On 1 May 2014 the revised Technology Trans- fer Block Exemption Regulation (hereinafter: TTBER) entered into force. At the same time, the European Commission adopted new and revised guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to Technology Transfer Agreements (hereinafter: Guidelines). In the following, we shall explain the main changes and the potential need for action for your company.
- Changes to the TTBER and the Guidelines
The good news is that there are only a few substantial changes. Several controversial proposals for amendment made by the Euro- pean Commission in the first drafts were aban- doned after the public consultations and have not been included in the final revision. In par- ticular, the following points have remained unchanged:
Technology rights: The scope of the TTBER has basically remained the same. Agreements concerning the licensing or assignment of patents, utility models, design rights, topogra- phies of semiconductor products, supplementary protection certificates for medicinal products, plant breeder’s certificates and software copyrights for the purpose of the production of contract products fall within the scope of the TTBER and can benefit from an exemption.
Relationship with other block exemption regulations (BERs): The new TTBER now explicitly states that it will only apply if the other horizontal block exemption regulations, i.e. the Research & Development BER and the Spe- cialisation BER, are not applicable.
Market share thresholds: The market share thresholds now remain unchanged. Initially, the European Commission had intended to lower the threshold for non-competitors in certain constellations. However, it later abandoned this plan. The basic rule therefore continues to be that the TTBER is applicable if the com- bined market share of competitors on the rele- vant market does not exceed 20 per cent or if the individual market shares of non- competitors do not exceed 30 per cent on the relevant markets.
In contrast, the following changes should be noted:
Restrictions of passive sales: In alignment with the Block Exemption Regulation for Verti- cal Agreements, restrictions of passive sales (i.e., sales where the potential customer ap- proaches the seller) are now nearly invariably seen as hard-core restrictions. Under the old TTBER there was an exemption during the first two years of agreements between non- competitors if an exclusive territory or exclu- sive client group was assigned to another li- censee. This block exemption does not exist under the new TTBER. Instead, it now has to be assessed on a case-by-case basis whether a temporary restriction of passive sales may exceptionally be admissible and, if so, for which period of time. However, the licensor is still allowed to restrict passive sales to territo- ries or to client groups which it has exclusively reserved for itself.
Exclusive grant-back obligations: Agreements which oblige the licensee to exclusively license back its improvements on the licensed technology to the licensor are not exempted under the new TTBER. The differentiation made under the old TTBER between severable and non-severable improvements has been abandoned. However, it remains possible for the licensor to oblige the licensee to license back improvements on a non-exclusive basis.
No-challenge and termination clauses: No- challenge clauses in licence agreements are still not exempted. In addition, the new TTBER has a stricter approach with regard to termina- tion clauses allowing the licensor to terminate the agreement if the licensee challenges the validity of the licensor’s technology right. Whereas such termination clauses were gen- erally considered exempted until now, this will from now on remain true for exclusive licences only, whereas termination clauses in non- exclusive licensing agreements will not be exempted.
Settlement agreements: The European Commission has included a paragraph in its Guidelines which highlights that settlement agreements are in principle a legitimate way to find a mutually acceptable compromise to a legal disagreement about technology rights. At the same time, however, the Guidelines stress that so called “pay-for-delay” agreements (on which the European Commission has issued several decisions in the last couple of years) are problematic under competition law. No- challenge clauses in settlement agreements are considered competitively problematic if they are granted on the basis of incorrect or misleading information.
Technology pools: The Guidelines now pro- vide an express “safe harbour” for technology pools (which the European Commission also refers to as a “soft safe harbour” due to its inclusion in the Guidelines rather than in the TTBER). The parties therefore can assume that a technology pool does not violate compe- tition law if it meets the criteria further detailed in the Guidelines.
- Potential need for assessment and amendment
The changes outlined above mean that new licensing agreements have to be in line with the revised rules from now on. Agreements already in force will have to be reviewed to ascertain whether they are compatible with the partially stricter requirements of the new TTBER. The European Commission has granted a transition period of one year – i.e. until 30 April 2015 – during which market par- ticipants can adapt their agreements to the new legal regime.
This means in clear terms that grant-back obli- gations for improvements and termination clauses in case of a challenge to the IP right have to be critically reassessed. Agreements between non-competitors which restrict pas- sive sales to exclusive territories or exclusive client groups of other licensees for a limited period of time in accordance with the previous legal situation would have to be reassessed and perhaps adapted if the limited period of time stipulated in the agreement ends after 30 April 2015.