2. TRANSFER OF TECHNOLOGY BLOCK EXEMPTION REGULATION NO. 240/96 AND ITS PROPOSAL TO REFORM 24 June 2003 Valeria Falce (vfalce@gop.it) Gianni, Origoni, Grippo & Partners GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters

3. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters OUTLINE EU Competition Law - Overview of current system and Modernisation Reform Technology Transfer Regulation No. 240/96 - Current Proposed Reform

4. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters EU Competition Law Overview of current system (1) Art. 81(1) prohibits “agreements between undertakings … which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market” Art. 81(3): the prohibition may “be declared inapplicable …”

5. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters EU Competition Law Overview of current system (2) Art. 81(3) criteria for exemption: all four conditions must be satisfied: –improve production, distribution, technical or economic progress –fair share of benefit to consumers –restrictions: minimum necessary –no elimination of competition

6. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters EU Competition Law Overview of current system (3) Art. 81 implemented by Regulation 17/62 “The Commission shall have sole power to declare Article 81(1) inapplicable” Commission has exercised its power by issuing: Notices (e.g. de minimis agreements) Block exemptions Individual exemptions or “comfort letters”

7. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters EU Competition Law Overview of current system (4) The problems: –Commission over-burdened –Notification is “excessive burden on industry” –Notification does not work The solution: Modernisation – Reg. 1/2003 -Notifications Art. 81(3) no longer possible -Commission monopoly Art. 81(3) disappears

8. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters THE AIM OF REG. 240/96 TO SIMPLIFY THE RULES GOVERNING LICENSING AGREEMENTS TO ENSURE EFFECTIVE COMPETITION IN TECHNOLOGICALLY NEW OR IMPROVED PRODUCTS TO CREATE A FAVOURABLE LEGAL ENVIRONMENT FOR COMPANIES

9. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters FORMAL REQUIREMENTS UNDER REG. 240/96 THE REG. 240/96 APPLIES TO SPECIFIC TYPES OF AGREEMENTS ONLY (PATENTS AND KNOW-HOW) THE REG. 240/96 ASSUMES THAT ANY RESTRICTIONS OVERSTEPPING THE BOUNDARIES OF THE PATENT SCOPE IS POTENTIALLY IN VIOLATION OF ART. 81 THE REG. 240/96 SETS OUT 3 CATEGORIES OF CLAUSES (WHITE CLAUSES; BLACK CLAUSES; GREY AREA CLAUSES) THE REG. 240/96 ALLOWS THE COMMISSION TO WITHDRAW THE BENEFIT OF THE REG

10. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters AMBIT OF APPLICATION OF REG. 240/96 (1) EXCLUSIVE LICENSING AGREEMENTS BETWEEN TWO PARTIES ONLY → Pure or mixed patent and Know-how licenses → Other IPRs are covered to the extent that such additional licensing contains only ancillary provisions

11. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters AMBIT OF APPLICATION OF REG. 240/96 (2) CERTAIN EXCLUSIVE LICENSES AGREEMENTS ONLY - Where the licensor undertakes → NOT to appoint other licensees and/or → NOT to exploit the licensed technology in the territories reserved to the licensor (Articles 1.1 (1), 1.1 (2) and 1.1 (3)) - Where the licensee is protected against → active/passive sales from licensees established in other territories (Articles 1.1 (4), 1.1 (5) and 1.1 (6))

12. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters THE COMMISSION EVALUATION REPORT (December 2001 Consultation 2002)

13. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters THE SCOPE OF THE PROPOSAL (1) THE SCOPE OF THE PROPOSAL TO GET RID OF FORMALISM, COMPLEXITY AND NARROWNESS OF SCOPE TO CONFORM REG. 240/96 TO OTHER BLOCK EXEMPTION REGUILATIONS TO SUFFICIENTLY RECOGNISE INTERBRAND COMPETITION AND COMPETITION BETWEEN LICENSORS AND LICENSEES TO PROVIDE FOR LEGAL CERTAINTY AND EASE OF APPLICATION

14. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters HOW TO REACH THE END (1) 1. To extend the application of Reg. 240/96 to: Other types of IP rights: copyright, design rights and trademarks also when not ancillary to patent and know- how licenses Multiparty agreements and licensing pools: such arrangements are likely to be pro-competitive between non-competitors, especially when they relate only to essential intellectual property rights

15. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters HOW TO REACH THE END (2) 2. To reconsider the threshold test in relation to JVs: Reg. 240/96 applies to licenses between competitors that holds interests in a bilateral joint venture provided that they have: - less than a 20% market share (production only) - 10% market share ( distribution included)

16. GIANNI, ORIGONI, GRIPPO & PARTNERS in associazione con Linklaters HOW TO REACH THE END (3) 3. To distinguish between relationships between competitors and relationships between non- competitors 4.To apply different market shares tresholds to: - Different relationship -Different restrictions 5. To abolish the opposition procedure