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From Antitrust Law Daily, March 21, 2014

EC adopts new rules for assessing technology transfer agreements under antitrust law

By John W. Arden, J.D., LL.M.

The European Commission (EC) has adopted new rules for the assessment of technology transfer agreements under the European Union (EU) antitrust rules, the EC announced today. The revised guidelines, which become effective on May 1, 2014, facilitate sharing of intellectual property through the licensing of patents, know-how, or software to produce goods and services and provide clearer guidance on licensing agreements that stimulate the economy and strengthen incentives for research and innovation.

Licensing plays an important role in economic growth and consumer welfare, but can also be used to harm competition, according to the announcement. Examples of the harm to competition are when two competitors use a licensing agreement to divide markets between them, rather than competing with each other or when a licensing agreement excludes the use of competing technologies in the market. These anticompetitive agreements are prohibited by Article 101 of the Treaty on the Functioning of the European Union.

The regulatory regime adopted today provides better guidance on how to use licenses in ways that stimulate innovation and preserve a level playing field in the Single Market, the Commission said. The regime consists of the Technology Transfer Block Exemption Regulation (TTBER), which exempts certain licenses from antitrust rules, and the Technology Transfer Guidelines.

Highlights of the new rules include:

  • The continuing belief that licensing is, in most cases, procompetitive.

  • New guidance on “patent pools.”

  • A more prudent approach to clauses that could harm competition and innovation.

  • Guidance on settlement agreements in light of the Commission’s recent experience.

The Technology Transfer Block Exemption creates a safe harbor for licensing agreements between companies that have limited market power (a combined 20% or less for competitors or 30% or less each foe non-competitors) and that respect certain conditions set out in the TTBER.

Such agreements are deemed not to have an anticompetitive effect or, if they do, the positive effects outweigh the negatives effects.

The exemption shall not apply to agreements that intend to restrict a party’s ability to determine its prices when selling products to third parties; limit output of a licensee in a non-reciprocal agreement or imposed on only one of the licensees in a reciprocal agreement; the allocation of markets or customers, with some exceptions; or the restriction of a licensee’s ability to exploit its own technology rights or the restriction on the ability of a party to carry out research and development. Excluded restrictions are direct or indirect obligations on the licensee to grant an exclusive license or to assign rights to the licensor or a third party designated by the licensor and direct or indirect obligations not to challenge the validity of intellectual property rights that the other party holds in the EU.

The Technology Transfer Guidelines provide guidance on the application of the TTBER as well as the application of the EU competition law to technology transfer agreements that fall outside of the safe harbor of the TTBER.

In addition to the TTBER and Technology Transfer Guidelines, the EC issued Frequently Asked Questions and answers.

The new regulatory regime arose out of a 2011-2012 public consultation on the then-current regime. A majority of public comments suggested incremental improvements, prompting the Commission to propose a revised draft in early 2013. A further public consultation elicited comments welcoming the proposal to keep the overall structure of the regime and clarification concerning the scope of the regulation. Most submissions focused on proposed changes concerning market share thresholds, termination clauses, exclusive grant-back obligations, and patent pools, the EC noted.

MainStory: TopStory Antitrust

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