Grant-back clause

An improvement clause, commonly known as a grant-back clause, is the provision in a licence agreement by which the licensee undertakes to disclose to the licensor the improvements it makes to the licensed technology and to grant it a licence over them, or even to assign ownership of them. It may be reciprocal where the licensor in turn undertakes to let the licensee benefit from its own improvements. It falls within freedom of contract, but its content is governed by EU competition law, under Article 101 of the Treaty on the Functioning of the European Union (TFEU) and the block exemption regulation applicable to technology transfer agreements.

Subject matter of the clause

The clause must carefully define the concept of improvement, which determines its entire scope. The parties usually distinguish between dependent improvements, the exploitation of which requires use of the licensed technology, and severable improvements, which can be exploited without infringing the licensor’s rights. The clause also specifies whether the obligation is a mere disclosure of information or a licence, exclusive or not, royalty-free or paid, and whether it survives the expiry of the contract. Where the improvement is protected by an improvement patent, the clause governs the dependency between the titles.

The competition law framework

The Technology Transfer Block Exemption Regulation, Regulation (EU) No 316/2014, excludes from the benefit of the exemption any obligation on the licensee to grant an exclusive licence to, or to assign in whole or in part to, the licensor or a third party designated by it, its own improvements to, or new applications of, the licensed technology. This excluded restriction does not cause the rest of the agreement to lose the exemption, but it is subject to individual assessment under Article 101 TFEU. An obligation to grant a non-exclusive licence, on the other hand, benefits from the exemption, within the market share thresholds set by the regulation. That regulation expired on 30 April 2026, and agreements concluded or amended since that date must be analysed under its successor instrument.

Risks in practice

An overly broad clause discourages innovation by the licensee and strengthens the licensor’s market position, which explains the vigilance of competition authorities. It may also create ownership conflicts where the improvement results from work carried out with a third party or funded by a public partner. Conversely, an overly narrow clause exposes the licensor to the risk of its licensee developing a competing technology from its own. The interplay with the no-challenge clause and with the provisions on know-how deserves particular attention.

Key points

An improvement clause determines what happens to the improvements made by the licensee to the licensed technology. Its lawfulness depends essentially on whether it is exclusive or non-exclusive and on the extent of the improvements covered. The concept of improvement should be defined precisely, a non-exclusive licence back preferred and the clause checked for compliance with the block exemption regulation applicable on the date the contract was concluded or amended.

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This glossary entry is general in scope and does not constitute legal advice.

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