European Commission consults on new technology licensing rules

European Commission consults on new technology licensing rules


Author: Sarah Livestro

The EC has conducted a consultation on proposed changes to the technology transfer block exemption (TTBE) and accompanying Guidelines, which exempt certain technology licensing agreements from the EU/UK competition law ban on anti-competitive agreements.

The current TTBE is due to expire in April 2014.

EU/UK competition law outlaws anti-competitive agreements between companies. Restrictions in technology licensing agreements - where one party authorises another to use its IP for the production of goods or services - may be caught by this prohibition.

But the TTBE exempts certain technology licensing agreements from the ban, provided that the agreement does not contain any serious (or 'hard core') restrictions of competition and the parties' market shares do not exceed certain thresholds. The current TTBE will expire in 2014 and the Commission has been consulting on what should replace it.

The Commission's view seems to be that the TTBE is working well. It has not proposed any fundamental changes to the current regime, but instead has fined tuned certain provisions. Amongst these are a lower market share threshold for certain licensing agreements between non-competitors and a new test for when the purchasing of raw materials or equipment will fall within the scope of the TTBE.

Particular areas of focus for the Commission appear to be encouraging innovation and preventing misuse of IP rights by licensors.

To encourage innovation, the Commission proposes that all exclusive grant back obligations (those under which the licensee must license its own improvements to the technology back to the licensor on an exclusive basis) should be excluded from the scope of the new TTBE.

This is in contrast to the current regime, where exclusive grant backs of non-severable improvements are block exempted. The implication is that parties will need to decide for themselves whether exclusive grant backs are lawful rather than being able to rely on the TTBE.

The Commission's view is that it is in the general interest for invalid IP rights to be challenged. So the new TTBE will not cover clauses which allow the licensor to terminate the agreement if the licensee brings a challenge alleging that the licensed IP is invalid.

This brings the treatment of termination clauses into line with no-challenge clauses, which prevent the licensee from challenging the IP's validity, and which currently fall outside the safe harbour of the TTBE.

These subtle changes may mirror the Commission's developing decision making practice in other areas of IP, which has seen it take action to end what it views as anti-competitive use of IP by the holders of those rights.

The consultation closed in mid-May and the Commission will now finalise the new TTBE and Guidelines.