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Articles 81 and 82 of the Treaty of Rome prohibit anti-competitive agreements and abuses of market power. The EU technology transfer regulation 240/96 sets out what restrictions are allowed in patent and know-how licence agreements. Breach leads to fines of up to 10% of worldwide annual group turnover. Clauses breaking the rules are void and the contracts must be changed.
Rights in technology both encourage and stifle competition. A patent entitles the owner to prevent others using the same invention for up to 20 years. Conversely without patent protection innovators could not afford to innovate and competition would be prevented.
EU competition law therefore draws a delicate line between protecting intellectual property rights and ensuring they are used in a pro-competitive manner.
Article 81 of the Treaty of Rome (formerly A85) prohibits anti-competitive agreements which affect trade between EU member states. It will not apply where a licence relates to an area outside the EU though other competition laws may be applicable such as US anti-trust law, which is just as stringent. A81 can apply even to a contract between two companies in the same state if the effects are felt outside.
In the UK from 1.3.00 the UK Competition Act 1998 enacts similar rules which apply whether trade in the EU is affected or not.
Where market shares are under 5% then normally the European Commission, which enforces Article 81, will not intervene and the agreement is not treated as anti-competitive. The Commission's notice on agreements of minor importance provides for this.
Many common commercial agreements contain restrictions which may breach Article 81. Therefore the European Commission has developed a series of block exemption regulations. These regulations provide an exemption from Article 81 but only for agreements which precisely come within the stringent requirements of the exemption regulation.
Typically the exemption regulations set out over several pages lists of restrictions which breach Article 81 but are exempted, those which are permitted in any event and those which are prohibited. No one should draft an agreement in the EU without the relevant exemption regulation to hand. There are currently (6.7.99) regulations of most common use in the following areas:
The regulation most relevant to technology licensing is the technology transfer regulation 240/96. This applies to patent and know-how licences. It exempts restrictions on a licensor appointing other licensees in the licensee's territory and from itself competing there. It also exempts restrictions on the licensee exploiting the technology outside its territory.
The licensee can be restricted from making any sales outside its territory for a maximum period of 5 years from when the technology was first licensed in the EU. Note this is not as long as 5 years from when the licence was granted.
If restrictions beyond those which are permitted are included:
Article 1 of regulation 240/96 exempts exclusivity restrictions but only in so far as they do not last longer than the duration of the licensed patents or for as long as the know-how is secret.
Once the technology has been on the EU market through licensees for more than 5 years, the licensor is not allowed to restrict the licensee from selling outside its territory in response to unsolicited orders. Any restriction of that sort will be banned. Advertising outside the territory can be banned (which presumably would include advertising on a web site).
Article 3 prohibits the following restrictions:
Where the licensed technology is not patents or know-how then the regulation does not apply and there is little guidance from the Commission on the restrictions permitted. Legal advice should be sought. It is possible to notify agreements to the Commission for an individual exemption under Article 81(3). Proposals to reform the notification system were published in 1999.
The EU competition directorate may be accessed at http://www.europa.eu.int/comm/dg04 in all EU languages.
The technology legislation is at http://europa.eu.int/comm/dg04/lawenten/
en/entente3.htm#technology
The technology transfer regulation is at http://www.europa.eu.int/comm/dg04/lawenten/
en/techtft.htm
Lawyers specialised in EU competition law are listed at http://www.chamberandpartners.com
The writer's firm provides legal advice in this field - email essingleton@link.org; tel (+44) (0)20 8866 1934.
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