Waking up a Sleeping Giant

The European Commission Invites Comments as it Reviews the Current Regime for Technology Transfer Agreements

There hasn’t been much comment or debate around the Transfer of Technology Block Exemption Regulation (TTBER) since it came into force in 2004.  But this is now about to change.  The current TTBER and its accompanying Guidelines on Technology Transfer Agreements (the Guidelines) will expire in 2014.  The European Commission has invited stakeholders to make comments via a questionnaire as a first step in the review process for a new regime.

In essence, the current TTBER determines how the EU competition rules on Cartels and the Abuse of Dominance are applied to technology transfer agreements, which are essentially licensing agreements.  The TTBER covers bilateral agreements between competitors and non-competitors.

Instead of a plethora of admissible clauses, the current TTBER provides a “safe harbour” for all agreements that fall into its scope and meet its conditions.  Any agreements between a licensor and a licensee concerning the exploitation of licensed technology are therefore exempt if the prescribed market share thresholds are not exceeded and the agreement concerned does not contain any “hard core” restrictions, such as restriction on a licensee to freely determine the prices of products produced under license.

The Guidelines provide for the assessment framework for those agreements that do not benefit automatically from the safe harbour, but that could nevertheless be considered acceptable from a competition law perspective.  They elaborate on the rules and concept of the TTBER while also outlining how to deal with multiparty licensing agreements such as patent pools.

When the Commission instituted a review process for the old 1996 regime in 2001 the feedback on the draft regulation and its accompanying guidelines was very critical.  While much of this criticism was taken into consideration in the final document, one of the main issues with the resulting Guidelines was that they created a degree of legal uncertainty for companies.  However, when the regime entered into force, its critics grew quiet, getting used to the idea that Guidelines are not meant to provide an all-encompassing set of rules, but that their application to “real” situations remained the responsibility of the companies themselves.  While most companies have made a significant effort to model their license agreements upon the new regime, the Commission has not actively enforced compliance with the TTBER, although there may have been some behind-the-scenes consultations with parties, notably on patent pools. 

Through its questionnaire, the Commission wants to get a first impression on how the TTBER has been working in practice for the stakeholders and get their ideas on possible enhancements.  Besides general questions such as: the impact the current set of rules has on the stakeholders business, problems raised in relation to the application of the regime, suggestions regarding the clarification of the terminology utilised, or the need to keep a block exemption in this field, the Commission addresses very specific issues such as the list of hard core restrictions and restricted restrictions, and the calculation of relevant market shares.

It will be interesting to see whether the Commission is intending to change its view on technology pools.  In the framework of the Horizontal Guidelines that were published early in 2011, the Commission provided guidance on standard-setting processes.  Increasingly, though, standard-setting processes have been linked to the exploitation of intellectual property rights in the context of technology pools, which suggests that the rules on technology pools may become a focus in this consultation process.

Clearly all stakeholders that have worked with the current set of rules will have a real interest in its improvement and should find it worthwhile to take part in the consultation process.  As experience shows, the Commission is generally receptive to valid arguments that are made by stakeholders.

It is likely that there will be a second consultation when the Commission has formulated its concrete proposals.  However, in order to be involved in the shaping of these proposals and not just in the polishing of them, it is important to submit a completed questionnaire and comments ahead of the 3 February 2012 deadline for the current consultation.