Research and development drive economy and competition. This is so far non-controversial, but what happens after someone´s creative spark has been developed further into a patent or know-how and other companies want to use it too? This is when technology transfer agreements (TTAs) come into play. Last week, the European Commission published its findings of the evaluation of the EU competition rules on such agreements.
In 2014, the Commission adopted specific rules on TTAs, namely the Technology Transfer Block Exemption Regulation (TTBER) and the accompanying Guidelines (Guidelines). Eight years later, the Commission launched a review of the TTBER and the Guidelines, which will both expire on 30 April 2026. The findings have now been published in a staff working document.
A quick recap: What is the TTBER again?
The TTBER regulates certain technology transfer agreements. In such an agreement, one company authorises another to use technology rights for the production of goods or services. These technology rights include patents, know-how, copyright in software and/or certain (other) intellectual property rights.
In general, TTAs are considered to have pro-competitive effects by facilitating the diffusion of technology, encouraging innovation, generating product market competition and incentivising research and development. However, negative effects through TTAs or restrictions in such agreements are also possible, as they may facilitate collusion or harm inter- or intra-technology competition, e.g., by reducing the incentives to innovate.
According to the TTBER, restrictions in a TTA are exempted from the cartel prohibition under two conditions:
- the market shares of the parties do not exceed the thresholds on the relevant technology and product markets (20% in case the parties are competitors, 30% in case the parties are not competitors), and
- the agreement does not include any so-called “hardcore restrictions”.
The TTBER also foresees a short list of so-called excluded restrictions, which are not exempted from the cartel prohibition. In addition, the Guidelines inter alia include a safe harbour for TTAs which fall outside of the scope of the TTBER (provided the agreement does not contain hardcore restrictions) as well as regulations about technology pools.
The results of the evaluation
The goal of the Commission’s evaluation was to gather evidence on the function of the TTBER and the Guidelines in order to determine whether the Commission should let the rules expire, prolong their duration or revise them.
For the assessment, the regulator used different means, namely a call for evidence, a public consultation, a specific consultation of national competition authorities, a stakeholder workshop and an external evaluation support study.
As a result, the EC found the following:
- The TTBER and the Guidelines have been largely successful for an effective, efficient and uniform application of EU competition law and have assisted companies with their self-assessment.
- The objectives (exempting pro-competitive agreements and providing legal certainty) of the TTBER and Guidelines remain relevant.
Furthermore, the Commission found room for improvement regarding the following areas:
- Dealing with practical difficulties in applying the market share threshold to technology markets;
- Broadening the scope to cover the licensing of data and data rights;
- Looking closer at the regulations regarding technology pools to ensure that only compliant pools benefit from the safe harbour;
- Considerations whether the Commission should provide guidance on the assessment of licensing negotiation groups (LNGs).
What does the case law say on the matter?
If you are finding it difficult to remember any bigger cases on the TTBER, you are not alone. Even the Commission had to note that compared to other block exemption regulations, there are very few enforcement cases and judgements by courts. Even the national competition authorities were unable to identify relevant cases in their national courts.
So, does that mean that the TTBER does not really have much relevance in practice? Not so in the Commission´s view, which stated that “the low number of relevant cases or judgements is not in itself evidence of a lack of relevance or effectiveness of these instruments” and finds that it simply has fewer sources for the evaluation, and therefore the findings are mostly based on stakeholder feedback.
Admittedly and as the Commission stated, the nature of the TTBER and the Guidelines is to provide guidance for a self-assessment by companies. Therefore, a low number of cases could also be interpreted as the regulation being very effective. Considering the conducted public consultation, where 16 stakeholders were asked if the TTBER and the Guidelines provide legal certainty for the self-assessment of TTAs, the answers point into one direction: Regarding the TTBER, 69% and regarding the Guidelines, 56% of respondents found the respective framework to be effective in providing legal certainty. However, for me as a practitioner, the missing number of cases leaves a little question mark.
Licensing negotiation groups – a new topic?
LNGs are groups in which technology implementers join forces to negotiate licences together. At the moment, neither the TTBER nor the Guidelines provide any guidance on LNGs. As there seems to be an increasing interest in LNGs from some stakeholders, the Commission is currently assessing the impact of LNGs on competition.
In discussions with the Commission, different views were exchanged. Those in favour, namely the technology implementers, are interested in LNGs to strengthen their bargaining power. Opponents argue that the amount of necessary coordination and information exchange raises competition concerns. Unsurprisingly, technology right holders see no need for LNGs to be covered in the TTBER or Guidelines, stating that a case-by-case assessment would be sufficient.
The German Federal Cartel Office (FCO) had to deal with a LNG just this summer (see our post here). As a result, the FCO tolerates the launch of the “Automotive Licensing Negotiation Group” (ALNG), a group of automotive companies with the goal to negotiate jointly conditions for the acquisition of licenses for so-called standard essential patents (SEPs) for general mobile communications technologies. The FCO recognized different potential competition issues but stated it would tolerate this cooperation because the activities are limited to standards that are not specific to the automotive sector.
Outlook
Considering the findings of the evaluation, letting the TTBER expire without a replacement seems to be off the table. As a next step, the Commission will now start an impact assessment to examine policy options for a revision of the rules and is planning a public consultation for December 2024. It does not seem unlikely that an updated TTBER or updated Guidelines will ultimately also include some guidance on LNGs. Whether updated rules will finally lead to relevant decisions and judgements remains to be seen.
Photo by Madison Oren on Unsplash
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