14

Study on Intellectual Property Licensing under

Antimonopoly Law in the U.S., Europe, Japan and Korea
Jiyoung Han（*）

In the market economy the intellectual property laws and antitrust law share a common purpose ofpromoting innovation and enhancing consumer welfare, even though they seem to have a possibility to crasheach other. The reason is that the intellectual property rights provide incentives for innovation through giving amonopoly right for a certain period, while antimonopoly law is aiming to prevent misuse of predominantposition in the marketplace and concentration of overriding.
In the field of intellectual property rights the owners make profits through using his right by themselves aswell as through licensing contract. The licensing contract is, however, likely to be applied by antitrust law inaccordance with under which conditions and restraints a licensing contract is concluded, and herein many
complicated constituents get involved. Therefore, countries such as America, Japan and Korea establish theirown guidelines in order to assist those who want to predict whether a licensing practice would be regarded as
anticompetitive. Especially it is noticed that with its enlargement European Union has published the Regulation
No. 772/2004 which came into effect on May 1st 2004 and will have a dramatic impact on technology licensing
in the European Union.
The following article gives an overview of major anticompetitive constituents in the guideline of eachcountry, and inspects legal meaning of guideline and the new Regulation of the EU competition law as well.

Ⅰ Introduction
Intellectual property gives the owners
monopoly right and incentives for innovation, andallows them to exclude others from the benefits
arising from new knowledge. Unless intellectual
property rights (IPR) are protected, imitators
could more rapidly exploit the efforts ofinnovators and investors without compensation.
In this case, intellectual property licensing iseffective not only for those who want to use suchnew knowledge, but also licensors who exploit it,inter alia, by licensing it to third parties. IP
licensing is getting more important throughtechnology
innovation,forexampleIT,biotechnology. In the end, IPR promotes
innovation and support economic growth.
On the other hand, competition law aims topromote innovation and consumer welfare, and it
could be arrived by prohibiting any action which
may harm competition.
Therefore, there is a consensus of opinion
that competition law and IPR share the identicalgoal of economic development and consumer
welfare through innovation. (*1)
The purpose of the report is to find out

preferable forms by comparing competition law
with intellectual property licensing in four
countries, US, EU, Japan and Korea.

Ⅱ Acts concerning Competition
1

Overview

Each country usually has its own acts
concerning competition. The oldest act
concerning competition in the world is the US
Sherman Act which was already established in
1890. In addition, US have other two acts
concerned, namely Clayton Act (1914) andFederal Trade Commission Act (1914). The
Department of Justice has authority over the
Sherman Act, while FTC (Federal Trade
Commission) over the FTCA. Since Reagan
Administration US competition policy has moved
from antitrust toward pro-patent policy.
On the other hand, on 25 March 1957 six (6)countries(*2) have established the first European
competition law, so-called Rome Treaty. Its
purpose was to ensure the economic and social
progress of the Member States by common action
to eliminate the barriers which divide Europe. On(*) Doctor of the University of Munich, Germany(*1) See US, EU and Japan Guidelines.
(*2) Belgium, Germany, France, Italy, Luxemburg and the Netherlands

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1 May 2004 enlargement of EU includinghasbrought
east-European
countries (*3)
fundamental change of EU competition law, whichis called modernization package being consistedof three (3) regulations and additional six (6)notices. (*4) The modernization package has two
essential features; first, it is moving from legal,
clause-by-clause approach toward more focusing
on economic analysis. Second, the authority to
grant exemption has moved from EC Commission
to national competition authorities and courts
which can apply to Article 81 (1) and (3).(*5)
After World War II, Japan was required by
SCAP (Supreme Commander of the Allied Power)
directive to passage of “such laws as will
eliminate and prevent monopoly and restraint oftrade”. (*6) As a result, the first Japanese
Antimonopoly Act based on US Antitrust laws
was enacted in 1947(*7), and the Japanese Fair
Trade Commission (JFTC) was established as anentity to enforce the Act. Through several
revisions, especially in 1977 and 1997, JFTC has
been empowered strongly to enforce the Act.
Compared with other countries, the first
antimonopoly Act in Korea was later established.
Since the Monopoly Regulation and Fair Trade
Act (KMA) came into effect in 1981, KMA has
experienced 13 times revisions, and current Act
is version of 26 January 2002. In 1987, the Korea
Fair Trade Commission (KFTC) adopted a policy
to restrain concentration of economic power inorder to inhibit excessive concentration of
economic power among a few conglomeratebusiness groups in Korea called as ‘chaebeol’.
Since the Asian financial crisis in late 1997, there
was a broad national consensus in Korea that theeconomy should be essentially driven by theprinciple of market competition. In this climate,
the Korean government took steps to eliminate
the old structural inefficiencies of the Korean
economy,and
KFTC
strengthened
theenforcement of competition law and actively
promoted market competition through the
deregulation and privatization of state-owned
companies.

