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The relationship between intellectual property rights and competition law

1. Introduction2. Licences of Intellectual Property

Rights: Article 813. Transfer Technology Agreements:

Regulation 772/2004

4. The Application of Article 81 to Other Agreements Relating to Intellectual Property Rights

5. Article 82 and Intellectual Property Rights

6. UK Law

� is chapter considers the relationship between intellectual property rights and compe-tition law. AQ er a brief introduction, section 2 of the chapter will deal in general terms with the application of Article 81 to licences of intellectual property rights; section 3 will examine the provisions of Regulation 772/20041, the block exemption for technol-ogy transfer agreements. Section 4 will consider the application of Article 81 to various other agreements concerning intellectual property rights such as technology pools and settlements of litigation. � is will be followed by a section on the possible application of Article 82 to the way in which dominant undertakings exercise their intellectual prop-erty rights, including an examination of the controversial subject of refusals to license intellectual property rights which are sometimes found to be abusive. Section 6 of this chapter will look at the position in UK law.

1. INTRODUCTION

(A) Defi nitionsIt is not possible to deal with the substantive law of intellectual property here in detail2. For present purposes the term ‘intellectual property’ includes patents, registered and

1 OJ [2004] L 123/11.2 For a general account of the law see Torremans and Holyoak Intellectual Property Law (Oxford University

Press, 4th ed, 2005); Cornish and Llewellyn Intellectual Property Law (Sweet & Maxwell, 6th ed, 2007);

CHAPTER CONTENTS

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introduction

unregistered designs, copyrights including computer soQ ware, trade marks and analo-gous rights such as plant breeders’ rights. It should also be taken to include know-how, de! ned for the purpose of the block exemption on technology transfer agreements as ‘a package of non-patented practical information, resulting from experience and testing’: such information must be secret, substantial and identi! ed in a su8 ciently comprehen-sive manner that it is possible to verify that it is secret and substantial3; although not strictly speaking an intellectual property right4, know-how may be extremely valuable and may be sold or ‘licensed’ for considerable amounts of money.

(B) Intellectual property rights and the single marketGenerally speaking intellectual property rights are the product of, and are protected by, national systems of law, although the growth of international commerce has resulted in an increasing measure of international cooperation5. � e existence of di� erent national laws on intellectual property presents particular di8 culties in the European Union in so far as this may be detrimental to the goal of single market integration. � e European Court of Justice developed the ‘exhaustion of rights’ doctrine to prevent an undertaking that has voluntarily placed goods on the market within the European Union from using a national intellectual property right to prevent the free movement of those goods around the Community6; the exhaustion of rights doctrine does not apply to goods placed on the market outside the EU7. Various harmonisation measures have been adopted to reduce the di� erences between di� erent systems of law; an obvious example is the Trade Mark Directive8, implemented in the UK by the Trade Marks Act 1994. � e adoption

Bently and Sherman Intellectual Property Law (Oxford University Press, 2nd ed, 2004); for speci! c discus-sion of the relationship between intellectual property rights and Community competition law see Rothnie Parallel Imports (Sweet & Maxwell, 1993); Tritton Intellectual Property in Europe (Sweet & Maxwell, 2nd ed, 2002); Govaere : e Use and Abuse of Intellectual Property Rights in EC Law (Sweet & Maxwell, 1996); Anderman EC Competition Law and Intellectual Property Rights: : e Regulation of Innovation (Clarendon Press Oxford, 1998); Maher ‘Competition Law and Intellectual Property Rights: Evolving Formalism’ in Craig and De Búrca (eds) : e Evolution of EU Law (Oxford University Press, 1999); Oliver and Jarvis Free Movement of Goods in the European Community (Sweet & Maxwell, 4th ed, 2003); Korah Intellectual Property Rights and the EC Competition Rules (Hart Publishing, 2006); European Competition Law Annual: : e Interaction between Competition Law and Intellectual Property Law (eds Ehlermann and Atanasiu, Hart Publishing, 2007); Faull and Nikpay : e EC Law of Competition (Oxford University Press, 2nd ed, 2007), ch 10; Bellamy and Child European Community Law of Competition (eds Roth and Rose, Oxford University Press, 6th ed, 2007), ch 9; Stothers Parallel Trade in Europe: Intellectual Property, Competition and Regulatory Law (Hart Publishing, 2007).

3 Regulation 772/2004, Article 1(1)(i); the Regulation is considered at pp 771–781 below.4 Know-how is protected by the law of obligations: see generally on con! dential information Cornish and

Llewellyn, ch 8.5 See Cornish and Llewellyn, paras 1.29–1.34.6 See Coates, Kyølbye and Peeperkorn in Faull and Nikpay : e EC Law of Competition (Oxford University

Press, 2nd ed, 2007), paras 10.36–10.49.7 Ibid, paras 10.50–10.54.8 Council Directive 89/104, OJ [1989] L 40/1; see also the Directives on computer soQ ware, Directive

91/250, OJ [1991] L 122/42; on rental rights, Directive 92/100, OJ [1992] L 346/1; on the duration of copyright, Directive 93/98, OJ [1993] L 290/9; on satellite broadcasting and cable transmissions, Directive 93/83, OJ [1993] L 248/15; on databases, Directive 69/9, OJ [1996] L 77/20; on biotechnology, Directive 98/44, OJ [1998] L 213/3; on designs, Directive 98/71, OJ [1998] L 289/28; and on copyright and related rights, Directive 2001/29/EC of the European Parliament and of the Council on the harmonisation of certain aspects of copy-right and related rights in the information society OJ [2001] L 167/10.


intellectual property rights and competition law

of the Community Trade Mark Regulation9 takes matters a step further, by creating an intellectual property right that is itself a creature of Community rather than national law; there is also a Regulation on designs10 and there are plans for a Community Patent Regulation11. Much of this chapter is concerned with the problem that intellectual prop-erty rights may be used in a way that compartmentalises the single market.

(C) Is there an inevitable tension between intellectual property rights and competition law?

� e essential characteristic of intellectual property rights is that they confer upon their owners an exclusive right to behave in a particular way. For example the UK Patents Act 1977 grants the owner of a patent the right to prevent others from producing the patented goods or applying the patented process for a period of 20 years; patents may be granted where a product or process is technically innovative12. A patent does not necessarily make the patentee a monopolist in an economic sense: there may be other products that compete with the subject-matter of the patent; however the patent does a� ord a degree of immunity from the activities of rival ! rms. � e owner of a registered trade mark can prevent anyone else applying that name to goods or services where this would be confusing to consumers.

Because intellectual property rights confer exclusive rights upon their owners on the one hand, whereas competition law strives to keep markets open on the other, it is easy to suppose that there is an inherent tension between these two areas of law and pol-icy13. However it has increasingly been recognised that this is simplistic and wrong14. As paragraph seven of the European Commission’s Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements15 (‘the Technology Transfer Guidelines’) says:

Indeed, both bodies of law share the same basic objective of promoting consumer welfare and an effi cient allocation of resources. Innovation constitutes an essential and dynamic component of an open and competitive market economy.

Clear statements to the same e� ect will be found in an invaluable document issued by the Department of Justice and the Federal Trade Commission in the US in April 2007

9 Regulation 40/94, OJ [1994] L 11/1. 10 Council Regulation 6/2002/EC OJ [2002] L 3/1.11 OJ [2000] C 337 E/278, COM(2000) 412 ! nal, 1 August 2000; the Council has agreed upon a common

political approach for the creation of a Community patent: see Commission Press Release, MEMO/03/47, 3 March 2003.

12 On the law of patents see Cornish and Llewellyn, chs 3–7.13 For general discussion of the relationship between intellectual property and competition law see the

publications cited in n 2 above.14 See eg Tom and Newberg ‘Antitrust and Intellectual Property: From Separate Spheres to Uni! ed Field’

(1997–98) 66 Antitrust Law Journal 167 on the ‘marked reduction in antitrust hostility toward intellectual property’ in the US in the last 50 years; see also Kobak ‘Running the Gauntlet: Antitrust and Intellectual Pitfalls on the Two Sides of the Atlantic’ (1995–96) 64 Antitrust Law Journal 341; Commission’s Evaluation Report on the Transfer of Technology Block Exemption Regulation No 240/96, December 2001, para 29; Report for the European Commission on Multi-Party Licensing (Charles River Associates, April 2003), pp 58–59; Kovacic and Reindl ‘An Interdiscipinary Approach to Improving Competition Policy and Intellectual Property Policy’ (2005) 28 Fordham International Law Journal 1062; Lianos ‘Competition Law and Intellectual Property Rights: Is the Property Rights’ Approach Right?’ Chapter 8 in Cambridge Yearbook of European Legal Studies, eds Bell and Kilpatrick (Oxford: Hart Publishing, 2006).

15 OJ [2004] C 101/2.


licences of intellectual property rights: article

entitled Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition16. It begins with the following very clear statement:

Over the past several decades, antitrust enforcers and the courts have come to recognize that intel-lectual property laws and antitrust laws share the same fundamental goals of enhancing consumer welfare and promoting innovation. This recognition signaled a signifi cant shift from the view that prevailed earlier in the twentieth century, when the goals of antitrust and intellectual property law were viewed as incompatible: intellectual property law’s grant of exclusivity was seen as creating monopolies that were in tension with antitrust law’s attack on monopoly power. Such generaliza-tions are relegated to the past. Modern understanding of these two disciplines is that intellectual property and antitrust laws work in tandem to bring new and better technologies, products, and services to consumers at lower prices.

Many of the issues discussed in this chapter are analysed in the DoJ/FTC document, which will be cited at various points in the text that follows. In the same spirit as that document, the current block exemption in force in the EU for technology transfer agree-ments, Regulation 772/200417, and the accompanying Technology Transfer Guidelines adopt a much less grudging attitude towards such agreements than used to be the case: indeed recital 5 of the Regulation notes that such agreements ‘will usually improve eco-nomic e8 ciency and be pro-competitive’; the same point is made at several points in the Guidelines18. � e complex matter in modern competition policy is to determine at what point, if at all, the exercise of an intellectual property right could be so harmful to consumer welfare that competition law should override the position as it would be on the basis of intellectual property law alone.

2. LICENCES OF INTELLECTUAL PROPERTY RIGHTS: ARTICLE 81

(A) IntroductionA patentee may decide, instead of producing the patented goods or applying the pat-ented process itself, to grant a licence to another ! rm enabling it to do so. � e same may be true of any other intellectual property right. � ere are many reasons why a ! rm may choose to grant a licence. A patentee may lack the resources to produce in quantity; it may wish to limit its own production to a particular geographical area and to grant licences for other territories; or it may wish to apply a patented process for one purpose and to allow licensees to use it for others. A patentee may wish to impose various restric-tions upon its licensees, for example as to the quantity or quality of goods that may be produced or the price at which they may be sold; these provisions relate to the patentee’s own products and so can be restrictive only of intra-technology competition19.

� e argument for controlling restrictions of intra-technology competition in patent licences is weak. Given that a patentee has an exclusive right to produce and sell the patented goods, it is not obvious why it should not be able to impose whatever restric-tions it chooses upon its licensees; the ability to do so is a manifestation of the right con-

16 � is document can be accessed at www.Q c.gov. 17 OJ [2004] L 123/11.18 See eg paras 8, 9, 17 and 146� .19 For discussion of this expression see the Technology Transfer Guidelines, paras 11–12.



ferred by statute. Indeed the grant of a licence can be seen as increasing competition, by introducing a licensee onto the market which, without the licence, would not be there at all; even if the patentee imposes restrictions of intra-technology competition, these are likely to be compensated for by the stimulation of inter-technology competition20. However Article 81(1) has been applied to intra-technology restrictions in patent (and other) licences, in particular where they divide the single market: the ‘single market imperative’ is as inz uential in this area of EC competition law as it is elsewhere21.

Some terms in patent licences may a� ect inter-technology competition: examples are tie-in clauses requiring a licensee to acquire particular technology or products solely from the patentee and non-competition clauses forbidding the licensee to compete or to handle technology or products which compete with the patentee’s: provisions such as these may foreclose the opportunities of other producers. Objection might be taken to terms which are perceived to be an attempt to extend a patentee’s monopoly power beyond the protection a� orded to it by the law and/or which might be considered to be oppressive to a person in a weak bargaining position.

(B) Typical terms in licences of intellectual property rightsIt will facilitate an understanding of the law on licensing agreements to have some knowledge of typical clauses that may be found in them. In the absence of legal con-trols it would be a matter for the parties to the agreement to settle the terms of the licence through the bargaining process. It would be wrong to assume that it is always the patentee that is in the more powerful bargaining position: a patentee may be an individual inventor and his prospective licensee a powerful company, in which case the former’s position may be weak.

(i) Territorial exclusivity22

In EC law territorial exclusivity is the most critical aspect of licensing agreements because of the overriding determination of the Commission and the Community Courts to pre-vent the isolation of national markets. A licensee may consider that the risk involved in exploitation of a patent is that the high level of capital investment required is so great that it would not be worth taking a licence at all unless it is given immunity from intra-technology competition from the licensor, other licensees and their customers: these issues have been discussed already in relation to vertical agreements23. A licensee will oQ en be taking a greater risk than a ‘mere’ distributor, since it has to invest in produc-tion as well as distribution, and so may require more protection against free riders than a distributor needs. � e extent of the exclusivity required will be a calculation for the licensee; the amount actually given, apart from any limiting legal constraints, will be a matter for bargaining between the licensor and licensee.

OQ en the licensor will grant to the licensee an exclusive right to manufacture and sell the goods in a particular territory and agree to refrain from granting similar rights to anyone else there; in this situation the licensor retains the right to produce the goods in the territory itself: this is known as a ‘sole’ licence. A sole licence may be distinguished from an ‘exclusive’ licence, where the licensor also agrees not to produce the goods in the licensee’s territory itself; this of course gives the licensee more protection than in

20 Ibid. 21 See ch 1, pp 22–23 and ch 2, pp 51–52.22 See further the Technology Transfer Guidelines, paras 161–174. 23 See ch 16, pp 616–617.



the case of a sole licence. � e licensee’s position may be further reinforced by the licen-sor agreeing to impose export bans on its other licensees preventing them, or requiring them to prevent their customers, from selling into the licensed territory. Apart from the impos ition of export bans, there are indirect ways of achieving the same end: for example a maximum quantities clause can limit the amount that a licensee can prod-uce to the anticipated level of demand on its domestic market. As we shall see, the mere grant of territorial exclusivity in a licence of an intellectual property right does not necessarily infringe Article 81(1); this will depend on the e� ect that this would have on the market. However, where a licensor grants a licensee absolute territorial protec-tion against any form of intra-technology competition there will almost certainly be an infringement of Article 81(1) and it is unlikely that the terms of Article 81(3) will be satis! ed.

(ii) Royalties24

A licensor will usually require the licensee to pay royalties for use of the patent. � e licensee may be required to make lump-sum payments, and in some situations the par-ties may agree upon a pro! t-sharing scheme. � e licensor may ask for a payment ‘up-front’ before production begins. A licensor may stipulate that the licensee must pay a minimum amount of royalties in a given period in order to encourage it to exploit the patented process.

(iii) DurationA licensor will specify what the duration of the agreement should be. It may decide to grant only a limited licence which will expire before the patent itself, aQ er which it can reconsider its position. On the other hand it may attempt to tie the licensee even aQ er the patent has expired, for example by requiring it to continue to pay royalties or to take licences of newly discovered technology.

