Post on 12-Sep-2021
OVERVIEW
■ The European Commission ("Commission") is
currently reviewing its rules for the assessment of
technology transfer agreements under EU
competition law. In December 2011 it conducted a
consultation and has now proposed a revised draft
Technology Transfer Block Exemption Regulation
("TTBER") and revised draft Guidelines on
Technology Transfer Agreements ("Guidelines").
The Commission is now consulting on the
proposals, and interested parties have until 17 May
2013 to make submissions.
■ Various significant changes are being proposed to
the provisions relating to exclusive grant backs,
termination rights, settlement agreements and
removing the safe harbour on passive sales as well
as numerous clarifications to the Guidelines.
PROPOSED CHANGES TO THE TTBER
The following are the substantive changes to the
TTBER proposed by the Commission.
Subsidiarity of the TTBER
The Commission proposes to clarify that the TTBER
be subsidiary to other regulations - for example where
the licensing occurs in the context of a R&D joint
venture then the existing R&D Block Exemption or
the Specialisation Agreements Block Exemption
would apply1.
TTBER not to be a catch all
It also clarifies the relationship with the Vertical
Agreements Block Exemption (VABE). For example,
where the purpose of a licensing agreement is to
enable the reproduction and distribution of copyright
protected products, this amounts to a distribution
agreement and should be analysed under the VABE
and the associated Guidelines2.
PROPOSED AMENDMENTS TO EU LAW ON TECHNOLOGY TRANSFER AGREEMENTS
1 Commission Regulation 1217/2010 OJEU L 335, 18.12.2010, p36; and Commission Regulation 1218/2010 OJEU L 335, 18.12.2010, p43. 2 Commission Regulation 330/2010 OJEU L 102, 23.4.2010, p1-7; and Guidelines on Vertical Restraints, OJEU C 130, 19.05.2010, p1.
02 | EU Law on Technology Transfer Agreements
Out with the old test, in with the new
For agreements involving both the licencing of IPR and
purchase of raw material, a new test has been proposed to
establish whether the secondary obligations can be
exempted under the TTBER. The current test requires
(i) the licensing to be the primary object of the
agreement, and (ii) the other products are directly related
to the licensed IP. However, this has been notoriously
difficult to apply, particularly where the value of the
other products (eg related raw materials) was greater than
the IP being transferred. In those cases, the obligations
relating to the other products were not covered by the
existing regulation (on the basis that the licencing was no
longer deemed to be the primary purpose of the
agreement). The proposal sets out a new test which
requires the other products be directly and exclusively
related to the production of the licensed products. The
intention here is that this will give licensors greater
certainty in circumstances where the value of the other
products exceeds the value of the licensed IP.
Market shares
The current TTBER states that the parties' shares on the
downstream market must be assessed as it is a proxy for
their power on the technology market. The proposed
revision makes it clear that this applies not only in
relation to the technology market but also in relation to
its geographic market.
Agreements with non-competitors
Where a licensee already has a substitutable technology
used for in-house production, and wishes to use obtain a
licence for third party sales, the proposed revision
requires the parties' market share to comply with the
threshold set for agreements between competitors (20 per
cent). The Commission considers that such agreements
entail a higher risk of anti-competitive effects: the
concern here is that the licensee with its own internal
technology may foreclose potential entrants by entering
into an exclusive license with the licensor. The
Commission considers that because of the higher risk of
anti-competitive effects, such agreements should be
subject to the lower market share threshold. Agreements
between non-competitors will remain subject to a
different hard-core list than agreements between
competitors.
Passive sales not to be automatically protected
The current exemption allows a restriction on passive
sales into an exclusive territory or to an exclusive
customer group of another licensee for the first two years
of the license covering that territory or customer group.
The Commission maintains that where a licensee must
invest heavily in order to use the licensed technology, the
licensee can be protected from active and passive sales
into its territory or to its customer group. However, the
Commission does not want this exception to apply to all
cases, particularly where no substantial investment is
required by the licensee. Accordingly, the Commission
proposes to remove this from the TTBER. However, the
revised Guidelines explicitly state that such restriction
may be allowed where substantial investment by the
licensee is required and must be protected.
