Courtney Doagoo is a doctoral student at the University of Ottawa, Faculty of Law.
On December 6 2011, the European Commission launched a public consultation to review the current regulatory regime surrounding “EU antitrust rules for the assessment of technology transfer agreements” for “patents, know-how and software licensing”. The aim of the public consultation is to gather information from relevant stakeholders (citizens, consumer interest groups, public authorities and the business community), in an effort to review and possibly reform competition and licensing rules in a way that would “strengthen the incentives for research and innovation, [and] facilitate the diffusion of intellectual property and stimulate competition”.
Technology transfer agreements are meant to facilitate and increase innovation, growth and competition. However, these agreements may, in certain circumstances, also have the undesirable effect of restricting competition. Article 101 of the Treaty on the Functioning of the European Union is a general rule enacted to prohibit the possible restriction of competition between companies, and also applies to the restriction of competition where licensing agreements are concerned. There are two additional instruments which are used to prohibit the restriction of competition specifically designed for technology transfer agreements: the Technology Transfer Block Exemption Regulation (TTBER) and the Guidelines for the Assessment of Technology Transfer Agreements (Guidelines).
The TTBER grants a safe harbor for technology transfer agreements (in cases where agreements appear to be “non problematic”) from Article 101, while the Guidelines provide instruction for the implementation of the TTBER, as well as on transfer agreements that do not qualify for the safe harbor. The consultation was prompted by the imminent expiry of the above instruments, which were originally enacted in May 2004.
The consultation was launched after the release of a study commissioned by the European Commission, Directorate General for Competition, conducted by Dr Pierre Régibeau and Dr Katharine Rockett, titled “Assessment of potential anticompetitive conduct in the field of intellectual property rights and assessment of the interplay between competition policy and IPR protection”.
The purpose of the study was to examine selective aspects of the “interface between competition law and patent law” by undertaking a review of recent economic analysis and literature on the Technology Transfer Guidelines. The authors caution that the study is not meant to be read as a ‘policy document’, rather, it is intended to act as a future guide for policy evaluation based on ‘economic foundations’.
The body of the study is divided into two general sections. The first section includes an analysis of the effects of intellectual property contracting on competition – specifically as it relates to patent thickets, cross-licensing, grant-backs, and pass-through agreements. The second section illustrates an overview of the impact of current merger policies, specifically in the context of licensing arrangements.
Overall, the 142-page study reveals many interesting insights and concludes with 16 recommendations that highlight issues for further consideration and analysis in future policy discussions on competition law and technology transfers. These recommendations reveal that there are an abundance of deficiencies – including the lack of empirical evidence and theoretical literature in many areas of the study – consequently rendering the depth of the study short of what the authors originally intended it to encompass.
For example, although ‘pass-through’ agreements – which are defined in the report as an instance where the “license of technology to a manufacturer also guarantees that clients using the manufacturer’s output in their own products are protected from infringement claims by the licensor upstream” – are an important aspect of licensing, the lack of case law concerning these agreements causes much uncertainty as to the direction reform should take in this area (Régibeau & Rockett, 101).
The authors also warned against the push towards reducing the safeguards guaranteed by competition law in cross-licensing and patent pool agreements. They argue that even in sectors with a higher incidence of patent thickets, the evidence should demonstrate “that there are actual thickets that would be cleared by the agreement” and justification should be sought as to whether or not clearing thickets is even beneficial to competition (Régibeau & Rockett, 96).
Based on the recommendations made in the study, it is evident that the Directorate General for Competition has a large task ahead. The study and ensuing public consultations are only preliminary steps necessary for a competent and accurate review, one which may inevitably affect the future of technology transfer agreements within the European Union.