(iv) Field of use restrictions25

A common clause is a ‘! eld of use’ restriction whereby a licensor limits the licensee’s authority to produce goods to a particular purpose: a chemical protected by a patent may be useful both medicinally and industrially and the licensee could be limited to production for one purpose only. Field of use clauses are normally seen as a reasonable exploitation of the patentee’s position, although the Commission may object where the restriction appears to be motivated by an intention to divide markets.

(v) Best endeavours and non-competition clauses26

To ensure that the licensee does exploit the patent (and that the patentee receives adequate royalties) the licensee may be required to produce minimum quantities or to use its best endeavours to do so. A non-competition clause, whereby the licensee is for-bidden to compete by using its own or rival technology, may encourage it to concentrate on producing the patented goods, although the tendency of such a clause to foreclose competitors might alarm the competition authorities.

24 See further the Technology Transfer Guidelines, paras 156–160. 25 Ibid, paras 179–185.26 Ibid, paras 196–203.



(vi) No-challenge clauses� e licensor may insist upon a no-challenge clause whereby the licensee agrees not to challenge the validity of the intellectual property right in question. A licensee with intimate knowledge of, say, a patented process may be in the best position to show that it lacks originality, and a licensor may be unwilling to grant a licence at all if it knows that the licensee might undermine its position by successfully applying for the patent to be revoked.

(vii) ImprovementsA licensor may be fearful that the licensee will build upon the knowledge that becomes available from using the patent and emerge as a strong competitor; it may therefore require the licensee to grant back to it any know-how or intellectual property rights acquired and not to grant licences to anyone else. Objection may be taken to this practice if the licensor requires the licensee to grant it exclusive access to such know-how, since this deprives the licensee of the opportunity to pass on the technology to third parties.

(viii) Tying and bundling27

� e licensor may make the licensing of technology conditional upon the licensee tak-ing a licence for another technology or purchasing a product from the licensor or a designated third party; or may bundle two technologies or a technology and a product together. � ese practices are capable of foreclosing access to the market, but may also lead to economic e8 ciencies.

(ix) Prices, terms and conditions� e licensor may wish to ! x the prices at which the licensee sells or the terms and con-ditions on which it does so. � e Commission, however, takes the view that the licensee should be free to determine its own policy when it brings the patented products to the market.

(C) The application of Article 81(1) to licences of intellectual property rights28

(i) The Commission’s evolving policy in relation to patent licences in the 1960s and 1970s

In the early 1960s the Commission took the view that most provisions in patent licences did not infringe Article 81(1) at all, since restrictions of intra-brand competition simply

27 Ibid, paras 191–195.28 See the Technology Transfer Guidelines, paras 10–17 and paras 130� ; on the position in the US see the

Antitrust Guidelines for the Licensing of Intellectual Property of the Department of Justice and Federal Trade Commission of 6 April 1995, available at www.usdoj.gov/atr/public/guidelines/ipguide.htm; the Guidelines state at para 2.0 that there is no presumption that intellectual property creates market power and they also say that licences of intellectual property rights are generally pro-competitive; the approach in the 1995 Antitrust Guidelines, which suggests that terms in licences should be subject to a rule of reason stand-ard rather than ‘bright line’ per se legality or illegality, was endorsed by the DoJ/FTC report on Antitrust Enforcement and Intellectual Property Rights of April 2007: see in particular chapter 4 of the report.



emanate from the exclusive right of the patentee. � e Commission’s Notice on Patent Licensing Agreements29 of 1962 rez ected this approach. However the Commission’s abstentionist view began to alter towards the end of the decade; the change can be traced back to the judgment of the ECJ in Consten and Grundig v Commission30. � ere the ECJ established that vertical agreements could fall within Article 81(1) and, of particular importance in this context, that the use of intellectual property rights could contribute to an infringement where it enabled a distributor to enjoy absolute territorial protection in its allotted territory; in Consten and Grundig it was the assignment to Consten of the GINT trade mark for France that enabled Consten to repel parallel imports from other Member States31. � e distinction drawn by the ECJ in this case – between the exist-ence of an intellectual property right on the one hand and its improper exercise on the other – provided the foundation of much of the law in this area including, in particular, the exhaustion of rights doctrine.

In a series of decisions from the early 1970s the Commission applied Article 81(1) to various clauses found in patent licences, and in particular to territorial restric-tions, although in some cases it was prepared to grant individual exemption under Article 81(3)32. In a series of block exemptions, beginning with Regulation 2349/84 in 198433 up until Regulation 240/96 in 199634, the Commission maintained a fairly for-malistic approach to the application of Article 81(1), applying that provision to a wide variety of contractual restrictions but then exempting them according to the terms of the relevant Regulation. � e latest block exemption, Regulation 772/2004, is noticeably less formalistic and, in conjunction with the Technology Transfer Guidelines, provides a more benign legal environment for the transfer of technology. � e Technology Transfer Guidelines explain both the ways in which licences of technology containing restrictive terms may have negative35 and positive36 e� ects on competition.

(ii) Territorial exclusivity and the Maize Seeds caseIn many of the decisions referred to above the Commission held that manufacturing and sales licences granting territorial exclusivity to the licensee infringed Article 81(1); it also considered that export bans and provisions having similar e� ects such as max-imum quantities clauses were caught. Having concluded that many patent licences were caught by Article 81(1), the Commission proceeded to grant them block exemption.

29 JO [1962] 2922; this Notice was withdrawn in 1984, OJ [1984] C 220/14.30 Cases 56/84 and 58/64 [1966] ECR 299, [1966] CMLR 418; for discussion of this case see ch 3, pp 124–125;

on the Commission’s change of policy see Anderman, ch 5.31 See ch 3, pp 124–125.32 In chronological order the Commission’s decisions on patent licences are Burroughs AG and Deplanque

& Fils Agreement OJ [1972] L 13/50, [1972] CMLR D67; Burroughs AG and Geha-Werke GmbH Contract OJ [1972] L 13/53, [1972] CMLR D72; Davidson Rubber Co Agreements OJ [1972] L 143/31, [1972] CMLR D52; Raymond and Nagoya Rubber Ltd Agreement OJ [1972] L 143/39, [1972] CMLR D45; Kabelmetal/Luchaire OJ [1975] L 222/ 34, [1975] 2 CMLR D40; Zuid-Nederlandsche Bronbemaling en Grondboringen BV v Heidemaatschappij Beheer NV OJ [1975] L 249/27, [1975] 2 CMLR D67; AOIP v Beyrard OJ [1976] L 6/8, [1976] 1 CMLR D14; Vaessen BV v Moris OJ [1979] L 19/32, [1979] 1 CMLR 511; IMA AG WindsurI ng International Inc OJ [1983] L 229/1, [1984] 1 CMLR 1, upheld on appeal Case 193/83 WindsurI ng International Inc v Commission [1986] ECR 611, [1986] 3 CMLR 489; Velcro/Aplix OJ [1985] L 233/22, [1989] 4 CMLR 157; the Commission has reached decisions on other types of licences in which it has applied similar principles: see below.

33 OJ [1984] L 219/15. 34 OJ [1996] L 31/2, [1996] 4 CMLR 405.35 Technology transfer agreements, paras 141–145. 36 Ibid, paras 146–152.



However, as we have seen in chapter 3, Article 81(1) applies only to agreements ‘which have as their object or e� ect the prevention, restriction or distortion of competition’37. It was explained there that the mere grant of exclusive territorial rights does not have as its object the restriction of competition38; such cases infringe Article 81(1), there-fore, only where they can be shown to have appreciable e� ects on competition39 and on trade between Member States40. � e reason for the strict treatment of the agreement in Consten and Grundig v Commission was that it went beyond the mere grant of exclusive distribution rights in France by conferring upon Consten absolute territorial protection against parallel imports from other Member States. � e application of Article 81(1) to territorial exclusivity in licence agreements follows the same contours.

� e ! rst case on the licensing of intellectual property rights to come before the ECJ was Nungesser v Commission41 (oQ en referred to as the Maize Seeds case). One issue for the ECJ was whether an exclusive licence of plant breeders’ rights42 by its very nature infringed Article 81(1): in other words, whether such agreements had as their object the restriction of competition43. � e ECJ distinguished between an ‘open exclusive licence’, whereby a licensor agrees not to license anyone else in the licensee’s territory, and not to compete there itself; and an exclusive licence which confers absolute territorial pro-tection, so that all competition from third parties is eliminated44. � is, of course, is the di� erence between the facts of Société Technique Miniere v Maschinenbau Ulm45 and Consten and Grundig v Commission. As to the open exclusive licence, the ECJ noted that a licensee of new technology might be deterred from accepting the risk of cultivating and marketing a new product unless it knew that it would not encounter competition from other licensees in its territory46. It followed that an open licence which does not a� ect the position of third parties such as parallel importers does not have as its object the restriction of competition; a detailed analysis would be required to determine the e� ects of the agreement47. Absolute territorial protection however would automatically be caught by Article 81(1)48 and was not eligible for exemption under Article 81(3)49.

� e Maize Seeds judgment meant that open exclusivity did not necessarily infringe Article 81(1); in particular where the licensee was accepting risk and marketing a new product the licence would not be caught. However in the years following the Maize Seeds judgment the Commission adopted a narrow approach to its application. For example in Velcro/Aplix50 it held that although the doctrine may have applied to the licence in that case in its early years, when the technology in question was novel, this

37 See ch 3, pp 116 � .38 See ch 3, p 124; see in particular the discussion of Case 56/65 Société Technique Minière v Maschinenbau

Ulm [1966] ECR 235, [1966] CMLR 357.39 On the de minimis doctrine see ch 3, pp 137–142.40 On the requirement for an appreciable e� ect on trade between Member States see ch 3, pp 142–146.41 Case 258/78 [1982] ECR 2015, [1983] 1 CMLR 278. 42 Plant breeders’ rights are analogous to patents.43 See ch 3, pp 119–122 for a discussion of agreements that have as their object the restriction of

competition.44 Case 258/78 [1982] ECR 2015, [1983] 1 CMLR 278, para 53.45 Case 56/65 [1966] ECR 235, [1966] CMLR 357.46 Case 258/78 [1982] ECR 2015, [1983] 1 CMLR 278, para 57. 47 Ibid, para 58.48 Ibid, paras 60–63.49 Ibid, paras 68–79; note that in the Coditel case even absolute territorial protection was found not to

infringe Article 81(1) in the case of a performing copyright: see p 765 below.50 OJ [1985] L 233/22, [1989] 4 CMLR 157, paras 43, 44 and 60.



was no longer the case by the time of the decision. In Tetra Pak I (BTG Licence)51 the Commission held that the doctrine was not applicable where an undertaking in a dom-inant position took over important technology: a dominant ! rm did not bear the same commercial and technical risks as a smaller undertaking and was not subject to strong inter-brand competition which might justify immunity from intra-brand competition. In Delta Chemie/DDD Ltd52, a decision on a licence of know-how rather than a patent, the Commission again concluded that the technology in question did not bene! t from the Maize Seeds doctrine53. � is reluctance on the part of the Commission to conclude that territorial exclusivity did not restrict competition was consistent with its formal-istic approach at the time towards vertical agreements54. � e Commission did acknow-ledge the Maize Seeds doctrine in recital 10 of the (now repealed) block exemption on technology transfer agreements, Regulation 240/96, but one suspects with no great enthusiasm; its preferred way of dealing with licences at the time was to exempt under Article 81(3) rather than to grant negative clearance under Article 81(1).

(iii) The case law of the Community Courts on territorial exclusivity after Maize Seeds

In chapter 3 we have seen that the ECJ has, in a number of judgments, refrained from concluding too readily that agreements containing contractual restrictions necessarily restrict competition: these two ideas should not be confused with one another55. Some agreements – for example to ! x prices or to share markets – are so obviously reprehen-sible that they are considered to have as their object the restriction of competition56; other agreements, however, infringe Article 81(1) only where it can be demonstrated that they will produce appreciable anti-competitive e� ects on the market57. In various judgments since Maize Seeds the ECJ has concluded that provisions involving territorial exclusivity did not infringe Article 81(1). In Coditel v Ciné Vog Films58 the ECJ acknow-ledged that, in the special circumstances of a performance copyright, a licensee may need absolute territorial protection from re-transmissions of ! lms from neighbouring Member States. In Louis Erauw-Jacquery Sprl v La Hesbignonne Société59 the ECJ held that a prohibition on the export of so-called ‘basic seeds’ did not infringe Article 81(1), but rather was a manifestation of Erauw-Jacquery’s plant breeders’ rights and neces-sary for their protection60. In Pronuptia de Paris v Schillgalis61 the ECJ suggested that the grant of exclusive territorial rights to a franchisee for a particular territory might not infringe Article 81(1) where the business name or symbol of the franchise was not well-known62.

Collectively these cases demonstrate that it is wrong to assume that all territorial exclusivity in licences of intellectual property rights infringes Article 81(1); a more

51 OJ [1988] L 272/27, [1990] 4 CMLR 47, upheld on appeal Case T-51/89 Tetra Pak Rausing SA v Commission [1990] ECR II-309, [1991] 4 CMLR 334.

52 OJ [1988] L 309/34, [1989] 4 CMLR 535, para 23.53 See also Knoll/Hille-Form XIIIth Report on Competition Policy (1983), points 142–146.54 For criticism of the Commission’s historical position towards vertical agreements see ch 16, p 639.55 See ch 3, pp 124–126. 56 See ch 3, pp 119–122. 57 See ch 3, pp 122 � .58 Case 262/81 [1982] ECR 3381, [1983] 1 CMLR 49.59 Case 27/87 [1988] ECR 1919, [1988] 4 CMLR 576.60 See p 769 below. 61 Case 161/84 [1986] ECR 353, [1986] 1 CMLR 414.62 [1986] ECR 353, [1986] 1 CMLR 414, para 24.



nuanced approach is required than this, and even absolute territorial protection and export bans may be justi! ed in particular circumstances.

(iv) Non-territorial restrictions caught by Article 81(1)� e Commission’s decisions have sometimes applied Article 81(1) to non-territorial restrictions in licences of intellectual property rights, as have some judgments of the Community Courts, in particular the judgment of the ECJ in WindsurI ng International Inc v Commission63. � e treatment of non-territorial restrictions will be considered below in the context of Articles 4 and 5 of Regulation 772/200464.

(v) Know-how licences� e Commission applied the principles that it had developed in its decisions on patent licences to licences of know-how65. � is culminated in the adoption of Regulation 556/8966 granting block exemption to know-how licences. As was noted at the beginning of this chapter, know-how is not an intellectual property right as such: it is protected by the law of obligations. An anxiety for the Commission was that spurious claims to exclusivity might be made for agreements that do not in practice have an enhancing e� ect on economic e8 ciency; this is why successive block exemption regulations have stipulated that know-how must be secret and substantial67. In practice the licensing of know-how is as important and as common as patent licensing, so that the extension of the protection of block exemption to this category of agreements was important for industry.

(vi) Copyright licences� ere is not a great deal of authority speci! cally on the application of Article 81(1) or Article 81(3) to copyright licences. As we have seen, the ECJ held that absolute territor-ial protection was not contrary to Article 81(1) in the speci! c context of a performance copyright in Coditel v Ciné Vog Films68.

