After The EU: The Technology Transfer Block Exemption Under Review In The UK

Following the European Commission's initiation of a review of the 2014 Technology Transfer Block Exemption Regulation (EU TTBER) which will expire on April 30, 2026, the time has come for the CMA to do the same. It has announced that it too is consulting on a proposed recommendation that the Secretary of State replace the Assimilated Technology Transfer Block Exemption Regulation (Assimilated TTBER) with a national UK block exemption order upon its expiration: also on April 30, 2026.

Introduction

On March 14, 2025, the CMA began its consultation on replacing the Assimilated TTBER, which currently forms part of assimilated EU law, recommending that the UK now adopt its own purely national block exemption order. The deadline for responding to the consultation is on April 11, 2025, before the deadline for the equivalent EU consultation, where responses are due on April 25, 2025. In many respects the CMA's consultation echoes provisional findings of the EU Commission in its own review of the TTBER; in others, it presents a few variations that will be specific to the UK:

• Changing the types of technology licenses which can benefit from the exemption, to drop utility models and to include database rights and copyright in a database;
• Adding definitions of active and passive sales using the definitions already provided in the Verticals Block Exemption Order;
• Removing the market share thresholds in technology markets and replacing the thresholds with a condition that the exemption will be available provided there are at least three independently controlled substitutable technologies;
• Providing guidance on licensee negotiation groups and technology pools, but not include them in the scope of the block exemption order;
• Including an obligation on parties to provide the CMA with information in connection with technology transfer agreements to which they are party.

Background

I. The EU TTBER

The EU TTBER was adopted in March 2014¹, in advance of the expiry of the first 2004 version of the EU TTBER², and provides a safe harbor from the prohibition under Article 101(1) of the Treaty on the Functioning of the European Union (TFEU)³for technology transfer agreements that meet certain criteria.

In a technology transfer agreement, the licensor grants the licensee the right to use certain industrial property rights (e.g., patents, design rights, software copyrights, and know-how) for the production of goods and/or provision of services. In many cases, these agreements either do not restrict competition (i.e., they fall outside the scope of Article 101(1) TFEU) or, where they fall within Article 101(1) TFEU, they create objective efficiencies that benefit consumers and meet the conditions outlined in Article 101(3) TFEU⁴. However, technology transfer agreements, or specific clauses within them, may also negatively impact competition by facilitating collusion, restricting competitors' ability to enter or expand within the market, or reducing the incentives to innovate. The EU TTBER is complemented by its Guidelines⁵that provide guidance on both the application of the EU TTBER to technology transfer agreements and the assessment of other technology transfer agreements not covered by the EU TTBER. The EU TTBER will expire on April 30, 2026 and is currently under review by the European Commission⁶to gather evidence on its effectiveness to determine whether to let that EU TTBER expire, or to refresh it, with or without amendments.

II. The Assimilated TTBER in the UK

On December 31, 2020, at the end of the Brexit transition period⁷, the EU TTBER was retained into UK law under the EU Withdrawal Act 2018⁸. Under the Retained EU Law (Revocation and Reform) Act 2023⁹, legislation which was previously "Retained EU Law", became "Assimilated Law" on January 1, 2024. The Assimilated TTBER therefore forms part of UK competition law as an assimilated block exemption regulation, subject to certain amendments that were made as part of the EU withdrawal process.

The Assimilated TTBER automatically exempts certain types of technology transfer agreements from the prohibition in the Competition Act 1998 (the Chapter I prohibition¹⁰ insofar as those agreements meet certain conditions providing legal certainty for businesses.

Consultation on the CMA's Proposed Recommendation to the Secretary of State

The CMA is currently consulting on its proposed recommendation (the Proposed Recommendation) to the Secretary of State for Business and Trade regarding the Assimilated TTBER¹¹. The deadline for responding to the consultation is April 11, 2025. In the Proposed Recommendation, the CMA suggests a 12-year block exemption order that would (i) cover the same categories of technology transfer agreements currently exempted by the Assimilated TTBER and (ii) incorporate the same definitions, conditions, and obligations as the Assimilated TTBER, but with certain variations detailed below (Recommended TTBEO).

The CMA's Proposed Recommendation focuses on prioritizing growth, encouraging investment, and enhancing international competitiveness in key sectors identified in the Government's Industrial Strategy¹². It also aims to help ensure that businesses are not deterred from engaging in pro-competitive technology licensing and to provide legal certainty as to when such technology transfer agreements are automatically exempt from the Chapter I prohibition.

The CMA is expected to publish detailed guidelines to help businesses understand the application of any block exemption order for technology transfer agreements; they will also explain how individual exemptions can still apply to agreements that do not meet the block exemption criteria and how the Chapter I prohibition applies to such agreements not covered by any such block exemption order.

