European Union: European Union Adopts New Rules for Technology Licensing Agreements

The European Union has a new regime for assessing technology licensing agreements under EU competition law. The new rules include a new technology transfer block exemption regulation ("TTBER"), which exempts certain bilateral licensing agreements from antitrust rules, and revised Technology Transfer Guidelines ("TT Guidelines"), which provide further guidance on the application of the rules to both bilateral and multi-party agreements.  These rules cover all technology licensing agreements that may affect trade between EU Member State and therefore be subject to Article 101 TFEU.  In force beginning 1 May, they replace the current rules dating from 2004. However, undertakings have until 30 April 2015 to ensure that existing agreements are put in conformity with the new rules.  

While technology licensing agreements are generally recognized as stimulating competition, companies should be aware of the fact that such agreements, or some their provisions, can be subsequently challenged by a competition authority or, even more likely, by the counterparty before national courts. 

These are the main changes:

  • The scope of IP rights agreements covered by the rules remains essentially similar, although a new test is introduced for ancillary purchases of raw material or equipment and trademark licensing.
  • Because the new rules do not modify the market shares thresholds, the list of hardcore restrictions, or the TT Guidelines additional safe harbor, most existing licensing agreements should remain compliant.
  • Some specific clauses that are frequent in practice (e.g., termination for challenge clauses and exclusive grant-backs on non-severable improvements) might nevertheless become unenforceable.
  • The TT Guidelines introduce more detailed provisions on settlement agreements and patent pools, including a specific safe harbor for patent pools.

What agreements are covered by the new rules?  All agreements concluded between two parties for licensing know-how or IP rights (patents, software, design, etc) for the production of goods and services are covered, whether concluded between competitors or non-competitors. 

By analogy the new rules also apply to copyright for the production of contract products (thus not for licensing of rental or performance rights for film or music). The licensing of software copyrights are covered by the TTBER, unless it is for the purpose of mere reproduction and distribution of protected work (i.e., production of copies for resale), which instead fall under the general rules for vertical agreements. 

With regards to trademarks and raw material/equipment purchases, the new TTBER modifies the test for the application of the TTBER and TT Guidelines from a center of gravity test or "primary object" test (i.e., whether trademark licensing or purchase conditions for raw materials are "less important" than the actual licensing of technology) to a direct relationship test (i.e., whether they are directly related to the production or sale of the contract products which are produced with the licensed technology). 

What remains unchanged? The primary rules of the existing system remains unchanged:

  • Thresholds to benefit from the TTBER safe harbor. When the combined share of the relevant markets accounted for by the parties does not exceed 20% for agreements between competitors and 30% for agreements between non-competitors, they benefit from the TTBER block exemption. 
  • Hardcore restrictions. The list of so-called "hardcore" restrictions that are never accepted remains largely untouched. The sole substantive modification was the replacement of the automatic exemption of passive sales restrictions between non-competitors during the first two years of an agreement by a case-by-case analysis of the objective necessity of such restriction (and its duration) for the licensee to penetrate a new market. 
  • Other changes in hardcore restrictions are merely textual. While the hardcore restrictions do not expressly exclude field of use restrictions between competitors anymore, the TT Guidelines clarify that such restrictions should not be seen as customer or output restrictions, and remain thus covered by the TTBER.  Similarly, the TT Guidelines confirm that the obligation on the licensor not to license the technology to another licensee in a particular territory is still not considered as a hardcore restriction. 
  • The TT Guidelines additional safe harbor. Besides the market share based block exemption provided in the TTBER, the TT Guidelines keep the second safe harbor that is applicable when (i) there is no hardcore restriction, and (ii) there are four or more additional independently controlled technologies that may be substitutable for the licensed technology at a comparable cost to the user. 

Termination for challenge. Provisions allowing the licensor to terminate a non-exclusive agreement if the licensee challenges the validity of the IP rights are no longer exempted, limiting the exemption of termination clauses to exclusive license agreements. Such clauses that are included in many licensing non-exclusive agreements would therefore have to be assessed on a case-by-case basis. However, they would not affect the application of the TTBER to the rest of the agreement. 

Grant-back. Grant-back obligations whereby the licensee is obliged to license back non-severable improvements to the licensor on an exclusive basis (i.e., not even use its own improvements to the licensed technology itself) will also fall outside the safe harbor of the TTBER and require an individual assessment. Non-exclusive grant-back obligations are still covered by the TTBER.

Settlements Agreements. Pay-for-delay or reverse settlement agreements are addressed in more details to reflect the Commission's recent decisional practice in the pharmaceutical and technology sectors which considers that such agreements might be caught when there is a significant value transfer to the licensee in return for a limitation of entry or expansion. 

In addition, while the previous Guidelines provided that non-challenge clauses in settlement agreements were "generally considered to fall outside Article 101 TFEU," the new Guidelines add that they might nevertheless be caught under specific circumstances, in particular in cases where the patent was granted following the provision of incorrect or misleading information or the licensee is "financially induced" to agree not to challenge the patent validity. 

Patent pools. Acknowledging the often procompetitive nature of patent pools, the licensing from multi-party agreements in the form of patent pools now benefits from a safe harbor in the Guidelines if:

  • participation in the pool creation process is open to all interested IP owners,
  • sufficient safeguards are adopted to ensure that only "essential" technologies (which therefore necessarily are also complements) are pooled,
  • sufficient safeguards are adopted to ensure that exchange of sensitive information (such as pricing and output data) is restricted to what is necessary for the creation and operation of the pool,
  • the pooled technologies are licensed into the pool on a non-exclusive basis,
  • the pooled technologies are licensed out to all potential licensees on fair, reasonable, and non-discriminatory ("FRAND") terms,
  • contributors and licensees are free to challenge the validity and the essentiality of the pooled technologies, and,
  • contributors and licensees remain free to develop competing products and technology.

The above safe harbor for patent pools, which applies regardless of market shares, covers not only the creation of the pool but also its subsequent licensing out from the pool (which in itself is considered as a multiparty agreement not covered by the TTBER).  This new regime is expected to give further incentives to the creation of pro-competitive patent pools.

Implications

To be prepared for the implementation of these new rules, companies subject to these rules should:

  • Review and possibly amend termination for challenge and grant-back clauses in their existing licensing agreements by 2015.
  • Ensure that all new bilateral licensing agreements fall under the TTBER or could be individually justified under the Guidelines.
  • When entering into patent pools, consider the conditions for the TT Guidelines safe harbor.

The Commission regulation and Guidelines can be read here.

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
Laurent De Muyter
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
Related Articles
 
Related Video
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