� e Commission has taken action in relation to copyright licences on a few occa-sions and in doing so it has applied the principles developed in relation to patent and know-how licences. In Neilson-Hordell/Reichmark69 the Commission gave details of its objections to clauses in a licence of technical drawings and the products they represent; in particular it required the abandonment of a no-challenge clause, a royalties clause extending to products not protected by any copyright of the licensor, a non-competition clause which was to continue aQ er the agreement and an exclusive grant-back to the

63 Case 193/83 [1986] ECR 611, [1986] 3 CMLR 489. 64 See pp 776–780 below.65 In chronological order the Commission’s decisions on know-how licences are Boussois/Interpane OJ

[1987] L 50/30, [1988] 4 CMLR 124; Mitchell Cotts/SoI ltra OJ [1987] L 41/ 31, [1988] 4 CMLR 111; Rich Products/Jus-Rol OJ [1988] L 69/21, [1988] 4 CMLR 527; Delta Chemie/DDD Ltd OJ [1988] L 309/34, [1989] 4 CMLR 535; see also ICL/Fujitsu XVIth Report on Competition Policy (1986), point 72 (case dealt with by comfort letter).

66 Corrected version at OJ [1990] L 257/15; this Regulation was replaced by Regulation 240/96, which in turn has been replaced by Regulation 772/2004: see pp 771–781 below.

67 See now Regulation 772/2004, Article 1(1)(i).68 Case 262/81 [1982] ECR 3381, [1983] 1 CMLR 49; see p 765 above.69 Commission’s XIIth Annual Report on Competition Policy (1982), points 88–89.



licensor of the improvements. In Ernest Benn Ltd70 the Commission took objection to a standard contractual term which prevented the export of books from the UK. In Knoll/Hille-Form71 the Commission intervened in the case of an exclusive licence of a design right relating to furniture and closed its ! le aQ er the parties agreed to remove export bans and to allow direct sales into each other’s territories.

In Film Purchases by German Television Stations72 the Commission investigated exclusive licence agreements entered into between MGM/UA, a major US ! lm produc-tion and distribution company, and ARD, an association of public broadcasting organ-isations in Germany. � e agreements granted ARD exclusive television rights to a large number of MGM/UA’s feature ! lms, including 14 James Bond ! lms, in most cases for a period of 15 years. � e Commission’s view was that the agreements restricted compe-tition, in particular because of the large number of the licensed rights and the duration of the exclusivity73. However the Commission decided that the criteria of Article 81(3) were satis! ed following modi! cations to the agreements, for example so that ARD would license the ! lms to third parties at certain periods known as ‘windows’.

� ere is no speci! c block exemption for copyright licences, although it may be pos-sible to take the bene! t of Regulation 2790/99 on vertical agreements or of Regulation 772/2004 on technology transfer agreements where the licensing of copyright is ancil-lary to an agreement covered by one of those Regulations74.

(vii) Software licences75

In the case of Sega and Nintendo76 the Commission required the deletion of clauses in licences of computer soQ ware with publishers of video games which, in the Commission’s view, enabled Sega and Nintendo to control the market for video games; this interven-tion followed the Competition Commission’s investigation of Video Games in the UK77. In the Microso@ Internet Explorer78 case the Commission required MicrosoQ to remove clauses from its soQ ware licences providing for minimum distribution volumes for its Internet Explorer browser technology and imposing a prohibition on advertising com-petitors’ browser technology. A minimum quantities clause is normally considered not to be restrictive of competition at all; the Commission’s concern here, however, was that the two clauses in question could have a foreclosure e� ect on competitors. A comfort letter was sent aQ er these amendments had been made; the Commission did not give a

70 Commission’s IXth Report on Competition Policy (1979), points 118 and 119; see also : e Old Man and the Sea VIth Report on Competition Policy (1976), point 164; STEMRA XIth Report on Competition Policy (1981), point 98.

71 Commission’s XIIth Report on Competition Policy (1983), points 142–146.72 OJ [1989] L 284/36, [1990] 4 CMLR 841; the decision is criticised by Rothnie ‘Commission Re-runs

Same Old Bill’ (1990) 12 EIPR 72.73 OJ [1989] L 284/36, [1990] 4 CMLR 841, paras 41–46. 74 See p 772 below.75 See Forrester ‘SoQ ware Licensing in the Light of Current EC Competition Law Considerations’ (1992)

13 ECLR 5; Darbyshire ‘Computer Programs and Competition Policy: A Block Exemption for SoQ ware Licensing?’ (1994) 16 EIPR 374.

76 See the Commission’s XXVIIth Report on Competition Policy (1997), point 80 and pp 148–149; see also, on the similar Sony case, the XXVIIIth Report on Competition Policy (1998), pp 159–160.

77 Cm 2781 (1995).78 See the Commission’s XXIXth Report on Competition Policy (1999), points 55 and 56 and p 162: details

of MicrosoQ ’s noti! cation in this case can be found at OJ [1998] C 175/3; for a separate investigation of MicrosoQ ’s licensing terms, following a complaint by Santa Cruz Operation in relation to the UNIX operat-ing system, see the Commission’s XXVIIth Report on Competition Policy (1997), point 79 and pp 140–141.



ruling on whether MicrosoQ ’s behaviour overall might amount to an abuse of a dom-inant position79. MicrosoQ ’s refusal to make interoperability information, assumed to be protected by intellectual property rights, available to third party competitors was found to be an abuse of a dominant position in March 200480.

� ere are some typical clauses in soQ ware licences which have no analogies in the general law, for example prohibiting decompilation of a computer programme and restrictions on copying81. SoQ ware licences are now covered by the Technology Transfer Regulation82.

(viii) Trade mark licences83

� e Commission has applied Article 81(1) to exclusive trade mark licences but decided that the criteria of Article 81(3) were satis! ed by applying principles derived from the block exemptions for vertical agreements. In Davide CampariMilano SpA Agreement84 the Commission considered that Article 81(3) applied in the case of a standard form of agreement whereby ! rms were licensed to use the Campari trade mark and were given exclusive rights in their own territory to apply that mark and required not to pursue an active sales policy elsewhere.

In Moosehead/Whitbread85 an exclusive licence of a trade mark with associated know-how was investigated by the Commission. � e licensee wished to manufacture and to promote the Moosehead brand, a popular Canadian beer, in the UK. � e licence prohibited active selling outside the UK. � e Commission concluded that the exclu-sive trade mark and the restriction on active sales infringed Article 81(1), as did a non-competition clause86. � e know-how was considered by the Commission to be ancillary to the trade mark, so that the block exemption for know-how licensing in force at that time, Regulation 556/89, was not applicable87; presumably the same conclusion would be reached under Regulation 772/200488. However the Commission granted an individ-ual exemption as consumers would have the advantage of another beer from which to choose89. � e agreement contained a no-challenge clause in respect of the trade mark, but the Commission held this to be outside Article 81(1) because the mark was not well-known and its non-availability to competitors was not a barrier to entry90.

Where a trade mark is ancillary to a vertical agreement or to a technology transfer agreement, it may bene! t from the block exemption conferred by Regulation 2790/99 or Regulation 772/200491.

79 Commission’s XXIXth Report on Competition Policy (1999), point 56. 80 See pp 790–792 below.81 It may be arguable that, by analogy from the Erauw-Jacquery judgment on the propogation of seeds, a

restriction on copying soQ ware is outside Article 81(1).82 See p 772 below.83 See Joliet ‘Territorial and Exclusive Trade Mark Licensing under the EC Law of Competition’ [1984]

IIC 21.84 OJ [1978] L 70/69, [1978] 2 CMLR 397; see similarly Goodyear Italiana SpA’s Application OJ [1975] L

38/10, [1975] 1 CMLR D31.85 OJ [1990] L 100/32, [1991] 4 CMLR 391; see Subiotto ‘Moosebead/Whitebread: Industrial Franchises

and No-challenge Clauses Relating to Licensed Trade Marks in the EEC (1990) 11 ECLR 226.86 OJ [1990] L 100/32, [1991] 4 CMLR 391, para 15(1).87 Ibid, para 16(1); a corrected version of Regulation 556/89 will be found at OJ [1990] L 257/15.88 See p 772 below. 89 OJ [1990] L 100/32, [1991] 4 CMLR 391, para 15(2).90 Ibid, para 15(4). 91 See p 772 below.



(ix) Licences of plant breeders’ rightsAs we have seen in Nungesser v Commission92 the ECJ held that an open exclusive licence to produce maize seeds did not infringe Article 81(1) where exclusivity was required to protect the investment of the licensee; the Court also considered that absolute terri-torial protection would infringe Article 81(1) and would be ineligible for exemption under Article 81(3). In Louis Erauw-Jacquery Sprl v La Hesbignonne Société93 the ECJ was asked to rule on the application of Article 81(1) to two clauses in a licence for the propagation and sale of certain varieties of cereal seeds. Erauw-Jacquery had licensed La Hesbignonne to propagate ‘basic seeds’ and to sell seeds reproduced from them (‘reproductive seeds’). Clause 2(f) of the licence prohibited the export of basic seeds; clause 2(i) required the licensee not to resell the reproductive seeds below minimum selling prices. � e ECJ’s view was that the export ban in relation to basic seeds did not infringe Article 81(1): a plant breeder is entitled to reserve the propagation of basic seeds to institutions approved by him and an export ban is objectively justi! able to protect this right94. Basic seeds are not intended for sale to farmers for sowing, but are intended solely for the purpose of propagation; it follows that an export ban of this kind arises from the existence of the plant breeders’ rights and is not an improper exercise of it95. � e ECJ concluded that the provision on minimum pricing for reproductive seeds had as its object and e� ect the restriction of competition96 but that the national court must decide on the facts whether it had an e� ect on trade between Member States97.

In Sicasov98 the Commission applied the ECJ’s judgment in the Erauw-Jacquery case to the standard licences of Sicasov, a French cooperative of plant breeders. � e Commission explains in more detail than the judgment in Erauw-Jacquery the distinc-tion between basic seeds, which are intended only for propagation, and ‘certi! ed’ seeds, intended for sale to farmers for sowing99. � e breeder is entitled to control the destin-ation of basic seeds by virtue of its plant breeders’ rights100, but cannot control certi! ed seeds that have been put onto the market with its consent101. It followed that obligations not to entrust basic seeds to a third party, not to export them and related provisions did not infringe Article 81(1)102. However a restriction on the export of certi! ed seeds did infringe Article 81(1)103 but was found to satisfy the terms of Article 81(3)104.

In Roses105 the Commission condemned two clauses in a standard licence of plant breeders’ rights. � e ! rst was an exclusive grant-back clause, which e� ectively removed the sub-licensee from the market for mutations which it discovered. � e second was a no-challenge clause: the fact that plant breeders’ rights are conferred only aQ er a

92 Case 258/78 [1982] ECR 2015, [1983] 1 CMLR 278. 93 Case 27/87 [1988] ECR 1919, [1988] 4 CMLR 576. 94 Ibid, para 10.95 � is was the view of Advocate General Mischo in this case, and of the Commission: [1988] ECR 1919,

[1988] 4 CMLR 576, para 9.96 [1988] ECR 1919, [1988] 4 CMLR 576, para 15. 97 Ibid, para 19.98 OJ [1999] L 4/27, [1999] 4 CMLR 192. 99 Ibid, paras 21–27.

100 Ibid, para 50, citing Erauw-Jacquery. 101 Ibid, para 51. 102 Ibid, paras 53–61.103 Ibid, paras 62–64.104 Ibid, paras 73–77; note that Regulation 240/96 on technology transfer agreements did not apply

since the standard licence did not correspond with any of the provisions listed in Article 1(1) thereof: ibid, para 72.

105 OJ [1985] L 369/9, [1988] 4 CMLR 193; see Harding ‘Commission Decision on Breeders’ Rights in Relation to Roses: Hard Line on Breeders’ Rights Maintained’ (1986) 9 EIPR 284.



national authority’s involvement does not mean that there might not have been an error of appreciation that could be challenged by a licensee.

(x) Sub-contracting agreementsSub-contracting agreements typically involve a licence from the principal to the sub-contractor. Horizontal sub-contracting agreements have been considered in chapter 15 and vertical ones in chapter 16106.

(D) The application of Article 81(3) to licences of intellectual property rights107

Licensing agreements which are not covered by Regulation 772/2004 and which con-tain provisions which are not ancillary to an agreement covered by that Regulation or by Regulation 2790/99 on vertical agreements108 may still ful! l the conditions of Article 81(3). With the entry into force of the Modernisation Regulation the system of notifying agreements to the Commission for individual exemption has ceased to exist. Instead, ! rms must assess the validity of their licences under the competition rules for themselves. When doing so they will derive guidance from the Commission’s block exemptions. � e Commission has said that the restrictions listed as ‘hard core’ in Article 4 of the Technology Transfer Regulation would be likely to satisfy the criteria of Article 81(3) only in exceptional circumstances109; however it also says that there is no presumption that agreements that fall outside the block exemption are caught by Article 81(1) or fail to satisfy the terms of Article 81(3)110.

In Telenor/Canal+/Canal Digital111 the Commission decided that the criteria of Article 81(3) were satis! ed and therefore permitted for ! ve years agreements concerning the distribution of pay-TV premium content channels on the satellite platform of Canal Digital in the Nordic region. � e agreements involved in this case concerned the licens-ing of material protected by artistic copyright, and fell outside the block exemption for vertical agreements because the licences were not ancillary to a vertical agreement in the sense of Article 2(3) of that Regulation112. Similarly the licences were not ancil-lary to a technology transfer agreement, as artistic copyright is not regarded as techno-logical. � e interesting issue raised by a case such as this is whether a licence is more analogous to a vertical agreement or to a transfer of technology: this will determine whether the principles of Regulation 2790/99 or Regulation 772/2004 provide better guidance for ! rms having to conduct a self-assessment under Article 81(3). As a general proposition Regulation 772/2004 permits more restrictions than Regulation 2790/99: for example the former allows (limited) restrictions on passive sales which the latter does not.

106 See ch 15, p 558 and ch 16, pp 666–667.107 See the Technology Transfer Guidelines, para 18 and paras 130� .108 On ancillary provisions see p 772 below. 109 Technology Transfer Guidelines, para 18.110 Ibid, para 37. 111 Commission decision of 29 December 2003. 112 See ch 16, p 647.


transfer technology agreements: regulation /

3. TRANSFER TECHNOLOGY AGREEMENTS: REGULATION 772/2004

Acting under powers conferred on it by Council Regulation 19/65113 the Commission has adopted Regulation 772/2004114 conferring block exemption on technology trans-fer agreements pursuant to Article 81(3) of the Treaty. Regulation 772/2004 replaced Regulation 240/96115. � e adoption of Regulation 772/2004 followed the publication by the Commission in December 2001 of an Evaluation Report116 on the previous block exemp-tion, which was followed by a public debate which was generally in favour of reform of the law. � e Commission recognises in the recitals of Regulation 772/2004 that technology transfer agreements usually improve economic e8 ciency and are pro-competitive, but notes that this depends on the degree of market power that the parties have or, to put the point another way, the extent to which they face competition from undertakings owning substitute technologies or undertakings producing substitute products117.

