EU and UK competition rules updated around tech licensing

In the EU, a revised Technology Transfer Block Exemption Regulation (TTBER) and revised Technology Transfer Guidelines (‘the guidelines’) enter into force today, 1 May. The revisions, which replace the 2014 versions, follow a four-year review by the European Commission into the functioning of the 2014 TTBER and related guidelines and aim to address concerns raised from a wide range of stakeholders.

In the UK, a new Technology Transfer Agreements Block Exemption Order (TTBEO) – which was subject to separate review and consultation by the UK government and the Competition and Markets Authority (CMA) – also enters into force today, 1 May. The TTBEO replaces the 2014 TTBER which was “assimilated” into UK national law following Brexit. The CMA is currently consulting on draft new guidance for the UK TTBEO regime.

A one-year transitional period, until 30 April 2027, applies under both the EU and UK regimes for existing technology transfer agreements that comply with the old TTBER requirements but not the new rules. New technology transfer agreements implemented from today must immediately comply with the new rules.

The key changes in the new EU regime are as follows.

Clearer market share thresholds

The TTBER regime applies to licensing agreements where the licensors and licensees’ market shares do not exceed 20% (if the parties are competitors) or 30% (if the parties are non-competitors).

The Commission’s review confirmed well-known difficulties in applying these market share thresholds in practice, and the updated TTBER and guidelines provide two main clarifications on this front:

• Technologies that have not yet generated sales of contract products will be treated as holding a market share equal to zero (and so will fall under the thresholds).
• The grace period during which the block exemption continues to apply where parties' market shares exceed the thresholds has been extended from two to three years, providing greater certainty where market shares fluctuate due to new technology launches.

New guidelines on data licensing

Data licensing agreements are increasingly common, but they were not covered under the 2014 TTBER and guidelines. The revised guidelines include a dedicated section on data licensing which:

• confirms that the TTBER can apply where licensed data qualifies as an existing technology right, such as production know-how
• extends TTBER principles to “those types of data that most closely resemble the technology rights covered by the TTBER even though the data does not qualify as one of the technology rights covered by the TTBER”. The Commission specifies that is referring here to databases protected by copyright or the database ‘sui generis’ right, with a case-by-case assessment required for other data types
• clarifies that information exchange in the context of database licensing will not typically restrict ‘competition by object’ – broadly, a practice so inherently harmful to competition by its very nature that it is deemed illegal without any need for analysis of the actual market effect – although exchanges going beyond what is objectively necessary will be assessed under the Commission’s Horizontal Guidelines
• confirms that data-sharing mandated by the EU’s Data Act 2023 will generally comply with Article 101 of the Treaty on the Functioning of the EU, except where used as a cover for anti-competitive conduct such as price fixing.

Strengthened technology pool conditions

Technology pools are arrangements through which two or more parties assemble a package of technology rights for licensing out to contributors to the pool, and/or to third parties. They typically arise in the context of industry standards and standard essential patents.

The 2014 guidelines provided a ‘soft safe harbour’ for technology pools that concerned essential technologies and met certain other criteria. The revised guidelines provide clarifications on how some of these criteria are to be established:

• To strengthen the existing condition that only essential technology rights are pooled, the guidelines require the pool to disclose in an effective manner to potential and existing licensees both the individual rights included in the pool and the methodology used by the pool to assess their essentiality
• Pools must avoid ‘double dipping’ – that is, they must ensure that licensees are not charged more than once for the same technology rights. In addition, the existing condition that the pooled rights must be licensed out on ‘fair, reasonable and non-discriminatory’ (FRAND) terms has been amended to clarify that this also applies to the licences granted by the pool itself.

New guidelines on licensing negotiation groups

Licensing negotiation groups (LNGs) – where implementers jointly negotiate licence terms with technology holders – were not addressed in the 2014 version of the guidelines. The revised guidelines distinguish genuine LNGs from buyer cartels, noting that transparent LNGs that limit their activity to licence negotiations generally do not restrict competition by object.

Reflecting feedback from the review, the Commission decided not to include a safe harbour for LNGs in the revised guidelines, noting that: “LNGs are a relatively new type of agreement, for which there is limited enforcement experience. There was therefore a risk that the conditions of the safe harbour might not address all the possible competition concerns”.

Other amendments

The TTBER now includes definitions of "active sales" and "passive sales", aligned with the recently revised Vertical Block Exemption Regulation. Guidance on the competitor/non-competitor distinction and settlement agreements has been updated to reflect recent case law.

The UK position

The provisions of the new the UK TTBEO are for the most part in alignment with those of the TTBER, but there are some important distinctions between the two regimes.

The TTBEO includes an alternative to the 20%/30% market share thresholds, which allows the exemption to apply to arrangements where there are three or more independent competing technology rights. Moreover, the TTBEO fully includes copyright in a database and database rights in the definition of technology rights, rather than the TTBER which provides that such rights “can” qualify as technology rights where they closely resemble the other listed technology rights.  Consequently, the new UK exemption regime may apply to some agreements in certain industries that fall outside the revised TTBER.

The draft new UK guidance largely reflects the EU guidelines insofar as the UK and EU regimes are aligned. The CMA is consulting on the draft guidance until 11 June and will issue finalised guidance thereafter.

Both regimes will apply for 12 years after coming into force on 1 May. The new EU TTBER will expire on 30 April 2038, whilst the UK TTBEO will expire on 31 December 2038.