2

Principle of Interpretation on Antitrustlaw(1) ‘Rule of Reason’
According to this principle, both anti- andpro-competitive effects should be taken into
account in analyzing restriction of a licensing
agreement, namely whether pro-competitiveeffects outweigh anticompetitive effects bycomprehensive inquiry into market conditions(*8).
(2) ‘Per se illegal’According to the principle, a restraint’s
nature and necessary effect are so plainly
anticompetitive without an elaborate inquiry into
the restraint’s likely competitive effect.(*9)
Both rules have greatly influenced not only
on the US, but also EU, Japan and Korea
regarding restriction of IPR licensing agreements.

Ⅲ Guidelines of IPR Licensing
under the Antimonopoly Act
Herein Guidelines of IPR licensing under
Antimonopoly Act will be dealt with. Some
important features of them will be analyzed laterby comparing each other.
1

US Antitrust Guidelines

US Antitrust Guidelines which state theantitrust enforcement policy of Department ofJustice and FTC have been established on 6th
April 1995.
(1) Principles
The Guidelines embody three generalprinciples; (a) IP is essentially comparable to any
other form of property of antitrust analysis; (b)There is no presumption that IP creates market
power in the antitrust context; and (c) Licensingof IP will generally be recognized as
pro-competitive.
The purpose of the Guidelines is to assist
those who need to predict whether the Agencies
will challenge a practice as anticompetitive. But,
these Guidelines cannot remove judgment and(*3) With this reform EU has enlarged from 15 to 25 countries including East-European Countries, for example, Cyprus,
Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.
(*4) Antitrust enforcement Regulation EC 1/2003; Horizontal merger control Regulation EC No. 139/2004; New Block
Exemption Regulation on Technology Transfer EC No. 772/2004; and 6 Additional Notices to complement and to
facilitate the implementation of the reform steps.
(*5) Art. 81 (1) is related to general prohibition on agreements which restrict competition and affect trade between
Member States, while Art. 81 (3) provides for an exception to the prohibition laid down in Art. 81 (1).
(*6) See Hiroshi Iyori and Akinori Uesugi, The Antimonopoly Laws of Japan, 10-11 (1983).
(*7) Act concerning Prohibition of Private Monopolization and Maintenance of Fair Trade(*8) The US Supreme Court agreed on the “rule of reason” as the principle to apply in antitrust cases, for example
Standard Oil case in 1911.
(*9) For example, ‘Nine-No-No’s’ rule in US; ‘black’ clauses in Japan and Korea, such as exclusive grant back; and‘hardcore restrictions’ in EU.
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discretion in antitrust law enforcement.
(2) Scope of application
The Guidelines are concerned withintellectual property protected by patents,
copyrights, trade secrets and know-how
agreements, but do not cover the antitrust
treatment of trademarks. It is noteworthy that the
Guidelines cover copyright licensing agreementseven in 1995, while other countries’ Guidelines atthe same period did not cover them. Although it
is not obviously described, it might be interpreted
that copyright licensing agreements could coverhigh technology-related copyright licensing
agreements such as software, IT, etc.
(3) Antitrust “Safety zone”
Pursuant to the ‘safety zone’ of the
Guidelines the government will not challenge a
restraint in an IP licensing arrangement if (a) the
restraint is not facially anticompetitive; and (b)licensor and its licensees collectively account forno more than 20% of each relevant market
significantly affected by the restraint. The
Guidelines also state that the status of a licensing
arrangement with respect to the safety zone may
change over time.
2