� e Commission adopted Regulation 772/2004 on 27 April 2004. It entered into force on 1 May 2004 and will expire on 30 April 2014118. Regulation 772/2004, the for-mat of which is similar to Regulation 2790/99 on vertical agreements, consists of 20 recitals and 11 Articles. Article 1 contains a series of de! nitions. Article 2 confers block exemption on certain technology transfer agreements. Article 3 imposes market share caps, which di� er depending on whether an agreement is horizontal or vertical, the former being treated more strictly. Article 4 contains a list of hard-core restrictions, the inclusion of which in an agreement will prevent the block exemption from applying: the list is stricter for horizontal than for vertical agreements. Article 5 sets out cer-tain restrictions that are not block exempted, but which do not prevent the application of the Regulation to the rest of the agreement. Articles 6 and 7 provide for the block exemption to be withdrawn from agreements in certain circumstances. Subsequent provisions deal with matters such as the calculation of market share thresholds and transitional arrangements. Regulation 772/2004 should be read in conjunction with the Commission’s Technology Transfer Guidelines.

(A) Article 1: defi nitionsArticle 1 of the Regulation contains a series of de! nitions. Some of these will be explained in the text that follows, in the speci! c context in which they are used in the

113 JO [1965] 533, OJ Sp Ed [1965–66] 87.114 OJ [2004] L 123/11; see the speech of the Commissioner for Competition describing the main fea-

tures of the new block exemption: SPEECH/04/19, 16 January 2004; for detailed commentary on Regulation 772/2004 see Dolmans and Piilola ‘� e New Technology Transfer Block Exemption: A Welcome Reform AQ er All’ (2003) 27(3) World Competition 351; Anderman and Kallaugher Technology and the New EU Competition Rules: Intellectual Property Licensing a@ er Modernisation (Oxford University Press, 2006); Korah Intellectual Property Rights and the EC Competition Rules (Hart Publishing, 2006); Coates, Kyølbye and Peeperkorn in Faull and Nikpay : e EC Law of Competition (Oxford University Press, 2nd ed, 2007), paras 10.58–10.125.

115 OJ [1996] L 31/2, [1996] 4 CMLR 405.116 COM(2001)786 ! nal, available at www.europa.eu.int/comm/competition/antitrust/technology_

transfer.117 Regulation 772/2004, recitals 5 and 6. 118 Ibid, Article 11.



Regulation. Of particular importance is Article 1(1)(b), which de! nes what is meant by a technology transfer agreement. � is term includes licences119 of:

Patents• 120

Know-how, meaning a package of non-patented information that is secret, substantial and • identi! ed121

SoQ ware copyright• 122

A mixture of patents, know-how and soQ ware copyright• Provisions in a technology agreement that do not constitute the primary objective of such • agreements, but are directly related to the application of the licensed technology (sometimes referred to as ‘ancillary provisions’)123.

Recital 7 of the Regulation explains that it applies only to agreements whereby a licen-sor permits a licensee to exploit the licensed technology for the production of goods or services: it therefore does not apply to an agreement that sub-contracts research and development to another party, since in that case the sub-contractor, to whom some technology may be transferred by the principal, will not exploit the technology itself124. Recital 7 also explains that the Regulation does not apply to technology pools125.

Article 1(2) of the Regulation explains that the terms ‘undertaking’, ‘licensor’, and ‘licensee’ include ‘connected undertakings’, as de! ned therein.

(B) Article 2: exemptionArticle 2 of the Regulation confers block exemption on certain technology transfer agreements pursuant to Article 81(3) of the Treaty. It provides that, subject to the provi-sions of the Regulation, Article 81(1) shall not apply:

to technology transfer agreements entered into between two undertakings permitting the pro-duction of contract products126.

Several points should be noted about Article 2(1).

119 � e Regulation can also apply to assignments where part of the risk associated with the exploita-tion of the technology remains with the assignor: ibid, Article 1(1)(b); and the Regulation can apply to sub-licensing whereby a licensee, with authority of the licensor, sub-licences to a third party for the exploi-tation of the technology: Technology Transfer Guidelines, para 48; the Regulation does not apply to a ‘master licence’ where sub-licensing is the primary object of the agreement: ibid, para 42.

120 � e term patents includes numerous rights, including utility models, designs, topographies of semi-conductor products, supplementary protection certi! cates for medicinal products and plant breeder’s rights: ibid, Article 1(1)(h).

121 Ibid, Article 1(1)(i); see also the Technology Transfer Guidelines, para 47.122 Note that copyright, other than soQ ware copyright, would not be included in this term, although

the Commission will as a general rule apply the principles set out in the Regulation to copyright licences: Technology Transfer Guidelines, para 51, although not necessarily in the case of performance copyright: ibid, para 52; see the Commission’s decision in Telenor/Canal + discussed at p 770 above.

123 See further the Technology Transfer Guidelines, paras 49–53.124 See further the Technology Transfer Guidelines, paras 44–45; on horizontal sub-contracting agree-

ments see ch 15, p 588 and on vertical ones see ch 16, pp 666–667.125 On pooling agreements see pp 781–785 below.126 On the meaning of ‘product’ and ‘contract products’ see Article 1(1)(e) and (f) of the Regulation.



(i) Many technology transfer agreements do not infringe Article 81(1)It is worth recalling that many technology transfer agreements do not infringe Article 81(1) at all, and therefore do not need to be block exempted. It has already been noted that Recital 5 of the Regulation acknowledges that such agreements usually improve economic e8 ciency and are pro-competitive, a point which is picked up in paragraph 9 of the Technology Transfer Guidelines, which states that there is no pre-sumption that licence agreements give rise to competition concerns. Indeed paragraph 17 of the Guidelines goes as far as to say that licence agreements ‘have substantial pro-competitive potential’; it continues that ‘the vast majority of licence agreements are pro-competitive’. Recital 12 of the Regulation states that there is no presumption that agreements above the market-share thresholds in Article 3 infringe Article 81(1), a point repeated in paragraph 37 of the Technology Transfer Guidelines. It is almost unthink-able that the Commission would have said such things in, say, the 1970s and 1980s, and this shows how far the Commission has moved in wanting to take a more economics-oriented, less regulatory approach to the application of the competition rules.

(ii) If it is not forbidden, it is permitted� e Commission’s less regulatory approach, speci! cally stated in Recital 4 of the Regulation, is rez ected in the removal from the Regulation of a ‘white list’, stating what must be in a technology transfer agreement127; instead there is a market share cap in Article 3, and the ‘black list’ of what must not be included in Article 4. � ese two are the Articles of key importance. Provisions in an agreement that are not black-listed in Article 4 are permitted, subject to the ‘excluded restrictions’ of Article 5 and the possi-bility of withdrawal of the block exemption by the Commission or a Member State (see below). Other than that the maxim of the verticals regulation, ‘If it is not forbidden, it is permitted’, is equally applicable under the Technology Transfer Regulation128.

(iii) The exempted agreement must be bilateralAn interesting distinction between the vertical block exemption and the one for tech-nology transfer is that the latter is applicable only in the case of bilateral agreements, whereas the former is capable of application to multilateral ones129. Council Regulation 19/65 does not provide a legal basis for block exemption of multilateral technology trans-fer agreements130. However Recital 19 of the Regulation explains that the Regulation can apply to an agreement between a licensor and licensee where the licensor makes stipula-tions for more than one level of trade. For example the licensor may impose conditions and obligations on the licensee not only in relation to its own production and sales; it may also require the licensee to impose conditions and obligations on its own distribu-tors, for example requiring them to maintain a selective distribution system. � e agree-ment between the licensor and licensee is still a bilateral agreement, and so capable of being covered by the block exemption; however the agreement(s) between the licensee

127 See Recital 8 of the Technology Transfer Regulation.128 See ch 16, p 642 for the position under the vertical block exemption.129 Ibid, pp 642–643.130 Speci! c provision for the block exemption of multilateral vertical agreements was made by Council

Regulation 1215/99, OJ [1999] L 148/1.



and any distributor would not be covered by the Technology Transfer Regulation, but might satisfy the block exemption for vertical agreements131.

Where a technology transfer agreement is multilateral, but of the same nature as one covered by the Regulation, the Commission will analyse the agreement by analogy to the principles contained in the Regulation132.

(iv) Duration� e block exemption will run until 30 April 2014. However Article 2 contains a further relevant provision as to the duration of block exemption in relation to any particular agreement. It provides that the exemption lasts only as long as the intellectual property right in the licensed technology has not expired, lapsed, or been declared invalid; or, in the case of know-how, that the exemption lasts only as long as the know-how remains secret. � e block exemption will cease to apply on the date of the last intellectual prop-erty right to expire, become invalid or enter the public domain133.

(v) Relationship with other block exemptionsParagraphs 56 to 64 of the Technology Transfer Guidelines explain how the Technology Transfer Regulation relates to other block exemptions, in particular the regulation for Specialisation Agreements134, for Research and Developments Agreements135 and Vertical Agreements136.

(C) Article 3: the market share cap� e Regulation applies only to technology transfer agreements that do not exceed a market share cap. Recital 12 states that there is no presumption that an agreement above the thresholds infringes Article 81(1) or that it is incapable of satisfying the terms of Article 81(3). Article 3(1) of the Regulation requires that the combined market share of the parties does not exceed 20 per cent of the a� ected relevant technology and prod-uct market for horizontal agreements; Article 3(2) provides that, in the case of vertical agreements, the market share of each of the parties must not exceed 30 per cent.

(i) Horizontal agreementsIn order to determine whether an agreement is a horizontal agreement it is necessary to ask whether the parties to an agreement are ‘competing undertakings’ as de! ned in Article 1(1)(j) of the Regulation137. Undertakings may compete on a technology market or on a product market.

(A) Technology markets Article 1(1)(j)(i) provides that undertakings compete on the relevant technology market where they license out competing technologies without infringing each others’ intellectual property rights. � e relevant technology market includes technologies which are regarded as interchangeable with or substitutable for the licensed technology, by reason of the technologies’ characteristics, their royalties,

131 See further the Technology Transfer Guidelines, para 39 and paras 61–64. 132 Ibid, para 40.133 Ibid, para 55. 134 Regulation 2658/2000: see ch 15, pp 589–592.135 Regulation 2659/2000: see ch 15, pp 583–588. 136 Regulation 2790/99: see ch 16, pp 640–662.137 See further the Technology Transfer Guidelines, paras 26–33.



and their intended use. � is de! nition captures only actual competitors in the technol-ogy market: it does not apply to potential competitors138.

(B) Product markets Article 1(1)(j)(ii) provides that undertakings compete on the rele-vant product market where, even without a technology transfer agreement, they are both active on the relevant product and geographic markets on which the contract prod-ucts are sold without infringing each others’ intellectual property rights (actual com-petitors) and where they might realistically be able to enter and compete on the market within ‘a period of one to two years’139 in response to a small but permanent increase in product prices (potential competitors). � e relevant product market includes products which are regarded as interchangeable with or substitutable for the contract products by reason of the products’ characteristics, their prices, and their intended use.

(ii) Vertical agreementsWhere an agreement is not horizontal, because it is not between competing undertak-ings as de! ned in Article 1(1)(j), it is vertical, and so the higher market share cap of 30 per cent is applicable. An agreement will not be horizontal where one party can use its intellectual property to prevent the other entering the market, or where both parties need the other’s technology to operate on the market: these are referred to as ‘one-way’ and ‘two-way’ blocking positions, as to which the Commission will require objective evidence, for example court judgments and the opinions of independent experts140. It can be the case that two undertakings compete in relation to existing products, but that a licence by A to B is not between competitors because A’s technology is so innovative that B’s current products are now obsolete or uncompetitive: such an agreement would be regarded as vertical and therefore subject to the higher market share cap (and the more lenient list of hard-core restrictions)141.

Where the parties are not competing undertakings at the time of the agreement, but subsequently become so, they will usually continue to be considered to be non- competing: Article 4(3) of the Regulation provides that this means that the less strict list of hard-core restrictions for vertical agreements will continue to apply142.

(iii) Technology marketsParagraphs 19 to 25 of the Technology Transfer Guidelines discuss market de! nition for the purpose of analysing technology transfer agreements. In particular they explain that such agreements can have an e� ect on competition both in the upstream technol-ogy market and in the downstream product market143. Article 3(3), in conjunction with paragraph 23 of the Technology Transfer Guidelines, explains that a licensor’s share of a technology market is to be calculated by reference to the value of the licensed tech-nology on the relevant product market; this ! gure is calculated on the basis of both the licensor’s and its licensee’s sales144. Where a new technology has yet to generate any sales a market share of zero is assigned145.

138 Ibid, para 66. 139 Ibid, para 29. 140 Ibid, para 32. 141 Ibid, para 33. 142 See pp 776–779 below.143 Technology Transfer Guidelines, para 20.144 See the ! nal sentence of Article 3(3) of the Regulation and the Technology Transfer Guidelines,

para 70.145 Ibid.



(iv) Product marketsA licensee’s market share of a product market is calculated on the basis of its sales of products incorporating the licensor’s technology and competing products, that is to say the total sales of the licensee on the product market in question; sales by other licensees are not taken into account146.

(v) Article 8: calculation of market share and marginal reliefArticle 8(1) of the Regulation deals with the calculation of market share, which should be done by reference to market sales value data. Where such data are not available, estimates based on other reliable information, including sales volumes, may be used to establish the market share of the undertaking concerned. Market shares should be calculated on the basis of data relating to the preceding calendar year.

Article 8(2) provides some marginal relief for up to two years where the market share caps of 20 per cent or 30 per cent are subsequently exceeded.

(vi) Examples� e Technology Transfer Guidelines provide examples of how the market share ! g-ures operate, both in relation to licensing between non-competitors and between competitors147.

(D) Article 4: hard-core restrictionsRecital 13 of the Regulation states that technology transfer agreements should not enjoy block exemption when they contain ‘severely anti-competitive restraints such as the ! xing of prices charged to third parties . . . irrespective of the market shares of the undertakings concerned’. � e block exemption ceases to apply to the entire agreement, not just to the o� ending provisions148. � e Commission considers that the hard-core restrictions are restrictions by object in the sense of Article 81 EC149. � e Regulation contains one set of hard-core restrictions for agreements between competing agree-ments in Article 4(1) and a di� erent set for agreements between non-competing under-takings in Article 4(2). As one would expect the provisions are stricter in the case of agreements between competing undertakings than between non-competing undertak-ings. Article 4(3) provides that, where the parties were non-competing at the time that they entered into an agreement, Article 4(2) applies to their agreement throughout its lifetime unless the agreement is subsequently amended in any material respect; in other words the agreement does not metamorphose into a horizontal one, and so become subject to the stricter standard of Article 4(1), simply because the ! rms subsequently become competitors.

(i) Agreements between competing undertakings: horizontal agreements150

� e concern of the Commission is that a technology transfer agreement between competing agreements might be a cloak for, or have the e� ect of, a horizontal cartel.

146 Ibid, para 71. 147 Ibid, para 73. 148 Ibid, para 75. 149 Ibid, para 14.150 See generally the Technology Transfer Guidelines, paras 77–95.



Article 4(1) therefore provides that block exemption is not available for agreements that, directly or indirectly, in isolation or in combination with other factors, have as their object restrictions concerning prices, output, the allocation of markets or cus-tomers, and the exploitation by the licensee of its own technology: such restrictions are regarded as hard-core. � e provisions on price and output are simple, but those on markets and customers can be complex. In some cases restrictions are treated as hard-core only where an agreement is reciprocal, that is to say where each undertaking grants a licence to the other and where the licences concern competing technologies or can be used for the production of competing products151; the same restriction in a non-reciprocal agreement152 is not regarded as hard-core153.

