New Block Exemption for Technology Transfer Agreements25/08/04 / cata_european-union-news

Article 81(1) EC prohibits all agreements and concerted practices between undertakings and decisions by associations of undertakings which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition. Article 81(3) EC allows to declare provisions of paragraph 1 inapplicable. It provides four conditions that must be met in order to declare the prohibition inapplicable.

The Regulation provides conditions subject to which the prohibition under Article 81(1) EC does not apply to technology transfer agreements. The Regulation is completely revised and replaces its predecessor (Commission Regulation no. 240/96).

The Regulation still covers only technology transfer agreements «between two undertakings». It follows from Article 2 that for licence agreements to be covered by the Regulation they must concern the production of contract products which means that the license must permit the licensee to exploit the licensed technology for production of goods or services. Subject to the duration of the Regulation, the block exemption applies for as long as the licensed property right has not lapsed, expired or been declared invalid.

The block exemption is now subject to market share thresholds (Article 3). In the case of agreements between competitors the market share threshold is 20% and in the case of agreements between non-competitors the market threshold is 30%. The market share on the technology markets is to be calculated on the basis of the sales of the licensor and all his licensees of products incorporating the licensed technology, for each relevant market separately.

The old distinction between white, gray and black listed clauses have been omitted. However, the Regulation provides a narrowed list of hardcore restrictions the inclusion of which in the agreement causes the agreement as a whole, irrespective of the market shares, to be outside of the benefit of the block exemption. In case of competing undertakings, the hardcore restrictions are price fixing, limitation of output, allocation of markets or customers (with exceptions), restriction of the licensee’s ability to exploit its own technology. In the case of non-competing undertakings, the hardcore restrictions are price fixing, restrictions on territory or consumers regarding passive sales (with exceptions) or the restriction of active or passive sales to end users. For a number of hardcore restrictions concerning competing undertakings, the Regulation makes a distinction between reciprocal and non-reciprocal agreements. Generally, hardcore restrictions are applied more strictly to reciprocal agreements.

Article 5 of the Regulation lists certain restrictions that are not block exempted and which, therefore, require individual assessment of their anti-competitive and pro-competitive effects but do not prevent the application of the block exemption to the rest of a given agreement. The obligations to which the block exemption shall not apply concern notably the obligation on the licensee to grant an exclusive license to the licensor in respect of its own severable improvements to or its new applications of the licensed technology, the obligation on the licensee to assign to the licensor rights to its severable improvements to or its new applications of the licensed technology and the obligation on the licensee not to challenge the validity of intellectual property rights held by the licensor in the common market.

Agreements that fall outside the Regulation´s “safe harbour” are not automatically considered illegal, however, they must be assessed individually under Article 81 EC in light of market conditions.

The Commission and the competition authorities of the Member States may withdraw the benefit of the block exemption in respect of individual agreements that do not fulfil the conditions of Article 81(3) EC. According to the guideline, where the withdrawal procedure is applied, the relevant authority bears the burden of proof that the agreement falls within the scope of Article 81(1) EC and does not satisfy the conditions of Article 81(3) EC. The Commission can also exclude from the scope of the Regulation, by means of regulation, parallel networks of similar agreements where these cover more than 50% of a relevant market. The Regulation entered into force on 1 May 2004. All technology transfer agreements must, therefore, immediately conform to this rules, except for licenses existing as of 30 April 2004 which comply with the predecessor regulation no. 240/963 and which must be brought in compliance by 31 March 2006.