Grant-backs to be excluded
The current TTBER excludes from its scope exclusive
grant-backs for severable improvements. However, the
Commission now proposes to remove the distinction
between severable and non-severable improvements, and
to exclude all exclusive grant-backs from the exemption
of the TTBER. (Non-exclusive grant-backs will be
covered by the TTBER.)
Right to terminate if IP challenged to be excluded
The Commission remains keen to ensure that any only
valid IP rights are enforced and recognises that licensees
are the best placed to challenge invalid rights.
The current TTBER provides that a restriction on the
licensee to challenge the validity of intellectual property
rights is an excluded restriction (ie not exempt). The
proposed revision also excludes any termination on the
basis of challenging intellectual property rights. The
Commission believes that in many cases - due to the
licensee's heavy investment for and reliance on the
license - the effect of a termination clause can amount to
a non-challenge clause.
PROPOSED CHANGES TO THE GUIDELINES
The changes to the accompanying Guidelines mainly
reflect the changes to the TTBER, and the drafting has
been clarified. The main changes are with regard to
settlement agreements and patent pools.
Settlement agreements
The revised Guidelines clarify that settlements may be
prohibited when the licensee agrees (in return for a value
transfer) to more restrictive settlement terms than would
otherwise have been accepted based solely on the
strength of the licensor's technology. The Commission is
currently pursuing various cases on reverse patent
settlements and has yet to reach a final decision in any of
them. The general message from the Commission is that
reverse payments make the settlement agreement
suspicious and indicate that the licensee would - but for
the reverse payment - have entered the market. There is
likely to be significant debate still as to what is meant by
"a value transfer".
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Non-challenge
The revised Guidelines clarify that non-challenge clauses
are likely to be anti-competitive where the licensor
knows or could reasonably be expected to know that the
licensed technology does not meet the respective legal
criteria to receive intellectual property protection. This is
one area where we expect significant comment, given
that it undermines the validity of a patent or other IP
right duly granted.
Patent pools
■ An important factor in assessing whether a patent
pool is pro-competitive is whether only non-
competing technology is included in the pool. The
revised Guidelines clarify that the definition of
"essentiality" of a technology covers not only
essentiality in relation to producing a particular
product but also essentiality in relation to complying
with a standard.
■ As regards licensing agreements between a patent
pool and third parties, the current Guidelines state
that they may be able to benefit from the TTBER.
The revised Guidelines clarify that licensing
agreements between a patent pool and third parties
fall outside of the TTBER. The reason for excluding
such agreements from the scope of the TTBER is that
in practice the terms of such agreements are agreed
by the pool members. The agreements are thus
multilateral agreements, while the Enabling Council
Regulation allows for block exemption regulations in
relation to bilateral agreements only. In any event,
even if the TTBER were to apply, the market share
thresholds would have been exceeded where the
patent pool was a successful one.
■ The revised Guidelines provide a comprehensive safe
harbour for the creation of and licensing by a patent
pool3. The conditions for the safe harbour are
conveniently set out in four pages in the revised
Guidelines, and the Commission believes most patent
pools will be able to satisfy the conditions.
The Commission's consultation closes on 17 May 2013
Copies of the draft proposals and details about how to
submit comments are available on the Commission's
website:
http://ec.europa.eu/competition/
consultations/2013_technology_transfer/index_en.html.
For more information please contact:
3 See recital 244 of the draft revised Guidelines.
Alexandra Kamerling
Partner
T +44 (0)20 7796 6490
alexandra.kamerling@dlapiper.com
Duncan Gillespie
Partner
T +44 (0)20 7796 6259
duncan.gillespie@dlapiper.com
Martin Rees
Partner
T +44 (0)20 7796 6126
martin.rees@dlapiper.com
www.dlapiper.com
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