(A) Prices Article 4(1)(a) provides that the block exemption is not applicable to an agree-ment between competing undertakings that restricts a party’s ability to determine its prices to third parties. It is immaterial whether the agreement concerns ! xed, min-imum, maximum, or recommended prices154. Where there are cross licences between two undertakings that have no pro-competitive purpose and where the parties agree to pay running royalties to one another the Commission might treat the case as sham and tantamount to a price-! xing agreement155. Article 4(1)(a) (and Article 4(1)(d)) may be infringed where royalties are based on the sales of products irrespective of whether the licensed technology was used in the production of those products156.

(B) Output Article 4(1)(b) provides that the block exemption is not applicable to an agreement between competing undertakings that has as its object the limitation of out-put, other than a limitation on the output of contract products imposed on the licensee in a non-reciprocal agreement or imposed on only one of the parties in a reciprocal agreement. Non-reciprocal agreements are treated more favourably than reciprocal ones since they are less likely to lead to a restriction of output and they are more likely to lead to an improvement in economic e8 ciency157.

(C) The allocation of markets and customers Article 4(1)(c) provides that the block exemp-tion does not apply to an agreement between competing undertakings that allocates markets or customers158. However there are seven exceptions to this:

An obligation on the licensee(s) to produce with the licensed technology only within one or • more technical ! elds of use or one or more product markets. � e ! eld of use restriction must not go beyond the scope of the licensed technology159. It does not matter whether, in a recip-rocal agreement, the ! eld of use restrictions are symmetrical or asymmetrical160

An obligation on the licensor and/or the licensee in a non-reciprocal agreement not to prod-• uce with the licensed technology within one or more technical ! elds of use or one or more product markets or one or more exclusive territories reserved for the other party

151 Technology Transfer Regulation, Article 1(1)(c). 152 Ibid, Article 1(1)(d).153 See the Technology Transfer Guidelines, para 78. 154 Ibid, para 79. 155 Ibid, para 80.156 Ibid, para 81; see also paras 156–160. 157 Ibid, para 82; see also paras 175–178.158 � e terms ‘exclusive territory’ and ‘exclusive customer group’ are de! ned in Articles 1(1)(l) and 1(1)

(m) of the Regulation; for further discussion of exclusive licensing and sales restrictions see the Technology Transfer Guidelines, paras 161–174.

159 Technology Transfer Guidelines, para 90; see also paras 179–185. 160 Ibid, para 91.



An obligation on the licensor not to license the technology to another licensee in a particular • territory� e restriction in a non-reciprocal agreement of active and/or passive sales by the licensee • and/or the licensor into the exclusive territory or to the exclusive customer group reserved for the other party� e restriction in a non-reciprocal agreement of active sales by the licensee into the exclusive • territory or to the exclusive customer group allocated by the licensor to another licensee pro-vided the latter was not a competing undertaking of the licensor at the time of the conclusion of its own licence. An agreement between licensees not to sell, actively or passively, into each others’ territories would be regarded as a cartel agreement between them and would fall out-side the scope of the block exemption161

An obligation on the licensee to produce the contract products only for its own use provided • that the licensee is not restricted in selling the contract products actively and passively as spare parts for its own products: these are known as ‘captive use restrictions’162

An obligation on the licensee in a non-reciprocal agreement to produce the contract products • only for a particular customer where the licence was granted in order to create an alternative source of supply for that customer.

(D) Exploitation by the licensee Article 4(1)(d) provides that the block exemption does not apply to an agreement between competing undertakings that restricts the licensee’s ability to exploit its own technology or that prevents any of the parties to the agree-ment from carrying out research and development, unless such a provision is indis-pensable to prevent the disclosure to a third party of the licensed know-how. Where such a restriction is found in an agreement between non-competing undertakings it is excluded from the block exemption under Article 5, but it is not listed as hard-core for the purpose of Article 4163.

(ii) Agreements between non-competing agreements: vertical agreements164

Article 4(2) of the Regulation provides that block exemption is not available for agree-ments between non-competing undertakings that, directly or indirectly, in isolation or in combination with other factors, have as their object restrictions concerning prices, territories, and customer groups or sales within a selective distribution system165.

(A) Prices Article 4(2)(a) provides that the block exemption does not apply to an agree-ment between non-competing undertakings that restricts a party’s ability to determine its prices when selling products to third parties. However it is permissible to impose a maximum price or to recommend a price provided that this does not amount to a ! xed or minimum price as a result of pressure from, or incentives o� ered by, any of the par-ties. Paragraph 97 of the Technology Transfer Guidelines provides examples of agree-ments that would be considered to ! x prices indirectly, for example ! xing a licensee’s margin, ! xing the maximum level of discounts, and making threats or intimidating a licensee as to a particular price level.

161 Ibid, para 89. 162 Ibid, para 92; see also paras 186–190. 163 See pp 779–780 below.164 See generally the Technology Transfer Guidelines, paras 96–106.165 � is term is de! ned in Article 1(1)(k) of the Regulation.



(B) Territories and customer groups166 Article 4(2)(b) provides that the block exemption does not apply to an agreement between non-competing undertakings that restricts the territory into which, or the customer group to whom, the licensee may passively sell the contract goods. Paragraph 98 of the Technology Transfer Guidelines provide examples of indirect methods of preventing passive sales, such as ! nancial incentives, monitor-ing mechanisms to identify the ! nal destination of the contract products, and, in some cases, quantity limitations. Article 4(2)(b) provides six exceptions to the prohibition on restrictions on passive sales:

A restriction of passive sales into an exclusive territory or to an exclusive customer group • reserved for the licensorA restriction of passive sales into an exclusive territory or to an exclusive customer group • allocated by the licensor to another licensee during the ! rst two years that the other licensee is selling the contract products in that territory or to that groupAn obligation to produce the contract goods only for its own use provided that the licensee • is not restricted in selling the contract products actively and passively as spare parts for its own productsAn obligation to produce the contract products only for a particular customer where the • licence was granted in order to create an alternative source of supply for that customerA restriction of sales to end-users by a licensee operating at the wholesale level of trade• A restriction of sales to unauthorised distributors by the members of a selective distribution • system.

It should be noted that Article 4(2)(b) does not prohibit sales restrictions on the licen-sor; nor restrictions on active sales by the licensee, except in the case of selective distri-bution systems (see below)167. Furthermore there is no restriction on active or passive sales by licensees to territories or customer groups reserved to the licensor168.

(C) Restrictions in selective distribution systems Article 4(2)(c) provides that the block exemption does not apply where an agreement between non-competing undertakings restricts active or passive sales to end-users by a licensee which is a member of a select-ive distribution system and which operates at the retail level, without prejudice to the possibility of prohibiting a member of the system from operating out of an unauthor-ised place of establishment.

(E) Article 5: excluded restrictions169

Recital 14 of the Regulation states that, in order to protect incentives to innovate, cer-tain restrictions should be excluded from the block exemption, in particular exclusive grant back obligations for severable improvements; however the inclusion of an Article 5 restriction does not prevent the application of the block exemption to the remainder of the agreement170.

Article 5(1) lists three excluded restrictions:

Exclusive grant back• : an obligation on the licensee to grant an exclusive licence to the licen-sor or a third party designated by the licensor in respect of its own severable improvements171 to or its own improvements of the licensed technology

166 � e terms ‘exclusive territory’ and ‘exclusive customer group’ are de! ned in Articles 1(1)(l) and 1(1)(m) of the Regulation.

167 See the Technology Transfer Guidelines, para 99. 168 Ibid, para 100. 169 Ibid, paras 107–116.170 Ibid, para 107. 171 � is term is de! ned in Article 1(1)(n) of the Regulation.



Assignments back• : an obligation to assign back such technologyNo-challenge clauses• : an obligation on the licensee not to challenge the validity of intellec-tual property rights held by the licensor in the common market, without prejudice to the right of the licensor to terminate the licence in the event of such a challenge.

Article 5(2) also excludes a restriction, in an agreement between non-competing under-takings, that imposes an obligation limiting the licensee’s ability to exploit its own tech-nology or limiting either of the party’s ability to carry out research and development, unless the latter restriction is indispensable to prevent the disclosure of the licensed technology to third parties.

(F) Article 6: withdrawal in individual cases172

Recital 16 of the Regulation states that the provisions of Articles 3 to 5 mean that agree-ments to which the block exemption applies normally will not eliminate competition in respect of a substantial part of the products in question, with the result that the fourth requirement of Article 81(3) EC will be satis! ed. However, as a safety net, the possibility exists of either the Commission or the NCAs of the Member States, in certain circum-stances, withdrawing the bene! t of the block exemption. � e authority doing so bears the burden of proving that an agreement falls within the scope of Article 81(1) and that the terms of Article 81(3) are not satis! ed173.

(i) Article 6(1): withdrawal by the Commission in individual casesArticle 6(1) provides that the Commission may withdraw the bene! t of the block exemp-tion in an individual case where an agreement has e� ects that are incompatible with Article 81(3). Recital 16 states that this may happen in particular where incentives to innovate are reduced or where access to markets is hindered, and Article 6(1) suggests this could be so where:

Access of third parties’ technologies to the market is restricted, for example as a result of the • cumulative e� ect of parallel networks of similar restrictive agreements prohibiting licensees from using third parties’ technologiesAccess of potential licensees to the market is restricted, for example as a result of the cumu-• lative e� ect of parallel networks of similar restrictive agreements prohibiting licensors from licensing to other licensees� e parties do not exploit the licensed technology, and have no objective justi! cation for not • doing so.

(ii) Article 6(2): withdrawal by an NCA of a Member StateArticle 6(2) provides that an NCA of a Member State may withdraw the bene! t of the block exemption under the same circumstances speci! ed in Article 6(1) where a tech-nology transfer agreement has e� ects incompatible with Article 81(3) in the territory of a Member State or a part thereof that has all the characteristics of a distinct geographic market. Recital 17 states that, in exercising this power, Member States must ensure that they do not prejudice the uniform application of the Community competition rules throughout the common market or the full e� ect of the measures adopted in imple-mentation of those rules.

172 See generally the Technology Transfer Guidelines, paras 117–122. 173 Ibid, para 119.


other agreements relating to intellectual property rights

(G) Article 7: non-application of the Regulation174

Article 7(1) of the Regulation provides that the Commission may by regulation declare that the block exemption does not apply to technology transfer agreements containing speci! c restraints relating to a market where parallel networks of similar technology transfer agreements cover more than 50 per cent of the relevant market. Article 7(2) adds that a regulation adopted pursuant to Article 7(1) will not become applicable earl-ier than six months following its adoption. Where the Commission exercises the power conferred on it by Article 7 it may make a decision in an individual case to provide guid-ance on the application of Article 81 EC to the agreements that will have lost the bene! t of the block exemption175.

(H) Article 8: application of the market-share thresholds� is provision was dealt with in the context of Article 3 above176.

(I) Articles 9 to 11: repeal, transitional period and period of validity

Article 9 repealed Regulation 240/96, the previous technology transfer regulation. Article 10 granted transitional relief to agreements that satis! ed Regulation 240/96 until 31 March 2006. Article 11 provides that Regulation 772/2004 will expire on 30 April 2014.

4. THE APPLICATION OF ARTICLE 81 TO OTHER AGREEMENTS RELATING TO INTELLECTUAL PROPERTY RIGHTS

� e previous two sections of this chapter considered the application of Article 81 to agreements to license intellectual property rights, with particular reference to technol-ogy transfer agreements and the block exemption conferred by Regulation 772/2004. In this section the application of Article 81 to other agreements relating to intellectual property rights will be examined.

(A) Technology pools177

It is not uncommon for two or more undertakings to ‘pool’ their technology. � e Technology Transfer Regulation explicitly states that it does not apply to technology pools, that is to say to:

agreements for the pooling of technologies with the purpose of licensing the created package to third parties178.

174 See generally the Technology Transfer Guidelines, paras 123–129. 175 Ibid, para 124.176 See p 776 above.177 See generally the report prepared for the European Commission on Multi-Party Licensing (Charles

River Associates, April 2003).178 Technology Transfer Regulation, Recital 7; see also the Technology Transfer Guidelines, para 210.



However the licences granted by the pool to a third party may not infringe Article 81(1) at all179; or they may be block exempted, provided that the conditions of Regulation 772/2004 are satis! ed180.

Sometimes a pooling arrangement is fairly simple and informal; however it is not unknown for the pool to have an elaborate structure, the management of which may be entrusted to a separate entity. In some cases a technology pool may be linked to an industry standard. Industry standards are sometimes established by law (‘de jure’); in others they may become a standard as a matter of fact (‘de facto’). It may be that, in order to comply with a standard, access is needed to intellectual property rights, and these rights might be managed through a technology pool. It follows that, just as agreements to establish standards might sometimes infringe Article 81181, so too might the creation and operation of a pool where it is the product of an agreement between undertakings and where it could have the e� ect of foreclosing access to the market182. A related point is that undertakings that participate in the setting of a standard may own essential patents, a licence of which is needed by anyone wishing to comply with the standard. A deliberate concealment of this fact during the standard-setting procedure, or a refusal to license the patents on reasonable, non-discriminatory terms, might amount to an infringement of Article 82 EC183.

It may also be the case that, within a particular industry, there may be more than one technology pool, and that the di� erent pools may compete with one another. � ere may be considerable bene! ts for a ! rm or ! rms which control a standard or a technology pool if the industry ‘tips’ towards that standard or technology as the industry norm. Obvious industries in which one witnesses this phenomenon are mobile telephony184, high-density television, and digital broadcasting, where the ‘battle of the standards’ may be ! erce. � e example of the video cassette industry tipping to the VHS standard, away from Betamax, 20 years ago was matched, in 2008, by the market opting for Sony’s Blu-Ray technology for the next generation of DVD players rather than Toshiba’s HD DVD platform.

Technology pools may have both pro-competitive and anti-competitive e� ects: they are discussed in chapter 3 of the DoJ/FTC report on Antitrust Enforcement and Intellectual Property Rights. � e Commission’s Technology Transfer Guidelines provide guidance on the application of Article 81 to technology pools185. � e Commission explains that pools may be restrictive of competition in two ways. First, the pooling of technology implies joint selling: if the pooled technologies are substitutes for one another this amounts to a price-! xing cartel186. Second, technology pools may, in particular when they support

179 See Philips/Sony CD Licensing program, Commission Press Release IP/03/1152, 7 August 2003.180 Technology Transfer Guidelines, para 212. 181 See ch 15, pp 596–598.182 � e Commission condemned a patent pooling scheme in Video Cassette Recorders Agreements OJ

[1978] L 47/42, [1978] 2 CMLR 160; see also Concast-Mannesman Commission’s XIth Report on Competition Policy (1981), point 93; IGR Stereo Television ibid, point 94 and XIVth Report on Competition Policy (1984), point 92.

183 See pp 793–795 below.184 See Commission Press Release IP/02/1651, 12 November 2002 dealing with pooling arrangements in

relation to third generation (‘3G’) mobile telephony standards; for discussion see Choumelova ‘Competition law analysis of patent licensing arrangements—the particular case of 3G3P’ Commission’s Competition Policy Newsletter, Spring 2003, p 41.

185 See also Piesiewcz and Schellingerhout on the issue of setting standards in ‘Intellectual property rights in standard setting from a competition law perspective’ Competition Policy Newsletter, Summer 2007, 36.