I. Changes to the Assimilated TTBER

A. Definitions

The Assimilated TTBER applies to technology transfer agreements involving the licensing or assignment of technology rights.

Article 1 of the Assimilated TTBER provides the definition of "technology rights," which encompasses know-how and the following rights, or a combination thereof, including applications for registration of those rights. Specifically, it covers patents, utility models, design rights, topographies of semiconductor products, supplementary protection certificates for medicinal products or other products for which such supplementary protection certificates may be obtained, plant breeder's certificates, and software copyrights.

The CMA is currently recommending that the definitions in Article 1 of the Assimilated TTBER be retained in the Recommended TTBEO, with the following proposed modifications:

• Removal of "utility models" from the Recommended TTBEO since UK law does not offer protection for utility models, making the existence of utility model licenses in the UK unlikely;
• Adding "copyright in a database" and "database right" definitions since data has become significantly more important in the modern economy compared to when the EU TTBER was adopted in 2014 and, therefore agreements for the licensing of data and database rights should be included within the scope of covered technology rights;
• Adding a definition of "active sales" and "passive sales," adopting the approach from Article 4 of the Assimilated TTBER regarding hardcore restrictions. This would be beneficial to align these definitions with those in the UK Vertical Agreements Block Exemption Order 2022 (VABEO)¹³ to ensure legal certainty and predictability for businesses.

B. Scope

The Assimilated TTBER currently applies to:

• Reciprocal agreements: two businesses granting each other technology rights licenses where those licenses concern competing technologies or technologies that can be used in the production of competing products;
• Non-reciprocal agreements: one business grants the other business a technology license, or each business grants the other a technology license of non-competing technology that cannot be used for the production of competing products;
• Agreements between competitors; and
• Agreements between non-competitors.

Different rules apply to these different types of agreements, such as different market share thresholds and different hardcore restrictions based on whether the parties are competitors or not, and for competing businesses, the hardcore restrictions apply differently depending on whether the agreement is reciprocal or non-reciprocal.

The CMA does not recommend altering the scope of the current distinctions between competing and non-competing businesses, and reciprocal and non-reciprocal agreements in the Recommended TTBEO. The CMA acknowledges that removing the distinction between competitor and non-competitor agreements could lead to stricter rules for all agreements (thus fewer agreements between non-competitors might not benefit from the block exemption), potentially reducing legal certainty for non-competing businesses. The CMA believes there are sound economic reasons for treating non-reciprocal agreements between competitors more leniently than reciprocal ones.

C. Technology pools and Licensing Negotiation Groups

Technology pools involve two or more patent holders agreeing to contribute their patents to a "pool" or package of intellectual property rights that is licensed. Contributors to a technology pool typically enter into licensing agreements, allowing the pool to grant licenses on their behalf for all essential patents. Royalties are then distributed to members and the pool administrator based. Agreements forming technology pools are generally multilateral¹⁴.

A Standard Essential Patent (SEP)¹⁵ is a patent which protects technology which is essential to implementing a technical standard¹⁶. Licensing Negotiation Groups (LNGs) refers to industry associations or groups representing implementers of standards that jointly negotiate licenses with individual SEP holders and SEP technology pools.

The Assimilated TTBER only covers technology transfer agreements between two businesses¹⁷and, since Technology pools and LNGs are generally multiparty agreements, as such they are not covered. The CMA proposes to not include Technology pools and LNGs in the Recommended TTBEO because (i) they differ significantly from the two-party technology transfer agreements covered by the Assimilated TTBER; (ii) including these arrangements would alter its scope and purpose; and (iii) the CMA is not currently able to determine if such arrangements meet the exemption criteria of section 9 CA98¹⁸. The CMA plans however to provide guidance on these agreements in its forthcoming guidelines.

D. Market share thresholds

According to Article 3 of the Assimilated TTBER, the exemption only applies if the market shares of parties are within certain thresholds:

• Agreements between competitors, the parties' combined market share must be less than 20% on the relevant market(s);
• Between non-competitors, the parties each have a market share of less than 30% on the relevant market(s).

If the parties' market shares are initially within these thresholds but subsequently rise above, the exemption in the Assimilated TTBER continues to apply for a period of two consecutive calendar years following the year in which the threshold was exceeded ("two-year grace period").

The Assimilated TTBER defines "relevant market" as a combination of the relevant product or technology market with the relevant geographic market¹⁹.