European Guidelines

On 1 May 2004 new Technology Transfer
Block Exemption Regulation (TTBER) No.
772/2004 came into effect. It lays down new rules
for the IPR licensing, replacing the old TTBER of
1996 (No. 240/96). Until 31 March 2006,
undertakings have to bring their existing
agreements in line with these new requirements.
Otherwise, such agreements may lead to nullity
of contract, and claims for damages and fines.
TTBER Guidelines explain application of
TTBER and provide a framework for analyzing
technology license agreement.
(1) General characteristics
New TTBER Guidelines recognize thattechnology transfer agreements usually improve
economic efficiency and are pro-competitive, andthat they, furthermore, strengthen the incentive
for the initial research and development. The
Guidelines describe that the likelihood that
efficiency-enhancing and pro-competitive effects
will outweigh any anti-competitive effects due torestrictions contained in technology transfer
agreements depends on the degree of market
power of the undertakings concerned. (*10)
Another important feature of the Guidelines
is that competitors and non-competitors aredifferently treated in the reciprocal or
non-reciprocal agreements. (*11) In this regard, theGuidelines obviously draw a distinction fromother countries’ Guidelines. Competitors are
relatively
strictly
treatedratherthan
non-competitors, because they pose a grater risk
to competition than agreements between
non-competitors.
(2) Scope of application
The Guidelines cover intellectual property
rights including not only patents, utility models,designs, topographies of semiconductor products,
plant breeder’s certificates, know-how, but also
software copyright licensing agreements, which
was not covered in the previous EU Guidelines
No. 240/96.
(3) Safe Harbor(i) The TTBER provides a safe harbor forcertain technology license agreements. These
agreements are block exempted from generalprohibition rule in Article 81(1) EC and so
automatically legally valid. Although they do notmeet requirements in Art. 81(3), namely, falloutside TTBER, they are not presumed to beillegal and still have an opportunity to individually
get exempted.
(ii) New Guidelines differentiate competitorsfrom non-competitors regarding safe harbor as
well. Herein ‘market share thresholds (MSH)’
play an important role; exemption contained in
the new guidelines covers agreements between:(a) Competitors if their combined market share
does not exceed 20% on the affected relevant
technology and product market; and (b)Non-competitors if each party’s individual market
share does not exceed 30% on the relevant
technology and product markets. If the applicable
MSH is exceeded on an affected relevant market,
the block exemption does not apply to theagreement for that relevant market. (*12)(4) Restrictions
TTBER Guidelines contain two restrictions;hardcore and excluded restrictions.

(*10) See II. Paragraph 15 of the Guidelines(*11) According to the Guidelines, ‘reciprocal agreement’ is a technology transfer agreement where two undertakings
grant each other a license, and where these licenses concern competing technologies or can be used for the
production of competing product. On the other hand, ‘non-reciprocal agreement’ means a technology transfer
agreement where one undertaking grants another undertaking a license, or where two undertakings grant eachother such a license, but these licenses do not concern competing technologies and cannot be used for the
production of competing products(*12) See III. Paragraph 69 of the Guidelines

