Block Exemptions [EU]

De minimis notice:

Exemption for agreements of minor importance

Notice on agreements of minor importance which do not appreciably restrict competition (De Minimis Notice)

Article 101(1) Treaty on the Functioning of the European Union  prohibits agreements between businesses that are liable to prevent, affect or distort competition within the EU.
The Court of Justice of the EU (CJEU) has consistently recognised that this article does not apply where the agreement has no appreciable impact on trade or competition within the EU.

The Notice provides a safe harbour* for agreements between businesses which the Commission considers to have no appreciable effects on competition. This safe harbour applies on condition that:

the market shares of the undertakings concluding those agreements do not exceed
10% for agreements between competitors or
15% for agreements between non-competitors; and
the agreements do not have as their object to restrict competition.

To assist businesses, the notice is accompanied by a Staff Working Document setting out guidance on restrictions of competition ‘by object’.

Communication from the Commission — Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice) (OJ C 291, 30.8.2014, pp. 1-4)

Exemption for specialisation agreements

Commission Regulation (EU) No 1218/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialisation agreements provides a block exemption for specialisation agreements and, in doing so, aims to ensure effective protection of competition and provide adequate legal security for the parties to specialisation agreements.

Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) is not applicable to specialisation agreements * (including joint production agreements), provided the agreement does not contain any hardcore restrictions of competition and the parties’ combined market share does not exceed 20 %.

The exemption provided for in Regulation (EEC) No 2821/71 also extends to specialisation agreements containing provisions relating to the assignment or licensing of intellectual property rights so long as those provisions are not the primary object of such agreements, but are instead directly related to and necessary for their implementation. Moreover, this regulation also provides an exemption where the parties accept exclusive purchase or supply obligations or jointly distribute the products they manufacture under a specialisation or joint production agreement.

Market share is calculated on the basis of the market sales value or, if that data is not available, then estimates based on other reliable market information may be used to establish the market share of the parties. If, after a certain time, the market share exceeds the 20 % threshold but remains below 25 %, the exemption continues to apply for two years. However, if the market share rises over 25 %, the exemption only applies for the following one year.

Hardcore restrictions

The exemption does not apply to specialisation agreements aimed, directly or indirectly, at:

• the fixing of prices;
• the limitation of output or sales;
• the allocation of markets or customers.

Exemption for R&D agreements

This regulation provides a block exemption regulation for research and development (R&D) agreements and, in doing so, aims to ensure an effective protection of competition whilst providing adequate legal security for parties to R&D agreements.

Commission Regulation (EU) No 1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreements.

In accordance with Regulation (EEC) No 2821/71, however, this regulation provides an exemption for R&D agreements which contain provisions relating to the assignment or licensing of intellectual property rights in order to carry out the joint R&D, paid-for R&D or joint exploitation, so long as those provisions are not the primary object of such agreements, but are instead directly related to and necessary for their implementation. The regulation also block exempts the joint exploitation of the results of R&D carried out by the parties under the regulation. This regulation replaces Regulation (EC) No 2659/2000, which expired on 31 December 2010.

Conditions for exemption

To be exempted, the agreement must state that all the parties have full access to the final results of the R&D, including any resulting intellectual property rights and know-how, for the purposes of further R&D and exploitation. If the parties limit their rights of exploitation, access to the results for the purposes of exploitation may be limited accordingly.

Where the agreement only provides for joint R&D or paid-for R&D, each party must have access to any pre-existing know-how of the other parties concerned, if this know-how is indispensable for the exploitation of the results. This exchange of pre-existing know-how may be compensated, but the compensation must not be so high as to effectively prevent such access.

Any joint exploitation may only concern results which are protected by intellectual property rights or constitute know-how and which are indispensable for the manufacture of the contract products or the application of the contract technologies.

Market share threshold and duration of exemption

Where the parties to the R&D agreement are not competing undertakings, the exemption provided for by this regulation is applicable for the duration of the R&D. Where the results are jointly exploited, the exemption continues to apply for seven years after the contract products or contract technologies are first put on the EU market.

