlement agreements may be caught by EU antitrust law and here particular reference is made to pay-for-delay agreements. If a settlement agreement also includes a licensing of the technology rights related to the underlying dispute, and that agreement leads to a delayed or otherwise limited ability for the licensee to launch the product on any of the markets concerned, the agreement may still be caught by EU antitrust law. If the parties to such a settlement agreement are actual or potential competitors and there was a significant value transfer from the licensor to the licensee, the Commission will be particularly attentive to the risk of market allocation/market sharing (which could result in the TTBER not applying and, most likely, the agreement being seen as anti-competitive under an individual assessment).

Even where such an agreement does not involve the transfer of technology rights, but is based on a simple value transfer from one party in return for a limitation on the entry and/or expansion on the market of the other party, the EU antitrust rules may apply.

A well-known example of this is the Lundbeck case from June 2013. In that case, its first reverse payment settlement decision, the EC imposed a fine of €93.8 million on Danish pharmaceutical company Lundbeck and fines totalling €52.2 million on several producers of generic medicines. Lundbeck had agreed with each of these companies to delay the market entry of cheaper generic versions of Lundbeck's branded citalopram, a blockbuster antidepressant. At the time, the EC expressly made it clear that it does not object to settlement agreements as such, stating that “The overwhelming majority of such agreements are entirely legitimate as they do not involve any payments by originators to exclude generic companies.” However, those which it sees as anti-competitive will be treated harshly.

Referring to further pharmaceutical sector cases (the seminal Astra Zeneca judgment of 2012 from the European Court of Justice), the Guidelines also state that no-challenge clauses in settlement agreements may be caught by EU antitrust law where an intellectual property right was granted following the provision of incorrect or misleading information (in any event, no-challenge clauses continue not to benefit from the TTBER safe harbour under the new rules). Further, it states that scrutiny of such clauses may also be necessary if the licensor, besides licensing the technology rights, induces, financially or otherwise, the licensee to agree not to challenge the validity of the technology rights or if the technology rights are a necessary input for the licensee's production.

The new TTBER and the Guidelines have set the framework for the next decade and more of EU antitrust law enforcement in the area of technology licensing. They will affect new and existing agreements, although the latter benefit from a one-year transitional period. Licensors and licensees need to consider and if necessary adjust their agreements and general practices in the light of the new rules.

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.

Authors
 
In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.