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(i)Hardcore restrictions
TTBER contains a series of ‘hardcore
restrictions’. (*13) If a licensing agreement contains
any such clause, it will lose the benefit of theblock exemption, regardless of whether or not
MSH is met, because they are regarded as almost
always anticompetitive. Such agreement will
normally not qualify for individual exemption
either, and so in the context of individual
assessment hardcore restrictions will only in
exceptional circumstances fulfill the conditions ofArticle 81(3). (*14)
Hardcore restrictions are divided into twogroups regarding competitors and non-competitors;(a) In the case of competing undertakings there
are following cases which belong to hardcore
restrictions, such as price-fixing restrictions,
reciprocal output or sales restrictions, allocation ofmarkets or customers and restriction of thelicensee’s ability to exploit its own technology. (*15)(b) In the event of non-competing undertakings
there are following things which are regarded as
hardcore restrictions, such as restrictions on
price maintenance other than a maximum or arecommended sale price, territory restriction into
licensee, and restriction of active or passive sales
to end-users. (*16)(ii) Excluded Restrictions
TTBER also contains lists of restrictions
which do not benefit from the safe harbor. They
are not automatically exempted, and require
individual assessment on the basis of thecomparison their pro-competitive effects with
their restrictive effects. If pro-competitive effects
outweigh their restrictive effects, they can be
exempted. (*17) The licensing agreement which
will belong to excluded restrictions is as follows;
exclusive grant back, assign and no-challenge
clauses.
(5) Cross-Licensing Agreements
Guidelines recognize that cross licensing
agreements may have pro-competitive effects.
However, if the terms of any cross-licensing
restrict the ability of either undertaking to exploit
its own technology, it is unlikely to benefit fromthe exemption in Article 81(3).(*18) The risk ofnegative effects on innovation is higher in thecase of cross licensing between competitors inwhich a grant back obligation on both parties iscombined with an obligation on both parties toshare with the other party improvements of his
own technology. (*19)(6) Technology Pools(i)

Definition and their nature
In the Guidelines technology pools aredefined as arrangements where two or moreparties assemble a package of technology that islicensed not only to contributors to the pool, butalso to third parties. (*20) Technology pools may
have anti- and pro-competitive effects. (*21) The
Guidelines classify technologies in technology
pools into following, namely complementary(non-essential), substitutable, and essential
technology. (*22)
The assessment of technology pools depends
on which technologies are involved in pools. For
example, when a pool comprises only essential
technologies and by necessity complements, thecreation of pool as such generally falls outside
Article 81(1) irrespective of the market positionof the parties. In addition, in pools comprising
non-essential technologies, the Commission
should consider, inter alia, for example, whether
there are any pro-competitive reasons forincluding the non-essential technologies in thepool. (*23)(ii) Assessment of individual restraints
In assessing individual restraints following
principles are commonly used in technology
pools; (a) the stronger the market position of thepool, the greater the risk of anti-competitiveeffects; (b) pools that hold a strong position onthemarketshouldbeopen
andnon-discriminatory; and (c) pools should not
unduly foreclose third party technologies or limit
the creation of alternative pools. (*24)
3.

Japanese Guidelines(1) Progress of Japanese Guidelines(i) Antimonopoly
Act
Guidelinesfor(*13) Article 4 TTBER and III.4 of the Guidelines.
(*14) See III.4.1 Paragraph 75 of the Guidelines(*15) Article 4.1 TTBER and III.4 Paragraphs 77 to 95 of the Guidelines(*16) Article 4.2 TTBER and III.4 Paragraphs 96 to 106 of the Guidelines(*17) Article 5 TTBER and III. 5 Paragraphs 107 to 116 of the Guidelines(*18) See IV.3 Paragraph 204 of the Guidelines(*19) See III.5. Paragraph 111 of the Guidelines(*20) See IV.4 Paragraph 210 of the Guidelines(*21) Ibid. Paragraphs 213 and 214 of the Guidelines(*22) Ibid. Paragraphs 215 to 222 of the Guidelines(*23) Ibid. Paragraph 222.
(*24) Ibid. Paragraph 224.
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International Licensing Agreements in 1968
It was the first effort to support the Agency’sviews regarding technology licensing that may
violate the AMA. The 1968 Guidelines provided“black” and “white” lists, and applied solely tointernational licenses. Therefore, they werecriticized as disfavoring non-Japanese licensors
during 1968 to 1989 when Japanese industry was
licensing lots of deals of foreign technology.

technology licenses will use the same generalapproach applicable to markets for goods orservices; however, they do not introduce theconcept “market share thresholds” like in theEuropean TTBER Guidelines. In this regard, it
may be discussed in the future as to whether or
not such concept ‘market share thresholds’
should be introduced into the Japanese
Guidelines.

(ii) Guidelines for the Regulation of Unfair Trade
Practices with respect to Patent and Know-How
Licensing in 1989
These Guidelines replaced 1968 Guidelines,
and brought important change of competition
policy shifts to the same application of foreign anddomestic IP licenses. The Guidelines added a“grey” list in which a licensing agreement islikely to belong to unfair trade practices. They arealso characterized by shifting toward a “rule ofreason” approach.

