The final public consultation period for the proposed revised technology transfer block exemption regulation ("TTBER") and associated guidelines has now closed, with the last submissions being accepted on 17 May. The current TTBER and guidelines are due to expire on 30 April 2014 and the EU Commission will now begin considering the various submissions ahead of releasing the new legislation and guidance.

The original introduction of the TTBER was widely welcomed by IP rights holders and licensors, as providing a "safe harbour" for licensing agreements from the application of the EU competition law rules on anti-competitive agreements. However, despite the welcomed respite that the TTBER was intended to offer, the TTBER regime has been criticised (particularly by owners of IP rights and licensors) as not going far enough and not providing a sufficiently broad and certain safe harbour for licensors of IP. Self-assessment of whether agreements fall within the scope of the TTBER can be difficult for undertakings, given its complexity in some areas, and may require sophisticated economic and market analysis, in particular given the dual market share thresholds contained within the TTBER.

The Commission's draft revised TTBER and guidelines were therefore eagerly anticipated by owners and licensors of IP rights. However, there was little in the draft materials to allay concerns or widen the scope of the safe harbour. The revised drafts in fact proposed a tightening of the regime in a number of respects and a narrowing of the circumstances in which the safe harbour of the block exemption is available, reducing flexibility and increasing uncertainty for businesses.

The likely key areas of concern ahead of the new legislation, from the viewpoint of licensors of technology, are:

  • Exclusion of legitimate commercial provisions from the safe harbour of the TTBER, namely:
    • provisions requiring exclusive grant-back of rights to non-severable improvements; and
    • provisions giving the licensor a right to terminate a technology transfer agreement in circumstances where the validity of the licensed technology is challenged by the licensee.
  • Removal of the previous exception (to the TTBER's hard-core restrictions) for restrictions on passive sales into territories/to customers exclusively allocated to another licensee for the first 2 years of a license, in favour of a self-assessment approach which will create uncertainty for undertakings.
  • Continued complexity associated with the calculation and application of the dual market share thresholds. The market share thresholds for agreements between non-competitors have been lowered in some circumstances rather than raised and defining the relevant market and calculating market shares is likely to remain very difficult to calculate for new technologies in many cases.
  • Inclusion (in the draft guidelines) of provisions designed to regulate settlement agreements containing licensing terms have not provided clear guidance and may put in doubt the compliance of settlement agreements with the competition rules.

Proponents for IP rights and licensors of technology will have no doubt expressed their concerns through the latest round of public consultation, but it remains to be seen whether these will be taken into account by the Commission within the final TTBER and guidelines. At present, it appears that the Commission has missed the opportunity to simplify the regime, as a way of promoting innovation, through certainty and also by recognising that most licensing regimes promote competition by spreading the use of technology.