The CMA is minded to propose:

• No change to the market share thresholds in the Assimilated TTBER with respect to product markets as these market shares help ensure that qualifying agreements do not eliminate competition for a substantial part of the relevant products²⁰and the CMA supports the approach of having different market share thresholds for different agreements considering the different competitive impacts that they may have;
• No change to the two-year grace period provided in the Assimilated TTBER as it strikes a good balance between providing legal certainty for businesses and promoting competition by ensuring timely review of agreements that exceed market share thresholds;
• Replacing the market share threshold for technology markets in the Assimilated TTBER with a test based on there being three or more independently controlled substitutable technologies in addition to the technologies held by the parties to the agreement. Considering the difficulties in identifying and assessing competing technologies, the CMA will provide guidelines.

E. Hardcore restrictions

The exemption in the Assimilated TTBER does not apply to any technology transfer agreement containing hardcore restrictions²¹. As mentioned above, the hardcore restrictions differ depending on whether the agreement is entered into between competitors (such as price-fixing, limitations on output, allocation of markets or customers, restrictions on active or passive sales to end-users by licensees members of a selective distribution system) or non-competitors (such as price-fixing, restrictions on the territories into which, or the customers to whom, the licensee may passively sell the contract goods/services or restrictions on the licensee's ability to exploit its own technology rights²². The hardcore restrictions include several exceptions which also vary depending on the type of the agreement.

The CMA proposes that the Recommended TTBEO should retain the hardcore restrictions outlined in Article 4 of the Assimilated TTBER, including those related to active and passive sales restrictions.

F. Excluded restrictions

The exemption in the Assimilated TTBER will not apply to the certain obligations or restrictions contained in a technology transfer agreement (whether direct or indirect)²³, such as:

i. Any obligation on the licensee to assign/license exclusively to the licensor any improvements to the licensed technology made by the licensee, or new applications for the licensed technology discovered by that licensee (grant-back);

ii. Any restriction prohibiting one of the parties from challenging the validity of the other party's UK intellectual property rights, with the exception that the exemption will apply to a provision in an exclusive license allowing the technology transfer agreement to be terminated if the licensee challenges the validity of the licensed technology rights (termination on challenge clauses).

The CMA recommends maintaining the existing approaches for grant-back and termination on challenge clauses in the Recommended TTBEO. The inclusion of an exclusive grant back requirement does not mean that such a provision will automatically infringe the Chapter I prohibition, such a provision will simply need individual assessment. The CMA also considers that the provisions on termination on challenge clauses continue to strike the right balance between preserving incentives to innovate and license technology and ensuring that invalid intellectual property rights are removed as a barrier to innovation and economic activity.

II. Other Provisions and Duration of the Recommended TTBEO

A. Transitional period

The CMA proposes that the Recommended TTBEO should provide for a transitional period of one year. This means that the Chapter I prohibition would not apply during a period of one year from the date on which the Recommended TTEBO comes into effect in respect of agreements already in force on that date which do not satisfy the conditions for exemption provided for in the Recommended TTBEO, but on that date, satisfied the conditions for exemption of the Assimilated TTBER.

B. Cancellation in individual cases

The CA98²⁴provides that a block exemption order may provide that if the CMA considers that a particular agreement is not an exempt agreement, it may cancel the block exemption in respect of that agreement (i.e., withdrawal of the benefit of the Recommended TTBEO in an individual case). The CMA proposes that the Recommended TTBEO should contain such a provision.

C. Obligation to provide information

The CMA proposes that the Recommended TTBEO should impose an obligation for parties to provide to the CMA (within ten working days of receiving a written request) with information in connection with those technology transfer agreements to which they are a party if requested to do so, and that failure to do so without reasonable excuse should result in cancellation, i.e., withdrawal of the block exemption. There will be an opportunity to present a "reasonable excuse" for failing to provide such information. This obligation would (i) ensure that the CMA can assess whether agreements benefiting from the block exemption meet the exemption conditions under section 9 CA98 and (ii) enable the CMA to investigate competition law concerns arising from parallel networks of similar technology transfer agreements.

D. Duration

The current Assimilated TTBER has a duration of 12 years and is due to expire on April 30, 2026. The CMA recommends that the Recommended TTBEO should also have a fixed duration of 12 years, as such a duration would offer the advantage of legal certainty while allowing for a review if any developments arise that warrant reconsideration of any aspect of the TTBEO.

Conclusion

The CMA's consultation on the Proposed Recommendation for the Secretary of State to replace the Assimilated TTBER with a UK block exemption order will be open until April 11, 2025. Although the results of the consultation have yet to be announced, we can already predict that any new TTBEO will be closely aligned to the proposed new EU TTBER. In fact, apart from the novel proposal to introduce the obligation for the parties to provide the CMA with information relating to technology transfer agreements to which they are party, the CMA's recommendations seem to align even more closely with the EU provisions.

