Licensing technology

Granting a licence of technology IPR (patent, know-how, software) is not invariably compatible with the EU's competition rules.

Granting a licence of technology IPR (patent, know-how, software) is not invariably compatible with the EU's competition rules.  An argument that the owner of IPR need not license his or her rights at all, and therefore that any licensing of those rights must enhance competition and be compatible with the competition rules, whilst logical, does not reflect the reality of enforcement.  Technology licences are assessed on their own terms.

There is in the EU a safe harbour (or block exemption) for certain types of technology transfer  agreements: that is, a licensing agreement where one party (the licensor) authorises another party or parties (the licensee(s)) to use its technology (patent, know-how, software) for the production of goods and services.  The current block exemption will expire on 30 April 2014 and a new one will come into force on 1 May 2014.

The key provisions/changes to look out for are:

• In the case of non-exclusive licences, no-challenge clauses under which the licensor reserves to itself the right to terminate in the event of a challenge to the validity of a patent by the licensee, no longer fall within the scope of the block exemption.

• Previously, exclusive grant back of improvements benefitted from the block exemption insofar as the improvements were non-severable (i.e. the improvements could not be exploited without infringing the licensor's original rights) but severable improvements did not.  Under the new rules, no distinction is made and provisions for exclusive grant back of improvements will not benefit from the block exemption.

• The previous rule also allowed licensors to confer absolute territorial protection on licensees in certain circumstances.  Under the new rules, licences that include restrictions on passive sales between territories will not be exempt.

In the EU, agreements and licences can move into and out of compliance with the competition rules (with serious consequences for enforceability and potentially investigation) without changes necessarily having been made to the terms.  The new block exemption may have such an effect. 

If you would like to discuss these issues, please do not hesitate to contact us.