Question Q194 National Group: United Kingdom Title: The ... - AIPPI

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Article 81(1) of the EC Treaty prohibits, ‘as incompatible with the common market,’ agreements ‘that may affect trade between member states and have the object or effect of preventing, restricting or distorting competition within the common market.’ However, agreements falling within Article 81(1) may be exempted under Article 81(3) or, if they fall within the defined parameters of a block exemption for the particular type of agreement, they may be automatically exempted. There are block exemptions for licences of patents and/or know-how (the Technology Transfer block exemption (Commission Regulation (EC) No 772/2004 (OJ 2004 L123/11) which replaced Commission Regulation (EC) No 240/96 as of 1 May 2004), for agreements concerning research and development or specialisation and for vertical agreements). Joint ventures that are ‘concentrative’ will in general avoid sanction (Commission control) unless they are large enough to fall within the scope of Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (ECMR), which provides a largely self contained mechanism of control. Other joint ventures, termed ‘co-operative’ fall to be considered under Article 81 and any applicable block exemptions. The Commission has issued a Notice concerning the assessment of horizontal co-operation agreements under Article 81 (the Guidelines) (OJ 2001 C3/02). Competition issues can arise in collaborative R&D agreements which result in IPRs being co-owned. The Commission's being concerned that collaborators (whether they are actual or potential competitors) reduce competition. Such agreements, if between large enough companies who are potential competitors, will in practice almost inevitably contain restrictions which might on their face breach Article 81, irrespective of whether or not the collaboration is undertaken by means of a separate joint venture vehicle. The Commission accepts it is in the public interest to encourage co-operation in R&D and in the exploitation of the results thereby generated, which requires a balanced approach to the restrictions of Article 81. The Research and Development Block Exemption (the R&DE) (Commission Regulation (EC) No 2659/2000 on the application of Article 81(3) of the EC Treaty to categories of research and development (OJ 2000 L304/7)), reflects this approach. The R&DE exempting from Article 81 certain agreements for joint R&D and joint exploitation (including assignments or licensing of intellectual property rights or the communication of knowhow to third parties) of the results of that R&D. However, the R&DE applies only where the agreement meets certain criteria such as: • All parties have access to the results of the joint R&D for the purposes of further research or exploitation (Article 3(2), R&DE). • Where the parties are not competing undertakings at the time the agreement is entered into, the right to exploit the results may be limited to one or more technical fields of application (Article 3(3)). • The joint exploitation relates to results which are protected by intellectual property rights, or constitute know-how, which substantially contribute to technical or economic progress, and the results are decisive for (that is, central to) the manufacture of the contract products or the application of the contract processes (Article 3(4)).
• Undertakings charged with manufacture by way of specialisation in production must fulfil orders for supplies from all the parties, except where the R&D agreement also provides for joint distribution (Article 3(5)). • Where the parties are not competing undertakings, the R&DE will apply for the duration of the R&D programme and for seven years afterwards if the results are to be jointly exploited. If the parties are competing undertakings, that same period will apply only if the parties' combined market share does not exceed 25% of the market for products capable of being improved or replaced by the contract products. In either case, after the seven-year exploitation period, the exemption may continue to apply indefinitely provided the parties' continued production of the contract products and other substitutable products does not exceed 25% of the total market for such products. All conditions under which undertakings pursue R&D are permitted, subject to certain conditions and to the exclusion of certain hardcore restrictions, such as: • A prohibition on challenges to the validity of intellectual property rights which the parties hold in the EU and which are relevant to or protect the results of the R&D (but provisions which allow a party to terminate the R&D agreement if its intellectual property rights are challenged by the other are allowed). • A prohibition on the putting of the contract products on the market, or the pursuit of an active sales policy for them, in territories within the EU that are reserved for other parties after the end of seven years from the time the contract products are first put on the market in the EU. • A requirement to refuse to meet demand from users or resellers in their respective territories who would market the contract products in other territories within the EU. Certain restrictions are specifically permitted: • Setting production targets where the exploitation of the results includes the joint production of the contract product. • Setting sales targets and fixing prices to be charged to immediate customers where the exploitation of the results includes the joint distribution of the contract products. (Article 5(2), R&DE.) (2) UK Law UK competition law mirrors EU law to a great extent, the Chapter I prohibition under the Competition Act 1998 which mirrors Article 81 is similarly subject to various exemptions. Although the substantive legal principles relevant to the application of the Chapter I Competition Act prohibition to agreements and the Chapter II Competition Act prohibition to conduct are similar or identical to those under Articles 81 and 82 of the EC Treaty respectively, the licensing of IP rights may be different in some respects. (3) Compulsory licences in patents One method by which the UK deals with anti-competitive practices is that of compulsory licences, per s.48 Patents Act 1977. Therefore in the scenario that
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Question Q194 National Group: United Kingdom Title: The ... - AIPPI

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