186 Technology Transfer Guidelines, para 213.



an industry standard or establish a de facto industry standard, reduce innovation by foreclosing alternative technologies from obtaining access to the market187. However the Commission also notes that technology pools may be pro-competitive; for example ! rms that need access to the technology in the pool will get the bene! t of a ‘one-stop shop’, dealing only with the pool, instead of having to negotiate individually with a number of di� erent owners; this can lead to a reduction in costs188. � e Commission authorised a technology pool in the case of MPEG-2189. MPEG-2 is a technology that improves the quality of video signals; to apply the technology it is necessary to have access to a number of patents. � ese were pooled by their respective owners, who agreed that access to the pool would be permitted on a non-exclusive and non-discriminatory basis. � is meant that the pool, far from foreclosing the market to third parties, would enable them to gain access to the technology with a bene! cial e� ect on technical and economic progress.

� e Technology Transfer Guidelines examine three issues, the nature of the pooled technologies, the assessment of individual restraints, and the institutional framework governing the pool.

(i) The nature of the pooled technologies� e Commission makes a distinction between the situation where the pooled technolo-gies are substitutes for one another and where they are complements to each other190.

(A) Substitute technologies Where the pooled technologies are substitutes for one another the Commission’s prime concern is that the royalties payable will be higher than they would otherwise be191 and that this amounts to price ! xing between competitors; this would violate Article 81(1) and be unlikely to satisfy the criteria of Article 81(3)192.

(B) Complementary technologies Where the pooled technologies are complements the arrangement is likely to reduce transaction costs and to lead to lower overall royalties193; this means that the creation of the pool is likely to fall outside Article 81, irrespective of the market position of the parties194. However the conditions on which any licence is granted may be caught by Article 81195. In particular the Commission has a concern where a licensee is required to take a licence of ‘non-essential’ technology as a condi-tion of gaining access to ‘essential’ technology196, as this amounts to a bundling prac-tice, and may have a foreclosure e� ect depending on the market power of the pool197. � e Commission will be less concerned about pools where, for example, technologies which, over time, become non-essential are excluded from the pool; where licensors remain free to license their technologies independently of the pool, so that a licensee could put together its own technology package; and where it is possible to take a licence of part only of the pooled technology at a lower royalty rate198.

187 Ibid. 188 Ibid, para 214.189 See OJ [1998] C 229/6 and the Commission’s XXIXth Report on Competition Policy (1999), points

55 and 56 and p 162; see similarly Philips/Matsushita—D2B OJ [1991] C 220/2, [1991] 4 CMLR 905; Philips International—DCC OJ [1992] C 333/8, [1993] 4 CMLR 286; see also : e European Telecommunications Standards Institute’s Intellectual Property Rights Policy OJ [1994] C 76/5, [1995] 5 CMLR 352.

190 Technology Transfer Guidelines, para 215. 191 Ibid, para 217. 192 Ibid, para 219. 193 Ibid, para 217. 194 Ibid, para 220. 195 Ibid. 196 � ese expressions are discussed in para 216 of the Guidelines. 197 Ibid, para 221.198 Ibid, para 222.



(ii) Assessment of individual restraintsWhere a technology pool has a dominant position on the market, the royalties and other licensing terms that it o� ers should be fair and non-discriminatory and the licences granted should be non-exclusive; this is to ensure that there is no foreclosure e� ect199. However it is permissible to charge di� erent royalty rates for di� erent uses and in di� erent product markets200. � e Commission is also concerned to ensure that a technology pool does not foreclose third party technologies from the market: licensors and licensees must therefore be free to develop competing products and standards and must be free to grant and obtain licences outside the pool201. Any grant-back obligations towards the pool should be non-exclusive and limited to developments that are essential or important to the use of the pooled technology202. In the event that a licensee chal-lenges the validity of a patent, the pool’s right to terminate the licensee’s licence is lim-ited to the patent in question, and cannot apply to the licence of other (non-challenged) technology: this is to prevent the ‘shielding’ of invalid patents203.

(iii) The institutional framework governing the pool� e Commission considers that the way in which a pool is created, organised, and oper-ated can reduce the risk of it restricting competition204. A restriction of competition is less likely when the process of setting a standard and creating a pool is open to all interested parties representing di� erent interests205; and the involvement of independ-ent experts may be a helpful factor, for example where they help to ensure that only essential technologies are included in the pool206. � e Commission is anxious that the operation of a pool does not lead to the exchange of sensitive commercial information that could lead to parallel behaviour, particularly in oligopolistic markets, and will look to see what safeguards have been put in place to prevent this207. � e Commission also has a preference for there to be dispute resolution mechanisms that are independent of the pool and its members208.

(B) Copyright poolsClosely related to technology pools are copyright pools. In IFPI ‘Simulcasting’209 the Commission authorised an agreement under Article 81(3) whereby two collecting soci-eties, acting on behalf of record companies, established a ‘one-stop shop’ whereby an international licence could be granted to radio and television broadcasters wishing to ‘simulcast’ programmes to the public both by conventional radio and television and also, at the same time, via the Internet. For broadcasters the advantage of the agreement was that they could obtain a single licence from one collecting society which would be e� ective throughout the EU. � e Commission required the deletion of territorial restric-tions that would have restricted competition between national collecting societies210.

199 Ibid, para 226. 200 Ibid, para 227. 201 Ibid. 202 Ibid, para 228. 203 Ibid, para 229.204 Ibid, para 230. 205 Ibid, para 231. 206 Ibid, paras 232–233. 207 Ibid, para 234.208 Ibid, para 235.209 OJ [2003] L 107/58; for comment on this decision see Pereira ‘From discothéques to websites, a

new approach to music copyright licensing: the Simulcasting decision’ Commission’s Competition Policy Newsletter, Spring 2003, p 44.

210 OJ [2003] L 107/58, para 3 and paras 27–28.



� e Commission concluded that the joint ! xing by the societies of the simulcasting royalty fee infringed Article 81(1)211. However, it considered that the agreement met the requirements of Article 81(3) as it would create a new type of licence: a ‘one-stop shop’ licence for simulcasting across the EU which would give consumers a wider access to audio and video music programmes through the Internet212. � e Commission required the parties to charge for their administrative costs separately from the royalties213, which were the subject of the horizontal agreement: this meant that broadcasters could exercise a competitive choice on the basis of di� erent societies’ costs.

(C) Settlements of litigation214

� e Commission will carefully scrutinise trade mark delimitation agreements whereby owners of independent trade marks accept restrictions on the exercise and use of their respective marks215. � is means that legal advisers must be careful when advising cli-ents as to the terms on which they should settle a trade mark dispute, since it may be that the settlement itself will contravene Article 81(1)216. In BAT v Commission217 the ECJ established that trade mark delimitation agreements are permissible and fall out-side Article 81(1) where they serve to avoid confusion or conz ict; however there must be a genuine dispute between the parties and the agreement must be no more restrictive than necessary to overcome the problem of confusion. In this case there was not a genu-ine dispute, the apparent intention of BAT being to prevent a Mr Segers from selling his tobacco on the German market; the trade mark in question had not been exploited in the past and was subject to cancellation under German law.

� e Commission’s Technology Transfer Guidelines discuss licensing as a means of settling disputes. Where the parties to a dispute agree, as part of a settlement, to license, or to cross-license, the terms of the licence(s) may be covered by the Technology Transfer Regulation subject, of course, to compliance with its conditions. � e Commission makes the point that where the undertakings agree to license one another in circumstances where their technologies do not block one another218 – in other words where they are actual horizontal competitors – an agreement between them would be a hard-core

211 Ibid, paras 69–80. 212 Ibid, paras 86–87. 213 Ibid, paras 99–107.214 On the position in the US see the DoJ/FTC report on Antitrust Enforcement and Intellectual

Property Rights, pp 88–91; see also Willig and Bigelow ‘Antitrust Policy Toward Agreements � at Settle Patent Litigation’ (2004) XLIX Antitrust Bulletin 655; Robert and Falconi ‘Patent Litigation Settlements in the Pharmaceutical Industry: Marrying the Innovation Bride and the Competition Groom’ (2006) 27 ECLR 524.

215 See Sirdar and Phildar Trade Marks [1975] 1 CMLR D93; Re Penney’s Trade Mark OJ [1978] L 60/19, [1978] 2 CMLR 100 (Article 81 inapplicable to a trade mark agreement which was a genuine attempt to settle litigation and not an attempt to partition the market); Syntex/Syntbelabo [1990] 4 CMLR 343 (Commission required modi! cation of trade mark agreement that unjusti! ably partitioned markets); Toltecs and Dorcet Trade Marks OJ [1982] L 379/19, [1983] 1 CMLR 412 (this decision was the subject of the appeal in BAT v Commission below); Hershey/Herschi XXth Report on Competition Policy (1990), point 111; Chiquita/FyF es plc XXIInd Report on Competition Policy (1992), points 168–176 (agreement by Fy� es not to use the Fy� es trade mark in continental Europe contrary to Article 81; also an abuse of a dominant position under Article 82); see FyF es plc v Chiquita Brands International Inc [1993] ECC 193 on the litigation in the English High Court in this case.

216 See generally Singleton ‘IP Disputes: Settlement Agreements and Ancillary Licences’ (1993) 15 EIPR 48.

217 Case 35/83 [1985] ECR 363, [1985] 2 CMLR 470; see Alexander (1985) 22 CML Rev 709.218 See p 775 above on one-way and two-way blocking positions.



restriction contrary to Article 4(1) of the Regulation219. On the other hand if one party had the ability to exclude the other from the market by virtue of its technology, a licence would be likely to be pro-competitive220. Cross-licences that impose restrictions on the parties’ use of their technologies, including restrictions on licensing to third parties, may infringe Article 81, in particular where the parties have signi! cant market power and where the agreement imposes restrictions that clearly go beyond what is required to give access to the disputed technology221. � e Commission will be concerned to ensure that any settlement between the parties does not inhibit their future opportunity to innovate and thereby gain a competitive advantage over each other222. No-challenge agreements in a settlement would generally be regarded as falling outside Article 81, since this is regarded as an inherent aspect of any such agreement223.

In Chiquita/FyF es plc224 the Commission took the view that an agreement between Chiquita and Fy� es whereby Fy� es agreed not to use the Fy� es trade mark in contin-ental Europe for a period of 20 years infringed both Articles 81 and 82. � e Article 82 infringement lay in the fact that the inability of Fy� es to use that mark diminished its ability to compete vigorously with Chiquita in Europe. Following the Commission’s intervention, Chiquita abandoned the agreement.

5. ARTICLE 82 AND INTELLECTUAL PROPERTY RIGHTS

� e law of intellectual property confers exclusive rights; Article 82 prohibits the abuse of a dominant position. � e question arises of whether Article 82 can be applied in such a way as to limit the exclusive rights given by intellectual property law225. � e ECJ has made clear that mere ownership of intellectual property rights cannot be attacked under Article 82; however Article 82 may apply to an improper exercise of the right in question226. Article 8(2) of the WTO agreement on Trade-Related Aspects of Intellectual Property Rights (the so-called ‘TRIPS Agreement’) says much the same:

Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

(A) Compulsory licencesA question that has been much debated is the extent to which the owner of an intel-lectual property right can be compelled to grant a licence of it to a third party under

219 Technology Transfer Guidelines, para 205. 220 Ibid, para 206. 221 Ibid, para 207.222 Ibid, para 208. 223 Ibid, para 209.224 Commission’s XXIInd Report on Competition Policy (1992), points 168–176.225 For further discussion of this subject see Tritton Intellectual Property in Europe (Sweet & Maxwell,

2nd ed, 2002), ch 11; Govaere : e Use and Abuse of Intellectual Property Rights in EC Law (Sweet & Maxwell, 1996), ch 5; Anderman EC Competition Law and Intellectual Property Rights: : e Regulation of Innovation (Clarendon Press Oxford, 1998), chs 10–19; Coates, Kyølbye and Peeperkorn in Faull and Nikpay : e EC Law of Competition (Oxford University Press, 2nd ed, 2007), paras 10.209–10.255.

226 See Case 24/67 Parke, Davis & Co v Probel [1968] ECR 55, [1968] CMLR 47 where the ECJ said that ownership of a patent is not an abuse in itself although ‘the utilisation of the patent could degenerate into an improper exploitation of the protection’; the ownership of intellectual property is a factor to be taken into account in assessing whether a ! rm has a dominant position: see ch 5, p 180.


article and intellectual property rights

Article 82. As a general proposition one would expect the issue of compulsory licensing to be addressed as a matter of intellectual property law, and not as a matter of competi-tion law. � e case law about to be discussed exhibits a certain deference to intellectual property law; as we shall see below, it imposes higher standards for a successful claim to a licence of an intellectual property right than to access to an essential facility such as a port or gas pipeline227.

(i) The Renault and Erik Veng judgmentsIn the Renault case228 and in Volvo v Erik Veng229 third parties wished to be granted licences of the car manufacturers’ intellectual property rights in order to produce spare parts, and claimed that a refusal to grant such licences was an abuse of a dominant position under Article 82. � e ECJ adopted an orthodox approach to the application of Article 82 to compulsory licensing and held that, in the absence of Community harmon isation of laws on designs and models, it was a matter for national law to deter-mine the nature and extent of protection for such matters. In the Volvo case the ECJ stated at paragraph 8 that:

the right of the proprietor of a protected design to prevent third parties from manufacturing and selling or importing, without its consent, products incorporating the design constitutes the very subject-matter of its exclusive rights. It follows that an obligation imposed upon the proprietor of a protected design to grant to third parties, even in return for a reasonable royalty, a licence for the supply of products incorporating the design would lead to the proprietor thereof being deprived of the substance of its exclusive right, and that a refusal to grant such a licence cannot in itself con-stitute an abuse of a dominant position.

� e ECJ added, however, that a car manufacturer might be guilty of abusing its dom-inant position where it refused to supply spare parts to independent repairers in an arbi-trary manner, charged unfair prices for spare parts230, or decided no longer to produce spare parts for models still in circulation.

(ii) The Magill caseA less orthodox approach was taken by the Commission in Magill TV Guide/ITP, BBC and RTE231, variously known as the Magill case or the TV Listings case. Mr Magill wished to publish the listings of three television companies broadcasting in the UK and Ireland in a single weekly publication. At the time there was no publication which contained the details of all three companies’ programmes for a week in advance; this information was available only in daily newspapers for the day in question, or on a Saturday for the weekend. � ere was an obvious public demand for listings magazines,

227 For an interesting discussion of whether the law is unduly deferential to intellectual property see Ritter ‘Refusal to Deal and “Essential Facilities”: Does Intellectual Property Require Special Deference Compared to Tangible Property’ (2005) 28(3) World Competition 281.

228 Case 53/87 Conzorzio Italiano della Componentistica di Ricambio per Autovericoli and Maxicar v Regie National des Usines Renault [1988] ECR 6039, [1990] 4 CMLR 265.

229 Case 238/87 [1988] ECR 6211, [1989] 4 CMLR 122; see Korah ‘No Duty to Licence Independent Repairers to Make Spare Parts: the Renault, Volvo and Bayer Cases’ (1988) 12 EIPR 381; Groves ‘� e Use of Registered Designs to Protect Car Body Panels’ (1989) 10 BLR 117.

230 In Case T-198/98 Micro Leader Business v Commission [1999] ECR II-3989, [2000] 4 CMLR 886 the CFI held that the Commission, before rejecting a complaint against MicrosoQ concerning the exercise of its copyright protection, should have investigated whether its prices were discriminatory contrary to Article 82(2)(c): ibid, paras 49–59.