(3) Relationship between AMA and IPRs
The JFTC’s analysis of licensing clauses
under the 1999 Guidelines begins with the central
issue by §21 AMA: “The provisions of this Act
shall not apply to such acts recognizable as theexercise of rights under the Copyright Act, thePatent Act, the Utility Model Act, the Design Act
or the Trademark Act”.
If a conduct is an “exercise of rights”, JFTC
proceeds to ask whether it violates against the
purposes of the intellectual property laws. An
exercise of rights that do not violate against the
IP laws’ purposes is exempt from the applicationof the AMA. However, if the conduct either (i) is
not an exercise of an IPR; or (ii) violates against
the purposes of IP laws, it is not exempt and issubject to scrutiny to determine whether it
constitutes monopolization, an unreasonable
restraint of trade, or an unfair trade practiceunder the AMA. With respect to exercise ofrights, it might be still criticized that there is not
any obvious objective criteria to differentiate
justifiable from unjustifiable acts.

(iii) Guidelines for Patent and Know-How
Licensing Agreements under the Antimonopoly
Act in 1999
On July 30 1999, JFTC issued Guidelines forPatent and Know-How Licensing Agreements
under the Antimonopoly Law, which replaced
1989 Guidelines.
(2) Characteristics of 1999 Guidelines(i) 1999 Guidelines are going toward more
liberalization about the policy on patent andknow-how licensing agreements from Japanese
Antimonopoly Act (Art. 3) and from unfair tradepractice standpoint.
(ii) Regarding restrictions the Guidelines
maintain black, grey and white lists, but add‘dark-gray’ lists which are defined as such
restraints are highly likely to be unlawful.(*25)
They were previously black-listed, but are now
subject to a strict sub-species of the rule ofreason.
(iii) Scope of application
The Guidelines cover patent and know-how
licenses, introducing the word “mutatis
mutandis”, which means that other forms of IP
can be covered to the extent possible on thenature of those rights. But it is non-obvious whichmeaning other forms of IP have, namely, whether
trademark or copyright licensing agreements also
belong to these ‘other forms of IP’. In this regard,
it should be expressly described.
(iv) Definition of relevant market
The Guidelines define relevant market, andmake clear that product market definition for

4.

