Thursday, 18 April 2013

Tech Transfer Block Exemption - Some Comments

I know that I promised to write about M&A, but it is coming - be patient! I thought that I post this first on the above topic while my M&A blog is still "under construction" as I recently had an opportunity to participated in the panel discussion organised by the Finnish Industrial Property Association and the Finnish Competition Law Association.

Other panelist were top competition law experts in Finland and as I have been doing mainly other things like technology deals, investments and M&A, I must say that I also personally learned a lot and got some new brilliant ideas! Moreover, I must say that I was impressed by these fellow panelists including Mikko Huimala from Castrén & Snellman, Ilkka Leppihalme from Peltonen LMR and professor Petri Kuoppamäki from the University of Helsinki - they are truly in a league of their own!
According to the consultation:

"In the meaning of the EU competition rules, a technology transfer agreement is a licensing agreement where one party (the licensor) authorises another party or parties, the licensee(s), to use its technology (patent, know-how, software license) for the production of goods and services. The rules on how to assess technology transfer agreements are set out in two instruments, the technology transfer block exemption regulation ("TTBE") and accompanying Guidelines. The TTBE exempts certain categories of licensing agreements concluded between companies that have limited market power and that respect certain conditions set out in the TTBE. Such agreements are deemed to have no anticompetitive effects or, if they do, the positive effects outweigh the negative ones. The Guidelines provide guidance on the application of the TTBE as well as on the application of EU competition law to technology transfer agreements that fall outside the safe harbour of the TTBE."

So let's look at the changes from IP lawyer's perspective:

First, exclusive grant-backs (whether to severable or non-severable improvements like in the previous TTBE) are now on the "grey list". This is good issue in particular as the previous competition law-based distinction to severable and non-severable was very confusing in the first place. Remains to be seen what are the practical effects of this as it would seem to be relatively simple task to draft a license grant just a bit differently and get the same end result.

Second, market share thresholds are slightly modified, but as neither IP lawyers nor competition law lawyers, as Professor Kuoppamäki pointed out, review these in real-life licensing situations, these changes are not very relevant in practice. Still more attention should be paid to competitor and non-competitor definition in order to review the right list of clauses from the TTBE.

Third, non-challenge clauses are also now on the grey-list. Difficult issue, especially, if settlement agreements are considered. Also good point was raised in the discussion that this clause may be an issue from the "social contract law" perspective if you think, e.g., a case where an individual inventor who has just licensed his or her patent to a large international company faces with an invalidation procedure, does it sound fair?

Fourth, relationship between TTBE and other block exemptions are also clarified. However, this is still not "bullet-proof" distinction in particular when one needs to consider a distinction between licensing and R&D. In most of the ordinary technology deals in which I have been involved lately, R&D block exemption would seem to be applicable still.

Finally, technology pools and reverse payment settlements I leave outside this blog, but please tell your views on those and I promise to share my opinions.

In conclusion when thinking about Finnish industry in general, I would have hoped for more specific guidance on those contractual measures licensors can use to protect their technology (limitations to own use and R&D are hardcore between competitors and gre-listed between non-competitors). In many cases these agreements are in the grey-zone and I would argue that Finnish entities are typically more often on the licensee-side than licensor- side (some telecom manufacturers excluding) so in addition to market efficiency views typically emphasised by competition lawyers we could also consider freedom to operate view to ensure our domestic incentives to innovate. See more on the below link (unfortunately only in Finnish), and definitely this draft TTBE is worth reading: