By John Wileur, Jennifer Boudet, and Miranda Cole

The European Commission published for consultation its proposal for revisions to the EU technology transfer competition regime yesterday.  The Commission is consulting on its proposals until 17 May 2013.

The EU’s approach to the application of competition law to technology transfer agreements is set out in two instruments, the technology transfer block exemption regulation (“TTBER”) and the accompanying guidelines (“Guidelines”).  The TTBER exempts certain types of agreements between entities with limited market power.  The Guidelines address the application of both the TTBER and EU competition law to technology transfer agreements that fall outside the “safe harbour” provided by the TTBER. 

Main proposed changes to the TTBER

  • A new test is proposed for deciding whether certain provisions of technology transfer agreements fall within the safe harbour provided by the TTBER.  The proposal would lead to provisions being assessed on the basis of whether they are “directly and exclusively related” to what the licensee produces with the licensed technology (Article 1 (c)).
  • Where a licensee owns a technology that is substitutable for licensed technology and the licensee only uses its own technology for in-house production and the licensee and licensor are not competitors, the agreement would be deemed to be unproblematic where the market share of the parties does not exceed 20% (rather than the 30% threshold that current applies in these circumstances) (Article 3.2).
  • The TTBER would no longer exempt restrictions on passive sales that protect a licensee with an exclusive territory (granted by a non-competitor licensor) from passive sales by other licensees into the exclusive territory during the first two years of licences (old Article 4.2 (b) (ii)).
  • All exclusive grant-back obligations would fall outside the scope of the TTBER.  The TTBER would no longer differentiate between severable and non-severable improvements (Article 5.1 (a)).
  • The inclusion of clauses that allow the licensor to terminate the agreement if the other party challenges the validity of the licensed technology would not remove the rest of the agreement from the safe harbour of the TTBER.  The termination clause itself would be examined on a case-by-case basis (Article 5.1 (b)).

Main proposed changes to the guidelines

The Commission has proposed revisions informed by recent and on-going investigations, including:

  • The proposed Guidelines state that settlement agreements containing a license may infringe Article 101 TFEU, particularly in cases of “pay-for-delay” agreements or reverse payment patent settlements (para 223).  In addition, they state that non-challenge clauses may be problematic, particularly when the patent holder knows or could reasonably be expected to know that the patentability criteria are not met (paras 226-227).
  • The Commission clarifies the definition of essentiality, both in relation to production and standard implementation (para. 236).  It also creates a safe harbour for the creation and operation of technology pools (para. 244).