Anticompetitive agreements and intellectual property licences

Intellectual property licences are agreements between undertakings and, as such, fall within the prohibition of anticompetitive agreements laid down by Article 101 TFEU and by Article L. 420-1 of the French Commercial Code. They are in principle pro-competitive, since they disseminate technology and allow it to be exploited by parties other than the holder. Certain clauses may nevertheless restrict competition between the parties or vis-à-vis third parties and be held void.

The analytical framework

The assessment distinguishes restrictions by object, which in themselves reveal a sufficient degree of harm, from restrictions by effect, which require a market analysis. It also depends on the relationship between the parties, a licence between competitors calling for greater vigilance than a licence between undertakings operating at different levels. The technology transfer block exemption regulation and the Commission guidelines provide the reference framework, and Article 101(3) TFEU allows the individual exemption of an agreement whose efficiency gains benefit users.

Sensitive clauses

Fixing the licensee’s selling prices, allocating markets between competitors and absolute territorial protection, which prohibits any passive sales outside the licensed territory, are among the most serious restrictions. Exclusive grant-back obligations for improvements, no-challenge clauses and royalties calculated on products that do not incorporate the licensed technology call for individual examination. The Court of Justice of the European Union accepts, on the other hand, that an open exclusive licence, which does not prevent parallel imports, may escape the prohibition where it is necessary for the introduction of a new technology.

Sensitive agreements and sanctions

Settlement agreements ending a patent dispute are closely scrutinised where they involve a transfer of value from the holder to the generic manufacturer in exchange for delayed market entry, as in pay-for-delay agreements. Patent pools are permitted where they bring together complementary technologies and remain open, and cross-licences between competitors are examined in the light of their effects on innovation. A clause contrary to Article 101 TFEU is automatically void, and the parties face fines as well as damages actions by injured third parties.

Key points

An intellectual property licence is in principle lawful, but certain clauses may bring it within the scope of the prohibition of anticompetitive agreements. The most dangerous are price fixing, market allocation and absolute territorial protection. Before signing, it should be checked whether the parties are competitors, what their market shares are and whether each clause complies with the block exemption regulation and the guidelines. A clause held void may undermine the entire economic balance of the contract if its severability has not been provided for.

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

Dhenne Avocats handles FRAND licences, standard essential patents and contracts bearing on patents, in advisory work as well as in litigation.

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