On 23 March 2014 the European Commission introduced a new Technology Transfer Block Exemption and accompanying guidelines.  Whilst it does not represent a radical departure from the existing rules of know-how and patent licensing, there are important changes which licensors and licensees should be aware of.  This article gives a brief overview of some of these changes.

What is a Block Exemption?

European and UK competition law provides that certain restrictive agreements are illegal.  Such agreements can be void and the parties to such agreements can be liable to investigations fines and damages actions.  Block exemptions are issued by competition law regulators and provide that categories of agreement will be exempt from the relevant competition law rules providing they satisfy certain conditions.  Once such block exemption is the European Commission’s Technology Transfer Block Exemption, applying to patent and know-how licences.

Do I need to worry about this change?

If your business is party to a patent or know-how licence then it is very likely that it was drafted to comply with the previous block exemption, even if you did not realise that this was the case.  It would therefore be sensible to review your existing licence agreements to ensure that they are consistent with the new exemption.  There are transitional provisions in place so the previous exemption can continue to apply to existing agreements until 30 April 2015, but an early review of existing licences and standard documents would be wise.

What has changed?

An in-depth review of the provisions of the new block exemption is beyond the scope of this article, however some of the biggest changes are:

the exemption will not apply to any obligation to exclusively “grant back” improvements to the licensor.  The previous exemption allowed exclusive grant back obligations in relation to “severable” improvements (ie those which could not be used without infringing the licensed technology).  This severable/non-severable distinction has now gone from the block exemption.  This distinction appears in many existing licence agreements and these should be reviewed in light of the changes.
the exemption will not apply to a provision allowing termination in the event that the licensee challenges the validity of the licensed technology unless the licence is exclusive.  This could leave a licensor whose licensee is challenging the validity of the licensed technology being required to continue to allow the licensee to enjoy the benefit of the licence.  Again many existing licences contain such termination rights and should be reviewed in light of the changes.

What my licence isn’t covered by the Block Exemption?

This does not mean that it is automatically in breach of competition law.  It is necessary to assess the licence to determine whether it is anti-competitive.  The European Commission has issued guidelines to assist with this process.  The guidelines contain valuable insight into the application of competition law to types of agreement other than a “standard” technology licence (eg settlement agreements and technology pool agreements).  Both the block exemption and the guidelines should be considered essential reading for all businesses which are involved in technology licensing.