Footnotes

1 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, OJ L 93, 28.3.2014.

2 Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements, OJ L 123, 27.4.2004.

3 Article 101(1) TFEU prohibits agreements between undertakings that restrict competition, unless they contribute to improving the production or distribution of goods or services or to promoting technical or economic progress while allowing consumers a fair share of the resulting benefits, in accordance with Art. 101(3) TFEU.

4 Pursuant to Article 101(3) TFEU, agreements between undertakings that restrict competition within the meaning of Article 101(1) TFEU may be declared compatible with the internal market if they contribute to promoting technical or economic progress or to improving the production or distribution of goods while allowing consumers a fair share of the resulting benefit, provided that the restrictions are limited to what is strictly necessary (principle of proportionality) and that they do not eliminate competition in respect of a substantial part of the relevant product market.

5 Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements, 2014/C 89/03 – https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014XC0328(01

6 Review of the TTBER and Technology Transfer Guidelines - https://competition-policy.ec.europa.eu/public-consultations/2023-technology-transfer_en

7 The Brexit transition period refers to the time following the UK's exit from the EU on 31 January 2020, during which the UK was no longer a member of the EU but remained part of the single market and customs union. This period allowed for the continuation of EU rules while negotiations for a future relationship took place, and it officially ended on 31 December 2020.

8 The European Union (Withdrawal) Act 2018 repeals the European Communities Act 1972 and provides for the UK's withdrawal from the EU - https://www.legislation.gov.uk/ukpga/2018/16/contents

9 Retained EU Law (Revocation and Reform) Act 2023, UK Public General Acts, 2023 c.28 - Retained EU Law (Revocation and Reform) Act 2023.

10 The Competition Act 1998 (CA98) prohibits agreements between businesses that restrict competition in the UK (unless they meet the conditions for exemption in section 9(1) of the CA98 or are otherwise excluded). This is known as the Chapter I prohibition.

11 The CMA has prepared the Proposed Recommendation having regard to responses to the call for inputs on the Assimilated TTBER, which ran from 26 July 2024 to 6 September 2024 and published on the TTBER consultation page.

12 Government's Industrial Strategy Green Paper - https://www.gov.uk/government/consultations/invest-2035-the-uks-modern-industrial-strategy/invest-2035-the-uks-modern-industrial-strategy .

13 Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022, SI 2022/516, Article 8(7) of the VABEO defines both "Active sales" and "Passive sales."

14 P= Paragraph 56 of the EU TTBER Guidelines.

15 Standard Essential Patent licensing - https://www.gov.uk/guidance/standard-essential-patent-licensing?trk=public_post_comment-text

16 Technical standard, i.e. an agreed technical description of an idea, product, service, or way of doing things, are usually produced by standard developing organizations with inputs from industry, government, academia and other technical experts.

17 Paragraph 54 of the EU TTBER Guidelines.

18 Section 9 of the Competition Act 1998 (CA98) provides an exception to the prohibition on anti-competitive agreements. It allows agreements that contribute to improving production or distribution of goods or promoting technical or economic progress, while ensuring consumers receive a fair share of the resulting benefits.

19 Article 1(1)(m) of the Assimilated TTBER: "Relevant product market" includes the contract products (incorporating the licensed technology) and other products that buyers consider interchangeable or substitutable based on their characteristics, prices, and intended use. "Contract products" are products produced directly or indirectly using the licensed technology rights. The licensee's market share in the relevant product market is based on its sales of products incorporating the licensor's technology and competing products. If the licensor also supplies products in the relevant market, its sales are included in the calculation. "Relevant technology market" includes the licensed technology rights and their substitutes, which licensees view as interchangeable or substitutable based on characteristics, royalties, and intended use. The licensor's market share is calculated based on the combined sales of the licensor and its licensees of products incorporating the licensed technology. "Relevant geographic market" means the area in which the businesses concerned are involved in the supply of and demand for products or the licensing of technology, in which the conditions of competition are sufficiently homogeneous, and which can be distinguished from neighboring areas because the conditions of competition are appreciably different in those areas.

20 Exceeding these thresholds does not automatically mean the agreement fails to meet exemption conditions under section 9 of CA98 or infringes the Chapter I prohibition. Instead, an individual assessment of the agreement is needed in such cases.

21 Article 4 of the Assimilated TTBER.

22 For agreements entered into between competing undertakings, hardcore restrictions are set out in Articles 4(1) of the Assimilated TTBER. For agreements between non-competing undertakings, hardcore restrictions are set out in Article 4(2) of the Assimilated TTBER).

23 Article 5 of the Assimilated TTBER.

24 Section 6(6)(c) of the CA98.

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