(1) Relationship between Art. 59 KMA and
Antimonopoly Guidelines
The normative system to apply Korean
antitrust law to IPRs licensing is consisted ofArticles 59 and 32 of Korean Monopoly Act(KMA), and both have their own guidelines
established by the Korean Fair Trade Commission(KFTC).
Article 59 KMA has the same rule to Art. 21
of Japanese Antimonopoly Act, and its
interpretation can be found in Art. 1 Guidelines.
Article 32 KMA deals with international contract,
and there is Notification concerned. The purposeof the Notification is to define the types and thecriteria for determining undue concerted acts,
unfair business practices and resale pricemaintenance activities in international contracts.
In this regard, KMA recognizes intra-national
competition as well as competition concerninginternational contracts. In order to remove
misunderstandings that foreign and domestic IP
licensing agreements could be separately dealt
with, it should be, however, discussed on the(*25) See Part 1.2. (1) (b) of the 1999 Guidelines.
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matter concerning unifying the Guidelines andNotification.
(2) Characteristics of Guidelines(i) Scope of Application
Compared with other countries’ Guidelines,
Korean Guidelines cover not only patent,
know-how, but also trademark and copyright. (*26)
However, it is strange why the Guidelines evencover trademark licensing agreements. The
reason might be found in the name of the
Guidelines ‘Guidelines of reviewing undue
exercise of IPRs’. It means that application of the
Guidelines probably would not be limited totechnology transfer agreements, but to all kindsof undue exercise of IPRs. It should be, however,discussed whether trademark should be coveredin the Guidelines.
(ii) Restrictions
Articles 3 to 5 of the Guidelines define unfair
business practices, in which black lists and theirsome exceptions are described. In determining
whether or not restraint of a licensing agreement
is unfair, the prescribed criteria in Guidelines aswell as the effect on competition, the contract
duration, relevant market conditions and so on
shall be comprehensively taken into account.
(iii) Tying agreements
If a licensor requires a licensee either tocollectively enforce technology or to purchaseproducts in a bundle which are not directly
necessary for the performance of the licensed
technology, it is unfair, except that the usage oftechnology and product is necessary to maintainthe quality of the contract product and thecredibility of the attached products of the ownerof the industry property rights. (*27)(iv) Grant back clause
According to the Guidelines it is unfair if alicensor requires a licensee to provide the licensor,
without compensation, with the ownership of or
the exclusive or non-exclusive right to use thetechnology or product improved by the licensee;
or if a licensor unilaterally requires a licensee toreport or give notice to the licensor of alltechnology or product improvements about thelicensed technology or product.
The Guidelines do not, however, describe
sub-licensing contract. In addition, exclusive andnon-exclusive right is, strange to say, treated
without discrimination in compared with othercountries’ Guidelines. However, exclusive andnon-exclusive grant back restraints should be,
owing to their natures, discriminatorily treatedirrespective of compensation, and non-exclusive
grant back clause should be admitted.
(v) No-challenge clause
According to the Guidelines it is unfair if alicensor unilaterally terminate a contract in theevent that the third party or a licensee dispute as
to whether or not the licensed technology is valid
or well-known. There are, however, two
exceptions; (aa) that the licensor makes thelicensee notice on the violation of industry
property rights about the contract technology to
the licensor; and (bb) that the licensor let thelicensee execute the case of violating theindustry property rights as proxy, or impose theobligation of cooperation to the licensor incarrying out such case. (*28)(vi) Cross-licensing and Pooling arrangement
The Guidelines recognize pro-competitive
and anti-competitive effects of cross-licensing andpooling arrangement. They are, however, subject
to invalid if licensors in mutually competitive or
substitutive relationship conclude a crosslicensing contract or a pooling arrangement
regarding their own IPRs, which may give birth toany anti-competitive effect. (*29)
5Art. 40 TRIPSAs the “largest and most ambitious attempt
to harmonize intellectual property rights on aworld scale” the multilateral Agreement on Trade
Related Aspects of Intellectual Property (TRIPS)
was established within the WTO framework. The
TRIPS does not require WTO members toregulate licensing transactions to protectcompetition, but expressly recognizes the powerof each state to take measures to redress abusesof intellectual property rights that harmcompetition in its markets.(*30)(*26) Article 2 (1) of the Guidelines.
