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COMPETITION LAWNEW BLOCK EXEMPTION REGIME FOR TECHNOLOGY TRANSFER AGREEMENTSOn 7 April 2004, the European Commission (the “Commission”) adopted the Regulation on the application of Article 81(3) of the EC Treaty to categories of technology transfer agreements (the “TTBER”). The TTBER will come into force on 1 May 2004 and will replace Regulation 240/96, of 31 January 1996 (the “former Regulation”). The TTBER is accompanied by interpretative Guidelines that provide guidance on the application of the TTBER by the Commission as well as on the application of Article 81 of the EC Treaty to technology transfer agreements that fall outside the scope of the TTBER (the “Guidelines”). Through this reform, the Commission intends to simplify the block exemption regime for technology transfer agreements, and bring it in line with Regulation 1/2003, of 16 December, and with the other provisions adopted in the modernisation process of EU competition law. |
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On 7 April 2004, the European Commission (the “Commission”) adopted the Regulation on the application of Article 81(3) of the EC Treaty to categories of technology transfer agreements (the “TTBER”). The TTBER will come into force on 1 May 2004 and will replace Regulation 240/96, of 31 January 1996 (the “former Regulation”).
The TTBER is accompanied by interpretative Guidelines that provide guidance on the application of the TTBER by the Commission as well as on the application of Article 81 of the EC Treaty to technology transfer agreements that fall outside the scope of the TTBER (the “Guidelines”).
Through this reform, the Commission intends to simplify the block exemption regime for technology transfer agreements, and bring it in line with Regulation 1/2003, of 16 December, and with the other provisions adopted in the modernisation process of EU competition law.
The most relevant aspects of the reform are highlighted below:
The TTBER regulates the block exemption of technology transfer agreements where the licensor permits the licensee to exploit the licensed technology for the production of contract products or services. As the former Regulation, both the TTBER and the Guidelines exclude from their scope of application technology transfer agreements concluded between more than two undertakings. In this regard, the Guidelines provide that, when assessing multilateral licence agreements in the light of Article 81(3) of the EC Treaty, the Commission will apply by analogy the principles set out in the TTBER.
The material scope of the TTBER is wider than that of the former Regulation since it includes, in addition to patents and know how licence agreements, licence agreements relating to other intellectual property rights, such as software copyright.
The TTBER removes the traditional characterisation of exempted and non-exempted clauses and, instead, defines the categories of technology transfer agreements which are exempted up to a certain level of market power, specifying the restrictive clauses which may not be included in such agreements. Thus, the TTBER introduces a larger flexibility in the block exemption regime for technology transfer agreements by allowing a potentially unlimited number of exemptable clauses.
The TTBER distinguishes between agreements concluded by competing undertakings and agreements entered into by non-competing undertakings: while the former are deemed to be exempted provided that the combined market share of the parties does not exceed 20%, the latter can only benefit from the exemption if the market share of each party does not exceed 30%.
These thresholds shall be calculated by reference to the product market (which comprises products which are regarded by the buyers as interchangeable with the contract products) and the technology market (which includes technologies which are regarded by the licensees as substitutable for the licensed technology).
These market share limits apply during the entire duration of the agreement. This means that, if the market share does not initially exceed 20% or 30% but subsequently rises above those levels, the agreement would lose the benefit of the exemption. However, the TTBER provides that such agreements shall continue to apply for a period of two consecutive years following the year in which the 20% or 30% threshold was first exceeded.
Technology transfer agreements containing certain restrictions to competition that are considered to be particularly stringent are entirely excluded from the benefit of the block exemption, regardless of the market shares of the parties to the agreement.
In this regard, the TTBER lays down a distinction between hardcore restrictions contained in agreements between competitors and those established in agreements between non-competitors, the former being subject to stricter scrutiny.
For example, clauses restricting output will in most cases be considered to be hardcore restrictions in agreements between competitors, but not necessarily so in agreements between non-competitors. In any event, price-fixing clauses are considered to be hardcore restrictions in all technology transfer agreements.
In relation to hardcore restrictions, the TTBER foresees the possibility that the parties to the agreement are not competing undertakings at the time of the conclusion of the agreement but become competitors thereafter. In such cases, the more favourable rules provided for non-competing undertakings shall apply for the full life of the agreement unless the agreement is subsequently amended in any material aspect.
The TTBER lists a number of contractual clauses restrictive of competition which are not exempted, but which do not affect the rest of the agreement which will be deemed exempted.
In particular, these non-exempted clauses include (i) the obligation on the licensee to grant an exclusive license to the licensor in respect of its own severable improvements, and (ii) the obligation on the licensee not to challenge the validity of the licensor’s intellectual property rights.
Where the undertakings party to the agreement are not competing undertakings, the obligations limiting the licensee’s ability to exploit its own technology or limiting the ability of any of the parties to the agreement to carry out research and development, shall not benefit from the block exemption.
Technology transfer agreements which are in force on 30 April 2004 and which enjoy a block exemption under the former Regulation but do not satisfy the conditions for exemption provided for in the TTBER, shall continue to benefit from the block exemption during the period from 1 May 2004 to 31 March 2006.
The texts of the TTBER and the Guidelines are available in http://europa.eu.int/comm/competition/antitrust/legislation/entente3_en.html#licensing
Brussels, 21 April 2004