Background
Scope
Criteria for block exemption
Duration and market share
Restrictions
In order to harmonise Albanian legislation with EU law – and in particular with EU Regulation 1217/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development (R&D) agreement – on May 26 2011 the Albanian Competition Authority approved the Regulation on the Exemption of Research and Development Agreement Categories.
The objective of the regulation is the block exemption from applicable competition restrictions of agreements regarding the R&D of products or processes up to the stage of industrial application and exploitation of the results, including provisions regarding IP rights. This exemption is intended to encourage undertakings in their technological R&D activity, as well as to support their efforts to cooperate with each another.
The new regulation sets the boundaries for defining the R&D agreements that are exempt under the regulation and seeks to determine cases where such agreements do not benefit from the exemption.
The new regulation provides that Article 4 of the Competition Law (on prohibited agreements) shall not apply to R&D agreements provided that such agreements do not contain competition restriction clauses.
This exemption shall apply to R&D agreements containing provisions that relate to the assignment or licensing of IP rights to one or more of the parties or to an entity established by the parties to carry out joint R&D, paid-for R&D or joint exploitation, provided that those provisions do not constitute the primary object of such agreements, but are directly related to and necessary for their implementation.
In order for an R&D agreement to benefit from the block exemption, it must meet certain conditions as set out in Article 6 of the regulation:
- The agreement must state that all parties must have full access to the final results of the joint R&D or paid-for R&D, including any resulting IP rights and know-how for the purposes of further R&D and exploitation. Where the parties limit their exploitation rights, access to the results for the purposes of exploitation may be limited accordingly. Special provisions are imposed for research organisations which supply R&D without being active in the exploitation of results. R&D agreements may provide for compensation to the parties for granting the right over the results for the purpose of further R&D, but the compensation must not be so high as effectively to prevent such right.
- If the agreement provides only for joint R&D or paid-for R&D, each party must have access to any pre-existing know-how of the other parties, provided that this know-how is indispensable for the exploitation of the results. If the agreement provides for compensation of the pre-existing know-how exchange, that compensation must not be so high as effectively to prevent such right.
- Any joint exploitation must be based on results protected by IP rights or constitute know-how which is indispensable for the manufacture of the contracted products or the application of the contracted technologies.
- Where one party is charged with manufacturing the relevant products (resulting from the R&D work), unless it is agreed that it should also have the exclusive distribution right, it must fulfil orders for the products from the other parties.
Regarding the duration of the exemption, the regulation provides that if the parties to the R&D agreement are not competitors, the exemption applies for the duration of the R&D agreement. If the results are jointly exploited, the exemption continues to apply for seven years after the contracted products or technologies are first put on the market.
Where the parties are competitors, the exemption is applicable only if, at the time the agreement is entered into:
- in the case of joint R&D agreements, the parties' combined market share does not exceed 25% of the relevant product and technology markets; and
- in the case of paid-for R&D agreements, the combined market share of the financing party and all parties with which the financing parties have entered into R&D agreements relating to the same contract products or technologies does not exceed 25% of the relevant product and technology markets.
At the end of the seven years, the exemption shall continue to apply, provided that the combined market share of the parties does not exceed 25% of the relevant markets.
The regulation provides for two sets of restrictions:
- Hardcore restrictions – the exemption does not apply to R&D agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object:
- restriction of the parties' freedom to carry out R&D in an unrelated field;
- certain restrictions on production or sales;
- certain cases of price fixing;
- restriction of territory;
- prohibition or limitation of active sale of products or technologies; or
- the restriction of the ability of users/resellers to obtain the products from other resellers.
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- Other restrictions – the exemption does not apply to R&D agreements which contain an obligation not to challenge the validity of related IP rights after completion of the R&D or an obligation not to grant licences to third parties to manufacture the contract products or to apply to contract technologies, unless the agreement provides for the exploitation of the results by at least one of the parties and such exploitation takes place in the internal market regarding third parties.
Moreover, the regulation contains provisions on the calculation and application of the market share threshold and the eventual exceeding of such threshold.
For further information on this topic please contact Elda Shuraja at Hoxha Memi & Hoxha by telephone (+355 4 227 4558), fax (+355 4 224 4047) or email ([email protected]).