(*27) Article 3 (10) of the Guidelines.
(*28) Article 3 (16) of the Guidelines.
(*29) See Art. 7 of the Guidelines.
(*30) Art. 40.1 identifies three negative aspects of licensing practice, those which (a) restrain competition; (b) haveadverse effects on trade; and which (c) may impede the transfer and dissemination of technology.
Art. 40.2 maintains that nothing in the TRIPs Agreement shall prevent Members “from specifying in theirlegislation licensing practices or conditions that may in particular constitute an abuse of intellectual property
rights having an adverse effect on competition in the relevant market”. The definition of ‘market’ plays a decisiverole in analysis of competitive impacts, because the broader a market is delineated, the less likely will be theanti-competitive impact of an individual trader’s activities. See Re Queensland Co-operative Milling Association Ltd.,(1976) 25 F.L.R. 169, p. 190; Michael Blakeney, TRIPs: A concise guide to the TRIPs Agreement, 1996, p. 109.
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Art. 40.2 TRIPS agreement recognizes thatmember states may specify licensing in theirlegislation practices or conditions which may bedeemed to constitute an abuse of intellectual
property rights having an adverse effect oncompetition in the relevant market, (*31) and may
adopt appropriate measures to prevent or control
such practices, including exclusive grantback
conditions in accordance with the provisions ofArticle 31 TRIPS. In addition, two otherexamples which fall within the scope of thisprovision are given, namely conditions
preventing challenges to validity and coercive
package licensing. They may be taken into
account a priori as abusive and anti-competitive,
but measures taken still need to be addressed ona case-by-case.(*32) In case of these measures the
TRIPS Agreement leaves a room to be settled
through consultations between a Member State
who believes that a contractual practice is abusive
and anti-competitive in a particular case andanother Member State in which the right ownerconcerned is a national or domiciliary. A
suggestion to refer disputes in cases wherebilateral consultations failed to reach a mutuallysatisfactory conclusion was not retained by thegroup, because it would have been impracticableas regarding investigation and control and in the
viewpoint of a lack of internationally agreed
dispute settlement standards. Despite of lack ofsuch an agreed procedure it is clearly emphasizedon consultations between governments in orderto solve trade conflicts between private
parties. (*33)
Article 40.2 TRIPS specifies anticompetitive
practices, such as exclusive grant back conditions,challenges to validity, compulsory tying
arrangements and cross-licensing and poolingarrangements. It needs, however, case-by-casedecision, because they may bring aboutpro-competitive or anti-competitive effect.
Pursuant to Article 40 (2) TRIPS Member States
have the right to specify practices to constitutean abuse of intellectual property rights and havean adverse effect on competition.
Article 40.2 specifies anticompetitive
practices as follows:(1) Grant back
The TRIPS recognizes that grant backconditions may be both pro- and anti-competitiveeffects. In the case of exclusive grant backpractices, they may adversely affect competitions
by substantially reducing the licenses incentive toengage in research and development, while non
exclusive grant back practices may be procompetitive in supplying a means for the licenseand licensor to share the risk in innovation. In thecase of applying the rule of reason, grant backconditions will be evaluated in light of the overall
structure of a licensing arrangement, thelicensors market power in the technology and thegeneral conditions in the relevant market.
(2) Challenges to validity
It may be unlawful practices to require
licensee to refrain from challenging the validity ofpatents and other types of protection for
inventions involving the transfer or validity ofother grants claimed or obtained by the supplying
party.
(3) Tying arrangements
Tying is a strategy adopted by licensors who
have market power in one product which is used
to extort competitive advantages in the market
for the tied product, in which the significant
advantage of market power may not exist.
(4) Cross-licensing
andpoolingarrangements
They may be pro-competitive in the case of
the integration of complementary technologies,
avoiding transaction costs and the costs oflitigation. In addition, such arrangements may be
pro-competitive in which the pooling makes useof economies of scale and co-operates
complementary abilities of pool participants.(*34)
On the contrary, they also have anti-competitiveelements when competitors with market power
are excluded from a cross-licensing or poolingarrangement. In this case a pooling arrangement
may retard innovation and competition throughpreventing participants from engaging in researchand development.