231 OJ [1989] L 78/43, [1989] 4 CMLR 757.



which were widely available in continental countries. Copyright protection was avail-able for TV listings under UK and Irish law, which is why Magill required a licence. � e Commission concluded that the three television companies had abused their indi-vidual dominant pos itions in relation to their own TV listings by refusing to make them available to Magill and required that advance information be supplied in order to enable comprehensive weekly TV guides to be published. � e Commission’s decision was appealed to the CFI and the ECJ, each of which upheld it232. � e ECJ stated that the abuse consisted of the refusal to provide basic information by relying on national copy-right provisions, thereby preventing the appearance of a new product, a comprehensive guide to television programmes, which the television companies did not o� er and for which there was a potential consumer demand233; the Court also noted that there was no objective justi! cation for the refusal234 and that the result of the refusal was to reserve to the television companies the downstream market for television guides235.

� e case was immensely controversial and led to numerous comments and articles, mainly adverse236. It appeared to sit oddly with the earlier judgments of the ECJ in Renault and Volvo v Erik Veng; it meant that the possibility of compulsory licensing had been introduced under Article 82; and it could be seen to be an application of the so-called ‘essential facilities doctrine’ to intellectual property rights237. A particular anx-iety was that the precedent might be applied to intellectual property rights that were the consequence of substantial risk-taking and investment – for example patents and com-puter soQ ware – as opposed to a mere list of television programmes, though this did not happen in practice. � ere is little doubt that the Commission and the Community Courts were inz uenced in Magill by the fact that information as prosaic as TV list-ings was entitled to copyright protection: most systems of law in the Member States would not have conferred intellectual property protection at all in such circumstances. However this was not an explicit part of the reasoning in the Commission’s decision or the Courts’ judgments.

(iii) Oscar BronnerIn Oscar Bronner v Mediaprint238 the ECJ stressed the exceptional circumstances in Magill: in paragraph 40 of its judgment it referred to four factors in particular: the information sought by Magill was indispensable to the publication of a comprehensive listings guide; there was a demonstrable potential consumer demand for the would-be product; there were no objective justi! cations for the refusal to supply; and the refusal would eliminate all competition in the secondary market for TV guides.

232 Cases T-69/89 etc RTE v Commission [1991] ECR II-485, [1991] 4 CMLR 586, upheld by the ECJ Cases C-241/91 P etc RTE and ITP v Commission [1995] ECR I-743, [1995] 4 CMLR 718.

233 Cases C-241/91 P etc RTE and ITP v Commission [1995] ECR I-743, [1995] 4 CMLR 718, para 54.234 [1995] ECR I-743, [1995] 4 CMLR 718, para 55. 235 Ibid, para 56.236 For comment on the ECJ’s judgment see eg Pombo ‘Intellectual Property and Intra-Community

Trade’ [1996] Fordham Corporate Law Institute (ed Hawk), 491–505; Crowther ‘Compulsory Licensing of Intellectual Property Rights’ (1995) 20 EL Rev 521; Anderman EC Competition Law and Intellectual Property Rights: : e Regulation of Innovation (Clarendon Press Oxford, 1998), paras 14.3.1–14.4.

237 See ch 17, pp 690–699; see generally Cotter ‘Intellectual Property and the Essential Facilities Doctrine’ (1999) 44 Antitrust Bulletin 211 on the question of whether intellectual property rights can be regarded as essential facilities.

238 Case C-7/97 [1998] ECR I-7791, [1999] 4 CMLR 112.



(iv) IMS HealthIn the next case to deal with this matter, IMS Health GmbH & Co v NDC Health GmbH & Co239, the ECJ repeated the formulation of the Court in Bronner. � e IMS case was an Article 234 reference from a German Court240. NDC Health was seeking a licence from IMS, the world leader in data collection on pharmaceutical sales and prescrip-tions, that would give it access to IMS’s copyrighted format for processing regional sales data in Germany, the so-called ‘1,860 brick structure’. AQ er considering whether the brick structure might be an indispensable requirement for NDC, as required by the Bronner judgment241, the ECJ went on to consider the questions of whether a refusal to license NDC might exclude all competition in a secondary market242, and whether it might prevent the emergence of a new product243. On the latter point the ECJ agreed with Advocate General Tizzano that, in achieving a balance between the need to protect the economic freedom of the owner of an intellectual property right on the one hand and the protection of free competition on the other:

the latter can prevail only where refusal to grant a licence prevents the development of the secondary market to the detriment of consumers244 (emphasis added).

In seeking some limitation to what might be meant by ‘exceptional circumstances’, this last statement of the ECJ in IMS was helpful: even if one acknowledges that there is room for debate as to what is meant by ‘the development of the secondary market’ – what, for example, is a ‘new’ product – nevertheless the Court establishes clearly that there is no right to a licence simply to duplicate what the owner of the intellectual prop-erty right in question is already doing. In DG COMP’s Discussion paper on the applica-tion of Article 82 of the Treaty to exclusionary abuses245 the Commission suggests that, in cases on refusal to license, there is a speci! c requirement to show that the refusal would prevent the licensee from producing new goods or services not o� ered by the owner of the right and for which there is a potential consumer demand246.

239 Case C-418/01 [2004] ECR I-5039, [2004] 4 CMLR 1543; for comment see Sufrin ‘� e IMS Case’ (2004) 3 Competition Law Journal 18; Brinker ‘Essential Facility Doctrine and Intellectual Property Law: Where does Europe Stand in the AQ ermath of the IMS Health Case?’ [2004] Fordham Corportate Law Institute (ed Hawk), 137; Eilmansberger ‘� e Essential Facilities Doctrine under Art. 82: What is the State of A� airs aQ er IMS Health and MicrosoQ ?’ (2005) 16 King’s College Law Journal 329; Fox ‘A Tale of Two Jurisdictions and an Orphan Case: Antitrust, Intellectual Property, and Refusals to Deal’ (2005) 28 Fordham International Law Journal 952; Ahlborn, Evans and Padilla ‘� e Logic & Limits of the “Exceptional Circumstances Test” in Magill and IMS Health’ (2005) 28 Fordham International Law Journal 1109.

240 Note that the Commission had adopted interim measures against IMS in NDC Health/IMS: (Interim Measures) OJ [2002] L 59/18, [2002] 4 CMLR 111; for comment see Korah ‘� e Interface between IP and Antitrust: � e European Experience’ (2001–02) 69 Antitrust Law Journal 801; Fine ‘NDC/IMS: In Response to Professor Korah’ (2002) 70 Antitrust Law Journal 247; the Presidents of the CFI and the ECJ suspended the Commission’s decision pending the CFI’s ! nal judgment; both noted that there was a serious dispute as to whether the circumstances in IMS were exceptional: Case T-184/01 R [2001] ECR II-3193, [2002] 4 CMLR 58 (President of CFI Order), upheld on appeal Case C-481/01 P (R) [2002] ECR I-3401, [2002] 5 CMLR 44 (President of ECJ Order); in due course the Commission withdrew the interim measures decision, so that the appeal to the CFI was itself withdrawn: see Commission Press Release IP/03/1159, 13 August 2003.

241 See ch 17, pp 694–695 on the meaning of indispensability in this context.242 Case C-418/01 [2004] ECR I-5039, [2004] 4 CMLR 1543, paras 40–47. 243 Ibid, paras 48–50.244 Ibid, para 48.245 Available at www.ec.europa.eu/comm/competition/antitrust/art82/index.html.246 Ibid, para 239.



(v) The Microsoft case� e Magill and the IMS cases established the possibility of a claim to a licence under Article 82 in exceptional circumstances, in particular where the licensee intended to produce a new product for which there was a potential consumer demand. � e potential signi! cance of this doctrine was dramatically revealed in the Commission’s decision in the Microso@ case of 24 March 2004247. � e Commission held that MicrosoQ was dom-inant in two markets, one for personal computer operating systems and the other for work group server operating systems. � e Commission held that MicrosoQ had abused its dominant position by refusing to supply competitors with interoperability infor-mation to enable them to develop and distribute products that would compete with MicrosoQ ’s on the market for servers. � e Commission also found MicrosoQ guilty of tying its operating system with its Windows Media Player248. For the two abuses MicrosoQ was ! ned €497 million. � e Commission’s ! ndings of abuse, and the ! ne, were upheld on appeal to the CFI in Microso@ v Commission249. A number of points should be noted about the abusive refusal to supply.

(A) The Commission and the CFI assumed that Microsoft enjoyed intellectual property protec-tion � e ! rst point is that the Commission and the CFI proceeded on the assumption that MicrosoQ ’s interoperability information was protected by the law of intellectual property, without actually reaching a conclusion on the point250. � e CFI noted that, in making this assumption, the Commission had imposed upon itself the strictest legal test, that is to say the one most favourable to MicrosoQ 251.

(B) The CFI’s summary of the applicable law � e second point is that the CFI then pro-ceeded to analyse the relevant case law, referring in particular to Magill, Bronner and IMS Health, from which it drew the following conclusion:

332 It follows from the case law cited above that the refusal by an undertaking holding a dom-inant position to license a third party to use a product covered by an intellectual property right cannot in itself constitute an abuse of a dominant position within the meaning of Article 82 EC. It is only in exceptional circumstances that the exercise of the exclusive right by the owner of the intellectual property right may give rise to such an abuse.

333 It also follows from that case law that the following circumstances, in particular, must be considered to be exceptional:

– in the fi rst place, the refusal relates to a product or service indispensable to the exercise of a particular activity on a neighbouring market;

247 OJ [2007] L 32/23; see Banasevic, Huby, Pena, Castellot, Sitar and Pi� aut ‘Commission adopts Decision in the MicrosoQ case’ Competition Policy Newsletter, Summer 2004, pp 44–46; Lévêque ‘Innovation, Leveraging and Essential Facilities: Interoperability Licensing in the EU MicrosoQ Case’ (2005) 28(1) World Competition 71; Dolmans, O’Donoghue and Loewenthal ‘Are Article 82 and Intellectual Property Interoperable? � e State of the Law Pending the Judgment in Microso@ v Commission’ (2007) 3 Competition Policy International 107.

248 See ch 17, pp 679–687 for discussion of the tying infringement; see also McMahon ‘Interoperability: “Indispensability” and “Special Responsibility” in High Technology Markets’ (2007) 9 Tulane Journal of Technology and Intellectual Property 123.

249 Case T-201/04 [2007] ECR II-000, [2007] 5 CMLR 846; for discussion of the case by Commission o8 cials see Kramler, Buhr and Wyns ‘� e judgment of the Court of First Instance in the MicrosoQ case’. Competition Policy Newsletter Number 3, 2007, 39; see also Howarth and McMahon ‘ “Windows has Performed an Illegal Operation”: � e Court of First Instance’s Judgment in MicrosoQ v Commission’ (2008) 29 ECLR 117.

250 Case T-201/04, paras 283–290. 251 Ibid, para 284.



– in the second place, the refusal is of such a kind as to exclude any effective competition on that neighbouring market;

– in the third place, the refusal prevents the appearance of a new product for which there is potential consumer demand.

334 Once it is established that such circumstances are present, the refusal by the holder of a dominant position to grant a licence may infringe Article 82 EC unless the refusal is objectively justifi ed.

335 The Court notes that the circumstance that the refusal prevents the appearance of a new product for which there is potential demand is found only in the case law on the exercise of an intellectual property right.

(C) The CFI’s benign application of the ‘new product’ requirement � e CFI concluded that the requirement of indispensability was satis! ed252 and that all competition would be eliminated on a secondary market253. A notable feature of the CFI’s judgment is its treat-ment of the ‘new product’ requirement254. � e CFI began by noting that this consider-ation was one that should be understood in the context of Article 82(2)(b) of the Treaty which prohibits abusive conduct which consists of ‘limiting production, markets or technical development to the prejudice of consumers’255. However the CFI did not make a ! nding, nor did it require the Commission to have made a ! nding, that any speci! c new product – such as the composite TV listings magazine in Magill – would have resulted from the provision of interoperability information; rather the CFI said that the new product criterion should be read to include a restriction of technical develop-ment256, and that the Commission’s emphasis on this factor was not manifestly incor-rect257. In the Court’s view MicrosoQ ’s refusal meant that consumers were increasingly locked into MicrosoQ ’s platform at the work group server level258; and that competitors were prevented from developing operating systems distinguishable from the Windows systems already on the market259. � e Court concluded with the rather bizarre statement that MicrosoQ had ‘impaired the e� ective competitive structure on the work group ser-ver operating systems market by acquiring a signi! cant market share on that market’260. � e CFI rejected MicrosoQ ’s claim that its behaviour was objectively justi! ed261.

� e Court seems to have taken a somewhat benign approach to the ‘new product’ rule in this judgment262. It can be anticipated that future cases will have to examine further the scope of the new product rule, both as to the ‘newness’ of the product and the possi-bility that a restriction of technical development may su8 ce.

(D) Remedy An obvious di8 culty with a case such as MicrosoQ is to determine an appropriate remedy, and to ensure that there is proper compliance. Courts in the US are reluctant to make positive orders that require supervision263. AQ er the Commission’s decision in Microso@ in March 2004 there were protracted negotiations between the Commission and MicrosoQ as to whether the latter was making the necessary inter-operability information available to the market on ‘RAND’ terms (reasonable and non-discriminatory). � e Commission appointed a Trustee to provide technical advice on compliance264, although the CFI subsequently ruled that the Commission lacked the

252 Ibid, paras 369–436. 253 Ibid, paras 479–620. 254 Ibid, paras 643–665. 255 Ibid, para 643.256 Ibid, para 647. 257 Ibid, para 649. 258 Ibid, paras 650–652. 259 Ibid, paras 653–659.260 Ibid, para 664. 261 Ibid, paras 688–712.262 See Vickers ‘A Tale of Two EC Cases: IBM and Microso@ ’ (2008) 4 Competition Policy International 3.263 See ch 17, p 691 discussing the Trinko case.264 See eg Commission Press Release IP/05/1215, 5 October 2005.



legal power to have done so265. � e Commission decided in July 2006 that MicrosoQ had been guilty of failing to provide interoperability information, as required by its deci-sion, from 16 December 2005 to 20 June 2006, and therefore imposed a daily period-ical payment penalty of €1.5 million on MicrosoQ which totaled €280.5 million266. In February 2008 the Commission imposed a further penalty of €899 million for charging unreasonable prices for the information from 21 June 2006 until 21 October 2007267. In October 2007 the Commission announced that it had ! nally reached agreement with MicrosoQ on compliance with its decision going forward268.

(B) Provision of proprietary information needed for interoperability

DG COMP’s Discussion paper suggests that where proprietary information is required for interoperability that is not protected by intellectual property law, but is ‘merely’ a trade secret, it is not necessary to apply ‘the same high standards’ as those for licences of intellectual property rights269.

(C) Collecting societiesArticle 82 may be applied to the activities of collecting societies, that is to say organ-isations that manage copyright on behalf of authors and publishers; in particular they collect royalties from the media, nightclubs, and other users on behalf of their mem-bers and distribute them in return for a fee. Article 82 has been invoked both by the Commission270 and in private law actions in domestic courts, several of which have reached the ECJ under Article 234 EC271.

