Submissions on the Transfer of Technology Block Exemption Review Report

July 22, 2002

Brussels, 19 July 2002

[Please scroll down for the list of individual submissions and downloads]

Summary of Submissions

[...] The comments confirm that a review of the TTBE is necessary. There is wide agreement that the EU competition policy approach to licensing agreements needs to be revised, that the TTBE is too formalistic and narrow in scope and that a more economic approach is required. There is also general support for the idea to replace the TTBE by a new umbrella-type block exemption regulation in combination with guidelines, as already in place for vertical and horizontal agreements. The guidelines should explain that what falls outside the block exemption regulation is not illegal, and should clarify what is likely to fall outside or inside Article 81(1) and 81(3). The guidelines should stress that licensing can often be pro-competitive as it can facilitate diffusion, reduce duplication of R&D, strengthen the incentive for the initial R&D, spur incremental innovation and generate down-stream competition.

A good number of the submissions stress the need and advantages of greater consistency of a future policy with Block Exemption Regulations 90/1999 and

2659/2000 for vertical and R&D agreements.2 Besides the advantages of increased consistency and predictability of policy it is mentioned that this would also bring EU policy closer to the US approach to licensing agreements. Some submissions favour a strict consistency with the US approach.

Specific comments

Most of the specific comments follow the structure of the Report, where in chapter 5 a number of specific issues like the scope of the TTBE and certain restraints are reviewed and in chapter 6 a possible framework for a future policy is presented. As could be expected the opinions expressed in the submissions are more diverse and differentiated when addressing such particular issues.

As to the question of extending the scope of a new block exemption regulation beyond patent and know-how licensing, many submissions indicate that it would be a good idea to cover also software licensing agreements, although they concern copyright.

It is for instance remarked that software distribution agreements where the licensee makes the copies or modifies the software are not covered by Block Exemption Regulation 90, while they deserve similar treatment as distribution agreements where the distributor does not copy the software.

On the issue whether the scope should be extended more in general to all IPRs, in particular to copyright, trademarks and design rights, the opinions expressed are neatly divided between those in favour and those against. Some submissions present both the arguments in favour and the arguments against.

The ones in favour stress the increased legal certainty, the difficulty to assess whether an IPR is ancillary in mixed agreements and that the general principles to be applied should be the same for all or most IPRs.

The ones against stress that the different IPRs involve different anti-trust concerns that require different treatment. Trying to cover them all in one BE would require different sub-sections and would risk to complicate the regulation too much.

Many of them argue that a distinction should be made between industrial property rights, where licensing involves a technology transfer, and intellectual property rights. The latter should not be covered or should be covered later in a separate regulation.

One submission questions whether Council Regulation 19/65 enables the Commission to adopt a block exemption regulation for non-industrial property rights. One submission mentions that also licensing/leasing for the use of self-reproductive biological material should be covered. Some argue that also licensing to do development work, in addition to licensing to produce or sell, should be covered.

As to the question whether to also cover multi-party licensing two opinions are expressed. Most submissions that express an opinion on this issue plead for the coverage of multi-party licensing by a future block exemption regulation, though often only below a rather low market share threshold and/or limited to situations of complementary or blocking IPRs.

These submissions therefore support the necessary changes that would need to be made to Council Regulation 19/65 for that purpose. The increased importance of these type of agreements is mentioned as the most important reason. A number of the submissions speak out against coverage.

Some because they consider that the issues will be too complicated to be handled in a block exemption regulation and are better addressed in guidelines, others because they would not like to see a new block exemption regulation being delayed by the amendment of Council Regulation 19/65 . Some argue that also patent pools for standard setting should be dealt with in the guidelines.

As to the issue of distinguishing between licensing between competitors and between non-competitors, practically all who express an opinion in this respect agree to the principal importance for a future policy to make this distinction. Many express the need to make this distinction as clearly as possible. There is general agreement that possible competition concerns depend very much on this distinction and that policy should be more strict towards licensing between competitors than between non-competitors.

The main question is whether the technology of licensor and licensee are competing, that is whether the licensor and licensee would be competitors absent the license. The Commission is asked to provide clarification on this in guidelines, in particular explaining when an innovation can be considered such a breakthrough that existing technologies can no longer be considered real substitutes.

As to the use of market share and dominance thresholds in a future block exemption regulation, three types of comments can be distinguished, provided by roughly equal numbers.

  • The first group submits that in the usual situation where licensing takes place it is often too difficult to define markets as it may concern new products or new technologies with unclear function and demand. In addition it is argued that market shares may often be high without implying market power and that the use of such thresholds would stifle licensing and thereby innovation.
  • The second group recognises certain of the problems to define markets but does not consider these as an impediment to the use of market share thresholds. They consider the use of market share thresholds as unavoidable for a proper competition policy. They stress that in the guidelines the Commission should provide maximum clarity on market definition issues and which markets to look at (product market ñ technology market ñ innovation market).
  • The third group supports the use of market share thresholds without reservations.

    Of the latter two groups most submissions support the thresholds as proposed in the policy framework in the Report: 25% market share for licensing between competitors, 30% market share for licensing between non-competitors when it concerns restrictions that do not relate to the exploitation of the IPR, and a dominance threshold when the restrictions do relate to the exploitation of the IPR. A few submissions indicate that these thresholds should be lowered, also some are in favour of higher thresholds.

    A small group of commentators specifically mentions that a dominance threshold would be even more difficult to apply than a market share threshold. Most of these commentators are against the use of any market share threshold and would like to see a future block exemption regulation also to cover licensing agreements by dominant companies, with withdrawal as the only corrective mechanism in place.

    Others draw the opposite conclusion and favour the use of only a market share threshold and not in addition a dominance threshold for licensing between non-competitors. Others also favour only a market share threshold for licensing between non-competitors as they find the distinction between restrictions that do relate and those that do not relate to the exploitation of the IPR unclear and formalistic.

    Two submissions favour the use of a technology or innovation pool approach, relying on the counting of competing technologies or research pools instead of market shares. It is argued that it is easier to count technologies, it is better suited to address the relevant competition problems and it would also allow licensing by technology leaders to be block exempted.

    As to the exemption of non-exclusive licensing agreements, all those that expressed an opinion favoured such inclusion. [...]

    Full text of the DG's summary of the comments

    Download page for all 33 replies.

    Eleven submissions were from industry and trade associations, seven from law and IPR societies, five from individual law firms, five from national competition authorities (UK, IT, FR, NL, FI), two from individual companies and three from consultants and others.

    Competition DG

    http://europa.eu.int/comm/dgs/competiti on/index_en.htm

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