Where the parties are competing undertakings, the exemption is applicable only if, at the time the R&D agreement is entered into:

in the case of joint R&D agreements, the combined market share of the parties does not exceed 25 % on the relevant product and technology markets;
in the case of paid-for R&D agreements, the combined market share of the financing party and all the parties with which the financing parties has entered into R&D agreements, relating to the same contract products or contract technologies, does not exceed 25 % on the relevant product and technology markets.
At the end of the seven years duration, the exemption shall continue to apply as long as the combined market share of the parties does not exceed 25 % on the relevant markets.

Hardcore restrictions

The exemption does not apply to R&D agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object:

the restriction of the freedom of the parties to carry out R&D in an unrelated field;
the restriction of the freedom of the parties to pursue R&D in a related field after the completion of the R&D agreement concerned;
the limitation of output or sales, with certain exceptions.

Excluded restrictions

The exemption does not apply to the following obligations contained in R&D agreements:

the obligation not to challenge the validity of related intellectual property rights after completion of the R&D;
the obligation not to grant licences to third parties to manufacture the contract products or to apply to contract technologies, unless the agreement provides for the exploitation of the results by at least one of the parties and such exploitation takes place in the internal market vis-à-vis third parties.

Key terms used in the act

Research and development agreement: an agreement entered into between two or more parties, relating to the conditions under which the parties pursue:
joint research and development of contract products or contract technologies and joint exploitation of the results of that research and development;
joint exploitation of the results of research and development of contract products or contract technologies jointly carried out pursuant to a prior agreement between the same parties;
joint research and development of contract products or contract technologies excluding joint exploitation of the results;
paid-for research and development of contract products or contract technologies and joint exploitation of the results of that research and development;
joint exploitation of the results of paid-for research and development of contract products or contract technologies pursuant to a prior agreement between the same parties;
paid-for research and development of contract products or contract technologies excluding joint exploitation of the results.

Ensuring technology transfer agreements respect competition rules

Licensing agreements that restrict competition are contrary to European Union (EU) competition rules. However, such agreements may also have positive effects that outweigh their restrictive effects on competition. A new ‘block exemption’* regulation and guidelines relating to technology transfer agreements* create an area of certainty for many licensing agreements.

Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements.

Under intellectual property law, holders of intellectual property rights are granted certain exclusive rights. These permit them to prevent unauthorised use of their intellectual property as well as to exploit their property, in particular by licensing it to third parties. Technology transfer agreements concern the licensing of technology and may be bilateral or multilateral (‘patent pools’*).

In March 2014, the European Commission adopted a Technology Transfer Block Exemption Regulation (TTBER), replacing a 2004 text. It clarifies how EU competition law (in this case, Article 101 of the Treaty on the Functioning of the EU) applies to certain categories of licensing agreements and the criteria used to assess these agreements. Like its predecessors, it is accompanied by guidelines which provide guidance on the application of the rules.

Scope and exemptions

The TTBER exempts licensing agreements between companies that have limited market power (i.e. market share of under 20 % for agreements between competitors and 30 % for agreements between non-competitors), and that fulfil certain conditions. These are deemed to have no anti-competitive effects or that, if they do, the positive effects outweigh the negative ones and thus do not contravene EU antitrust rules.

The TTBER only applies to research and development (R & D) agreements if the specific block exemption regulations (BERs) on R & D agreements and on specialisation agreements* are not applicable.

The TTBER applies only to bilateral agreements; the guidelines also cover patent pools.

Main changes introduced:

a new test to determine whether certain clauses in a technology transfer agreement (in particular concerning purchases of raw material or equipment from a licensor or the use of the licensor’s trademark) are exempted from Article 101 of the TFEU, together with the technology transfer agreement itself;
passive sales restrictions* between licensees are added to the list of ‘hardcore’ restrictions listed in Article 4 (practices deemed so serious that they, together with the rest of the agreement in which they are found, are excluded from the safe harbour of a BER) and can never be exempted by the TTBER;
all exclusive grant-back obligations* will fall outside the TTBER safe harbour (non-exclusive grant-back obligations however remain covered);
termination clauses allowing the licensor to terminate the license agreement if the other party challenges the validity of the licensed technology will fall outside the TTBER safe harbour.

Application

The new rules apply not only to agreements concluded after its entry into force (1 May 2014). Agreements under the previous regime had to be adapted to the new rules by 30 April 2015.