Commission consults on technology transfer agreements
The Technology Transfer Block Exemption (TTBER) is a key piece of EU legislation for anyone involved in IP licensing, particularly patents, know-how and software.
The TTBER and Guidelines expire on 30 April 2014 and, on 6 December 2011, the European Commission launched a consultation on how the EU rules governing IP licensing might be revised after that date.
No firm proposals have been put forward as yet. The Commission is in "listening mode" and seeks the views of anyone who has practical experience in applying the TTBER or who deals to a significant extent with technology transfer agreements.
The TTBER determines how EU competition rules apply to licensing agreements for patents, know-how and/or software copyright (note that other forms of copyright licensing, for example media rights, are not covered by the TTBER). It creates a safe harbour for non-problematic technology transfer agreements and the accompanying Guidelines provide detailed guidance on the application of the TTBER and on the principles to be applied when assessing whether licensing agreements might be anti-competitive.
The TTBER came into force in May 2004, replacing the previous Patent and Know-How Block Exemption. Like other recent Commission block exemptions, such as the Block Exemption for Vertical Agreements, the TTBER moved away from the old style of prescribing certain permitted ("white list") clauses, prohibiting certain other clauses ("black list"), whilst neither prohibiting nor specifically permitting certain other clauses ("grey list"), towards a "safe harbour" model based on market share thresholds. Provided the market shares of the parties fall below certain defined thresholds, and provided that there are no hardcore restrictions, the exemption applies. The concept of the grey list remains in the form of certain excluded restrictions relating to grant-back and no-challenge clauses.
At the time of its adoption, concern was expressed that the use of market share thresholds would create legal uncertainty, but at the same time the TTBER and the lengthy accompanying Guidelines provided a clearer statement of the Commission's policy on IP licensing agreements than had ever previously been made available. The Guidelines, in particular, sought to reconcile the tension between IP protection and competition law and recognised the importance of licensing as a way of promoting and disseminating innovations. But the TTBER and Guidelines still imposed constraints on the restrictions that may be placed on licensees, particularly in relation to downstream sales and pricing. An added complication is that there is a more permissive regime for agreements between non-competitors, including a higher market share threshold and fewer controls on sales restrictions, than for agreements between competitors.
The Commission has published a questionnaire for stakeholders to respond to as a first step in the consultation process. Some of the questions are outlined below:
1. Do you consider that the TTBER and Guidelines have proven to be a well-functioning system for assessing technology transfer agreements?
2. Can you give an indication of the impact (positive and negative) of the current competition rules on the business of your company? What would be the impact if there were no TTBER and Guidelines?
3. Please report any problems raised by the application of the TTBER and/or the Guidelines. Please indicate also the sector/broad product group(s) in which such problems were encountered and the type of solution found, if any, to address the problems and results obtained.
4. According to your experience, do you consider that some of the provisions in the current TTBER and/or parts of the Guidelines have become unsatisfactory or need to be updated due to developments that have taken place at the national and European level either generally or in a particular industry?
5. Do you believe that there are any specific competition "issues" related to technology transfer agreements not currently addressed by the current TTBER or Guidelines and that should be considered in the review?
6. Do you consider that there is a need to keep a TTBER in this field or would it be enough to merely give guidance (including relevant safe-harbours) in the Guidelines?
Why does it matter?
The Commission acknowledges that licensing is vital for economic development and consumer welfare but also recognises that licensing agreements can have a stifling effect on competition. The way that IPR holders license their rights to other market participants is crucial for achieving the right balance between stimulating innovation and preserving a level playing field in the internal market.
It is not, however, apparent from its published decisions that the Commission has had much direct experience of applying the TTBER since it was adopted in 2004. This could be a sign either that the legislation is working well or that the Commission has other priorities (or possibly both). Its experience of IP cases in the past decade or so has focused on big cases of abuse of dominance or patent pooling, neither of which are covered by the TTBER. Comments from interested parties and stakeholders will therefore be a key element in framing the Commission's policy in relation to IP licensing agreements for perhaps the next 10 years.
The consultation period closes on 3 February 2012.