� e ECJ has indicated that there is nothing intrinsically objectionable about the establishment of collecting societies, which may be necessary in order that individual artists can obtain a reasonable return for their endeavours272. However the activities of a society may amount to a breach of Article 82 in various ways. Of particular signi! cance in Community Law terms will be the tendency of national societies to discriminate

265 Case T-201/04 Microso@ Corp v Commission [2007] ECR II-000, [2007] 5 CMLR 846, paras 1251–1279.266 Commission decision of 12 July 2006. 267 Commission Press Release IP/08/318, 27 February 2008.268 Commission Press Release IP/07/1567, 22 October 2007; see also Commission MEMO/08/106, 21

February 2008.269 Discussion paper, paras 241–242.270 GEMA JO [1971] L 134/15, [1971] CMLR D35; Interpar v GVL GmbH OJ [1981] L 370/ 49, [1982] 1

CMLR 221; GEMA Statutes OJ [1982] L 94/12, [1982] 2 CMLR 482; BIEM-FPI XIIIth Report on Competition Policy (1983), points 147–150; GEMA XVth Report on Competition Policy (1985), point 81; GVL OJ [1981] L 370/49, upheld on appeal to the ECJ Case 7/82 GVL v Commission [1983] ECR 483, [1983] 3 CMLR 645; the Commission’s decision not to proceed with complaints against SACEM, a French collecting society, was unsuccessfully challenged in Case T-114/92 BEMIM v Commission [1995] ECR II-147, [1996] 4 CMLR 305 and in Case T-5/93 Roger Tremblay v Commission [1995] ECR II-185, [1996] 4 CMLR 305, on appeal to the ECJ Case C-91/95 P [1996] ECR I-5547, [1997] 4 CMLR 211; for comment see Torremans and Stamatoudi ‘Collecting Societies: Sorry, the Community is No Longer Interested!’ (1997) 2 EL Rev 352.

271 Case 127/73 Belgische Radio en Televisie v SABAM [1974] ECR 313, [1974] 2 CMLR 238; Case 22/79 Greenwich Film Production v SACEM [1979] ECR 3275, [1980] 1 CMLR 629; Case 402/85 Basset v SACEM [1987] ECR 1747, [1987] 3 CMLR 173; Case 395/87 Ministère Public v Tournier [1989] ECR 2521, [1991] 4 CMLR 248; Case 110/88 Lucazeau v SACEM [1989] ECR 2811, [1991] 4 CMLR 248.

272 See Case 127/73 BRT v SABAM [1974] ECR 313, [1974] 2 CMLR 238, paras 8–15.



against undertakings from other Member States273. In the case of CISAC the Commission negotiated commitments under Article 9 of the Modernisation Regulation from the International Confederation of Composers and Authors and 18 collecting societies that restrictions would be ended that obliged authors to transfer their copyright only to their own national collecting society and that required commercial users to obtain a licence only from their domestic collecting society, limited to the domestic territory; there is no formal decision yet274.

Other aspects of collecting societies’ activities have been condemned, such as clauses in the constitution which unreasonably restrict an author’s right to act unilaterally and provisions which are unreasonable vis-à-vis the media or which attempt to extend the protection of copyright to non-copyrighted works275. In Basset v SACEM276 the ECJ was asked whether SACEM was entitled to charge a 1.65 per cent ‘supplementary mechanical reproduction fee’ above its normal royalty for performances at discotheques, on juke-boxes and radios, where the recordings in question were imported from other Member States in which no such fee was payable. � e ECJ held that the extra charge was not in principle contrary to Articles 28, 30 and 82, as it amounted to a normal exploitation of copyright and was not an act of arbitrary discrimination nor a disguised restriction on inter-Member State trade.

(D) Miscellaneous cases concerning intellectual property rights

(i) Unlawful acquisition of technologyIn Tetra Pak Rausing v Commission277 the CFI upheld the Commission’s decision278 that it was an abuse of Tetra Pak’s dominant position in the market for cartons and machines for packaging milk to acquire Liquipak and thereby obtain the bene! t of an exclusive licence relating to technology for a new method of sterilising cartons suitable for long-life milk. � is ! nding was despite the fact that the licence complied with the provisions of the block exemption in force at the time on patent licensing agreements.

(ii) Demanding excessive royaltiesIn EuroI x-Bauco v Hilti279 the Commission held that it was an abuse to demand an ‘excessive’ royalty with the sole object of blocking, or at any rate unreasonably delay-ing, a licence of right which was available under UK patent law. � is was seen as part of Hilti’s strategy of preventing competition in respect of its nail cartridges.

In Duales System Deutschland280 the Commission concluded that it was an abuse of a dominant position for DSD, an undertaking that operated a comprehensive system for

273 Re GEMA JO [1971] L 134/15, [1971] CMLR D35; Case 7/82 GVL v Commission [1983] ECR 483, [1983] 3 CMLR 645.

274 Details are available on DG COMP’s website.275 � e most thorough decision on these issues remains the Commission’s decision in Re GEMA JO [1971]

L 134/15, [1971] 1 CMLR D35.276 Case 402/85 [1987] ECR 1747, [1987] 3 CMLR 173.277 Case T-51/89 [1990] ECR II-309, [1991] 4 CMLR 334.278 Tetra Pak I (BTG Licence) OJ [1988] L 272/27, [1990] 4 CMLR 47.279 OJ [1988] L 65/19, [1989] 4 CMLR 677, para 78, upheld on appeal Case T-30/89 Hilti AG v Commission

[1991] ECR II-1439, [1992] 4 CMLR 16, para 99.280 OJ [2001] L 166/1, [2001] 5 CMLR 609, paras 111–113.



the collection and recycling of waste in Germany, to contain a provision in its trademark agreement that its clients would pay a royalty for sales packaging bearing its ‘Green Dot’ trade mark, irrespective of whether the client actually used the services of DSD. � is could dissuade those clients from using the services of competitors. On appeal to the CFI the Commission’s decision was upheld281.

In August 2007 the Commission sent a statement of objections to Qualcomm Inc of the US, the owner of patents in the European standard for third generation (3G) mobile telephony technology, alleging that it had abused its dominant position by failing to license its technology on FRAND (fair, reasonable, and non-discriminatory) terms282. An important issue in this case, if the Commission does decide that Qualcomm is guilty of abusing its dominant position, will be its assessment of how the fairness and reason-ableness of licensing is to be determined in circumstances where a standard-setting procedure enhances the value of patents that are essential for compliance with the standard283.

(iii) Vexatious behaviour and abuse of processIn BBI/Boosey and Hawkes: Interim Measures284 the Commission seems to have regarded it as an aspect of Boosey and Hawkes’ abusive behaviour to have brought vexatious liti-gation against an undertaking for ‘slavish imitation’ of its products285. On one occasion the Commission intimated that it might be an abuse for a ! rm in a dominant position to register a trade mark knowing that a competitor already uses that mark286.

In AstraZeneca287 the Commission adopted an important decision in which, for the ! rst time, it held that it can be an abuse of a dominant position to misuse regulatory procedures. AstraZeneca had a patent for a highly successful drug, Losec. When a patent expires, it is normal for so-called ‘generic’ manufacturers to enter the market and to sell the drugs in question at considerably lower prices than were charged during the period of patent protection. AstraZeneca was found by the Commission to have abused regulatory procedures in two ways. First, it had succeeded in persuading various patent authorities to grant it ‘supplementary protection certi! cates’, extending the period of patent protection, on the basis of misleading information. Second, AstraZeneca held a

281 Case T-151/01 Duales System Deutschland v Commission [2007] ECR II-000, [2007] 5 CMLR 300; for comment see Gremminger and Miersch ‘� e Court of First Instance con! rms Duales System Deutschland’s abuse of dominance in the packaging recycling system’ Competition Policy Newletter Number 3, 2007, 47; the case is on appeal to the ECJ, Case C-385/07 Duales System Deutschland v Commission, not yet decided.

282 See Commission MEMO/07/389, 1 October 2007; see also Piesiewcz and Schellingerhout on the issue of setting standards in ‘Intellectual property rights in standard setting from a competition law perspective’ Competition Policy Newsletter Summer 2007, 36.

283 See Swanson and Baumol ‘Selection of Compatibility Standards and Control of Market Power Related to Intellectual Property’ (2005) 73 Antitrust Law Journal 1; Layne-Farrar, Padilla and Schmalansee ‘Pricing Patents for Licensing in Standard-Setting Organisations: Making Sense of FRAND Commitments’ (2007) 74 Antitrust Law Journal 671; the issues are discussed in ‘Untangling FRAND: what price intellectual prop-erty?’, available at www.oxera.com.

284 OJ [1987] L 286/36, [1988] 4 CMLR 67, para 19.285 On vexatious litigation see further ch 17, pp 704–705.286 Osram/Airam, XIth Report on Competition Policy (1981), point 97.287 Commission decision of 15 June 2005; see De Souza ‘Competition in Pharmaceuticals: the challenges

ahead post AstraZeneca’ Competition Policy Newsletter Srping 2007, 39; Gunther and Breuvart ‘Misuse of Patent and Drug Regulatory Approval Systems in the Pharmaceutical Industry: an Analysis of US and EU Converging Approaches’ (2005) 26 ECLR 669.


uk law

market authorisation that allowed the drug to be sold in a capsule form. AstraZeneca withdrew the capsules from the market, selling them in tablet form instead. � is meant that the generics companies could no longer market their capsules. � e case is on appeal to the CFI288.

� e Commission’s website discloses that it has initiated proceedings against Boehringer, a German pharmaceutical company, alleging that it had infringed Article 82 by ‘misuse of the patent system’ in order to exclude competitors in the market for chronic obstructive pulmonary disease drugs; however there is no explanation of what this misuse consists of289. In January 2008 the Commission announced that it had opened a sector inquiry into the pharmaceuticals sector, which would include an inves-tigation of whether undertakings in the sector were creating arti! cial barriers to entry through practices such as misuse of patents and vexatious litigation290.

In August 2007 the Commission sent a statement of objections to Rambus alleging that it had infringed Article 82 by conducting a so-called ‘patent ambush’. � is refers to the phenomenon of an undertaking participating in the setting of an industry standard, but doing so in a deliberately deceptive manner by not disclosing the existence of patents that would be necessary for anyone making use of the standard. � is means that, once the standard is set, the owner of the patents will be able to demand unreasonable royal-ties from licensees that need access to the technology in question291. � e Commission’s intervention in this case followed an earlier action in the US, where the FTC required Rambus to license its technology for computer memory subject to max imum royalty rates; Rambus was also required to employ a compliance o8 cer to ensure that Rambus’s patents and patent applications are disclosed to industry standard- setting bodies in which it participates. � e FTC’s decision was reversed by a Circuit court and the case is now on appeal: information about this case can be found on the FTC’s website292.

6. UK LAW

(A) Licences of intellectual property rights: the Chapter I prohibition

� e Chapter I prohibition in the Competition Act 1998 applies to agreements that have as their object or e� ect the prevention, restriction or distortion of competition293. � ere

288 Case T-321/05 AstraZeneca v Commission, not yet decided.289 See www.ec.europa.eu/comm/competition/antitrust/cases/decisions/39246/initiations.pdf.290 Commission Press Release IP/08/49, 16 January 2008.291 See Commission MEMO/07/330, 23 August 2007.292 See www.Q c.gov; see also Broadcom Corporation v Qualcomm Incorporated, US Court of Appeals

for the � ird Circuit, 4 September 2007, 501 F 3d 297 [2007] (3d Cir. 2007); for discussion of issues arising from the adoption of standards and intellectual property rights see Ohana, Hansen and Shah ‘Disclosure and Negotiation of Licensing Terms Prior to Adoption of Industry Standards: Preventing Another Patent Ambush?’ (2003) 24 ECLR 644; on patent ambushing more generally see Naughton ‘� e Antitrust Risks of Unilateral Conduct in Standard Setting, in the Light of the FTC’s Case Against Rambus’ (2004) XLIX Antitrust Bulletin 699; Petritsi ‘� e Case of Unilateral Patent Ambush Under EC Competition Rules’ (2005) 28(1) World Competition 25; Farrell, Hayes, Shapiro and Sullivan ‘Standard Setting, Patents and Hold-Up’ (2007) 74 Antitrust Law Journal 603.

293 For a general account of the Chapter I prohibition see ch 9, pp 327–353.



are no speci! c provisions in the legislation on licences of intellectual property rights, and the OFT has not published a guideline on the subject294. As a general proposition it can be anticipated that the Chapter I prohibition will be applied to agreements in the same way as Article 81 EC295. � e possibility exists that some of the jurisprudence of the Community Courts might not be applied to a purely domestic agreement in so far as that jurisprudence rez ects single market considerations that need not be applied within the UK; this is a matter that has yet to be addressed by the UK institutions296.

Perhaps the most important provision of the Competition Act as far as licences of intellectual property rights are concerned is section 10, which provides for so-called parallel exemption297. � is section means that any agreement that is exempt under the EC Technology Transfer Regulation, or that would be if the agreement in question were to have an e� ect on trade between Member States, is also exempt from the Chapter I prohibition. � is means that many agreements are exempt from both EC and UK law, and that there is no need for the UK to adopt a block exemption of its own for technol-ogy transfer agreements.

Section 70 of the Competition Act repealed sections 44 and 45 of the Patents Act 1977298; section 44 prohibited certain tie-in and non-competition clauses, while sec-tion 45 made it possible to terminate, on three months’ notice, patent licences or supply agreements for patented products aQ er the expiry of the original patents. Given the broad ambit of the Competition Act 1998 it was considered that special treatment for these ‘tie-in’ and ‘post-expiry’ provisions was no longer necessary.

(B) Other agreements relating to intellectual property rightsIt is reasonable to assume that domestic law will, subject to the point about single mar-ket considerations, be interpreted consistently with the jurisprudence and decisional practice under Article 81 EC; and that the sections of the Commission’s Technology Transfer Guidelines on matters such as the settlement of litigation and technology pools will be closely followed299.

(C) Anti-monopoly control of intellectual property rights: the Chapter II prohibition and market investigations

� e Chapter II prohibition could apply to abusive behaviour in relation to intellectual property rights; the decisional practice of the Commission and the judgments of the Community Courts would of course be relevant to the application of this prohibition300. � e OFT has said that a ! rm’s conduct is not immune from the Chapter II prohibition purely on the basis that its market power stems from the holding of intellectual prop-erty rights301. In the case of Capita Business Services Ltd and Bromcom Computers plc302

294 A draQ Guideline was published in November 2001, OFT 418, but it was not published in ! nal form.295 See pp 762 � above.296 See ch 9, pp 362–367 for discussion on section 60 of the Competition Act 1998.297 On parallel exemption see ch 9, p 353. 298 See Heal ‘Loosening the Ties’ (1999) 21 EIPR 414.299 See pp 781–786 above. 300 See pp 786–796 above.301 BSkyB OFT Decision, 17 December 2002, available at www.oQ .gov.uk, paras 331–340.302 Weekly Gazette of the OFT, Competition case closure summaries, 26 April–2 May 2003, available at

www.oQ .gov.uk; see also British Standards Institution agrees to grant online licence, OFT Press Release PN 94/03, 7 July 2003.


uk law

Capita gave the OFT voluntary assurances that it would provide ‘interface information’ to a third party to enable it to have access to data on Capita’s server; the case was there-fore closed.

� e market investigation provisions of the Enterprise Act 2002 may also be rele-vant where features of a market are anti-competitive as a result of intellectual prop-erty rights. � ese provisions have been described in chapter 11. � e Competition Commission did publish some reports under the now-repealed monopoly provisions of the Fair Trading Act 1973 dealing with intellectual property issues, including Exhaust Gas Analysers303, Recorded Music304, Historical On-line Database Services305, Video Games306 and Performing Rights307.

303 Cm 2386 (1993). 304 Cm 2599 (1994). 305 Cm 2554 (1994). 306 Cm 2781 (1995).307 Cm 3147 (1996).


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