New EU competition rules governing technology transfer agreements, consisting of a new Technology Transfer Block Exemption Regulation (the "2014 TTBER") and revised Technology Transfer Guidelines (the "2014 Guidelines"), have entered into force on 1 May 2014, replacing the 2004 versions of both texts (the "2004 TTBER" and the "2004 Guidelines").
The new texts contain mainly clarifications and only a very limited number of substantive changes.
Clarifications relate to (i) the scope of the TTBER, which is now explicitly distinguished from that of horizontal block exemption regulations, (ii) the IP rights to which it applies, which are now listed in a clearer way, trademarks still not being covered, and (iii) the calculation of market shares, the shares having been left unchanged,
Substantive changes relate to (i) the relation to the vertical competition rules, (ii) an extension of the catalogue of ''hardcore'' and excluded restrictions; (iii) guidance on settlement agreements in IP disputes; and (iv) more extensive guidance regarding the compatibility of technology pools with EU antitrust rules.
On the whole, the approach is stricter than ten years ago, especially in relation to non-challenge early termination clauses, which are no longer block exempted in non-exclusive licences. It is therefore adviseable to use the 12 month transitional period for existing licensing agreements to examine their compatibility with the new rules.
- Relation to distribution situations
The 2014 TTBER applies to the licensing of "technology rights" combined with the licensing of other IP rights (e.g., trademarks, or non-software copyrights) or with provisions relating to the purchase of products by the licensee, insofar as such licensing or purchase is directly and exclusively related to the production of the contract products. This is a change from the 2004 TTBER, which required that such licensing constitute the "primary object" of the agreement in order for the TTBER to apply.
- "Hard-core" and Excluded Restrictions
- Licensees' protection from sales by other licensees as "hard-core" restrictions
In the case of technology license agreements between non-competing firms, the 2014 TTBER still allows for the protection of the licensor in its exclusively allocated territory against "passive" sales made from its licensees. However, as opposed to the 2004 TTBER regime, the safe harbour no longer protects licensees from passive sales by other licensees made into their exclusive allocated territories or designated exclusive customer groups during the first two years in which licensees sell products manufactured under license. This revision aligns the TTBER with the rules on vertical agreements.
While the 2014 Guidelines indicate that "restrictions on passive sales by licensees into an exclusive territory or customer group allocated to another licensee [. . .] may fall outside Article 101(1) of the Treaty for a certain duration [of up to two years] if the restraints are objectively necessary for the protected licensee to penetrate the new market," this limited exception will be difficult to invoke in practice, as it transfers the risk and burden of the self-assessment process under Article 101 TFEU entirely to the licensing parties.
- General blacklisting of exclusive "grant-back" obligations
Under the 2004 TTBER regime, a licensor could benefit from the safe harbour even if it imposed on its licensee an obligation to grant back an exclusive license or to assign it rights with respect to the licensees' own non-severable improvements on the licensed technology. However, in the 2014 TTBER, the Commission removed the benefit as regards the exclusive licensing or assignment obligations of any improvements made by the licensee to the licensed technology (i.e., whether severable or non-severable). Thus, the safe harbour will now cover only non-exclusive grant-back obligations, regardless of whether they: (i) relate to severable or non-severable improvements; (ii) are non-reciprocal; (iii) envisage the payment of consideration; or (iv) entitle the licensor to feed-on these improvements to other licensees. Exclusive grant-back obligations must be assessed individually, but the remainder of the agreement may still benefit from the safe harbor.
- Exclusion of non-challenge termination clauses in non-exclusive licenses
The Commission has expanded the scope of the exclusion from the safe harbour of non-challenge clauses regarding licensed IP rights. Under the 2014 TTBER, as under the previous 2004 TTBER, non-challenge clauses do not benefit from the exemption, regardless of whether the ultimate beneficiary of such a provision is the licensor or the licensee. However, contrary to the 2004 TTBER, which exempted termination arrangements for any kind of technology transfer agreements, the 2014 TTBER now excludes from the exemption regime any clause that allow for the termination of the technology license agreement in the event of a challenge to the validity of the IP rights concerned in the case of non-exclusive licenses. According to the Commission, such clauses can have the same deterring effect as no-challenge clauses, which do not benefit from the exemption, and would not be justified on the basis of any "exclusive" character of the license in question.
- Settlement Agreements
In the wake of fines imposed in the pharmaceutical sector, the 2014 Guidelines clarify that settlement agreements may have anti-competitive outcomes where the licensee agrees, upon being induced by the licensor to accept more restrictive settlement terms than would otherwise have been accepted solely on the basis of the strength of the licensor's technology (so-called "pay-for-delay" or "reverse payment" settlement agreements). Furthermore, the Commission indicates that non-challenge clauses in the context of settlement agreements are likely to be anti-competitive if the licensor knows or could reasonably be expected to have known that the licensed technology was obtained unfairly (e.g., it did not meet the appropriate legal conditions to justify being conferred IP law protection).
- Technology Pools
Following an increased demand from industry in the Consultations, the 2014 Guidelines expand the guidance regarding the Commission's competitive assessment of technology pools. The guidance still focuses on the same aspects, i.e. the inclusion of essential patents and the access under FRAND conditions, but gives more examples than the 2004 version.