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Commission adopts new Regulation on technology transfer agreements

The Commission has adopted a new Regulation on technology transfer agreements. The Regulation, which will come into force on 1 April 1996, is aimed at promoting innovation and technology transfer in the European Union. The new Regulation will contribute to this goal by substan...
The Commission has adopted a new Regulation on technology transfer agreements. The Regulation, which will come into force on 1 April 1996, is aimed at promoting innovation and technology transfer in the European Union. The new Regulation will contribute to this goal by substantially simplifying the rules relating to patent licensing agreements, particularly through the harmonization of existing Regulations in this area.

The Regulation is the result of a long consultation process involving the Member States, the other Community institutions and the economic sectors concerned. The text being proposed aims to ensure the effective application of competition rules to technology licensing agreements whilst avoiding unnecessary administrative procedures, guaranteeing the legal security of companies and contributing to the dissemination of new technologies.

The main elements of the new concept, presented by Commissioner Karel Van Miert, can be summarized as follows:

- An automatic exemption is granted for all licensing agreements which include territorial restrictions between parties or between licensees. A licensing agreement including such restrictions does not, therefore, need to be notified to the Commission;

- A number of obligations, which may lawfully be inserted by the contracting parties into the agreement (such as the right for the licenser to terminate the agreement in the case of challenges by the licensee of the validity of the patent, the confidential nature or importance of the know-how involved, or the obligation for the licensee to manufacture and commercialize the patented product);

- A "black list" of clauses or restrictions whose presence in an agreement would preclude exemption by category (limitations on price and quantity, prevention of exploitation of competing technologies, clientele restrictions between competing manufacturers, obligation on the licensee to cede improvements made to the technology, territorial restrictions exceeding the time limit exempted);

- An opposition procedure under which the exemption is extended to agreements including additional competition restrictions not expressly mentioned in the Regulation, on the condition that these agreements have been notified to the Commission, and that the Commission has not notified its opposition within four months.

The Regulation thus reduces the discrepancies existing between rules on patent licensing agreements and know-how licensing agreements and eliminates, or places under the opposition procedure, several clauses which previously prevented exemption by category. It also foresees new licit clauses aimed at increasing the respect of the contractual freedom of the parties concerned.

This increased flexibility, which will benefit the great majority of Community operators, is, nevertheless, accompanied by a clear warning to companies holding a strong market position. Thus a market-share threshold of 40% is foreseen which, if exceeded, allows the Commission to withdraw the advantage of the Regulation in cases where these companies managed, thanks to exclusive licenses, to monopolize the product market and prevent the access of third parties to new technologies.

Transitionary arrangements have been made for the continuation of patent licensing agreements falling under the previous Regulation of 1984 in the period preceding the entry into force of the new Regulation on 1 April 1996.
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