(*31) The negotiation for TRIPS Agreement resulted in request of that both criteria be met simultaneously instead of aword “or”. Id., p. 191.
(*32) The following practices and conditions may be deemed to such measures: (i) exclusive dealing; (ii) restrictions on
research; (iii) restrictions on use of personnel; (iv) price fixing; (v) restrictions on adaptation; (vi) exclusive sales
or representation agreements; (vii) patent pooling or cross-licensing agreements; (viii) tying arrangements; (ix)export restrictions; (x) restrictions on publicity; (xi) payments and other obligations after expiration of industrial
property rights; (xii) restrictions after expiration of an arrangement. See Daniel Gervais, The TRIPS Agreement:
Drafting History and Analysis, 1998, p. 189.
(*33) Id., p. 192.
(*34) S. Michael Blakeney, Trade Related Aspects of Intellectual Property Rights: A concise guide to the TRIPs
Agreement, 1996, p. 116.

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6(iv) In Korea no challenge is principally unfair
trade practice with exceptions.

Comparison(1) Scope of application(i) In the U.S., patents, copyrights, trade
secrets and know-how licensing agreements arecovered.
(ii) European new Guidelines cover patents,
designs, know-how as well as software copyrightlicensing agreements.
(iii) Japanese Guidelines cover solely patents andknow-how licensing agreements, and additionallyhave the rule ‘mutatis mutandis’.
(iv) Korean Guidelines cover patents, designs,
know-how, copyright and even trademarks
licensing agreements.
(2) Restrictions(i) In the U.S., the ‘rule of reason’ and ‘per seillegal’ shall be applied.
(ii) Europe has abolished the classification‘white and black’ lists, but introduced ‘safe
harbor’, ‘hardcore’ and ‘excluded restrictions’with the concept “MSH” and with discriminatory
treatment of competitors and non-competitors.
(iii) Japan has classified the restrictions into
‘white’, ‘gray’, ‘dark-gray’ and ‘black’ lists.
(iv) In Korea there are ‘black’ lists with some
exceptional cases which shall be applied
according to the ‘rule of reason’.
(3) Grant back(i) In the U.S., a basic rule is the ‘rule of reason’.
Generally speaking, grant back restrictions of
exclusive
licensingareprohibited,but
non-exclusive licensing is allowed.
(ii) In Europe, exclusive grant back restrictions
belong to excluded restrictions (Art. 5(1)(a)TTBER) and required individual assessment,
while non-exclusive licensing may be allowed.
(iii) In Japan, grant back restrictions ofcompletely exclusive licensing agreements
belong to ‘dark gray’, but non-exclusive licensing
is allowed.
(iv) In Korea, grant back restrictions of exclusive
and non-exclusive licensing agreements are notallowed without compensation.
(4) No-challenge clause(i) The U.S. do not have any provision regarding
no-challenge clause in Guidelines, but this clausehas been invalid since Lear v. Adkins Case 395 US
653 (1969).
(ii) In Europe no challenge clause belongs to
excluded restriction (Art. 5(1)(c)), and needs
individual assessment according to the ‘rule ofreason’.
(iii) In Japan no-challenge clause is classified into
unfair trade, because it may have an adverse
effect on competition, except that there areprovisions on termination in the agreements.

(5) Tying-in agreements(i) In the U.S., the ‘rule of reason’ shall beapplied, and tying agreements are unfair tradepractices unless there is any justification.
(ii) In Europe they are not block exempted if
MST is more than 20% between competitors and
30% between non-competitors.
(iii) In Japan they belong to unfair trade practiceand unjust trade restraint. However, it may be fair
if it is necessary to guarantee the effectiveness of
the licensed technology.
(iv) In Korea they also belong to unfair tradepractice, but they may be fair if it is necessary tomaintain the product quality and credibility of the
products.
(6) Cross-licensing and Pooling agreements
Fourcountries’
Guidelines
recognizepro-competitive effects of cross-licensing andpooling. The problem is under which conditions
they are regarded as anti-competitive.
(i) In the U.S., the ‘rule of reason’ shall beapplied.
(ii) In Europe the ‘rule of reason’ shall be appliedin accordance with which technologies in the pool
are included, e.g. complementary, substitutableand essential technologies.
(iii) In Japan they belong to unreasonable trade
restraints and private monopolization provided
that the competition is substantially restricted.
(iv) In
Korea they are invalid if competitorsand substitutive relationship may result in
anticompetitive effects.

Ⅳ Conclusion(1) The revised European TTBER Guidelines
are mostly characterized by moving legalistic,clause-by-clause to more economic approach, e.g.
through introducing market concept. In thisrespect it is expected in other countries to be
discussed as to whether or not such concept
should be introduced into restraint of licensing
agreements, and whether it is preferable todifferentiate “competitor” from “non-competitor”
at the IP licensing market.
The market share to be introduced in the
new TTBER Guidelines bring about significant
legal uncertainty. In addition, self-assessment
might be very complex without consistency,
involving a mix of legal and economic arguments,for example, with respect to the definition ofmarkets, the calculation of market shares, thedetermination as to whether technologies are
essential, complementary, substitutable etc.,
because the current technologies are very

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complex and innovative. Therefore, a proper
assessment is necessary to guarantee thatagreements are not declared null and void, andthat parties do not expose themselves to claims
for damages or even fines.
In addition, there is another problem behindthe EU reforms. Although the Commission wants
to see a greater exchange of information between
national competition authorities and courts, there
remain still problems, namely there might be realrisk of diverging views on similar issues by thenational competition authorities and courts,
because of different provisions and competition
policies in the Member States. Apart from, theCommission
expectsanallocationofresponsibility within the competition network,and so pan-European or worldwide cartels should
be investigated, even though intellectual
property-related infringement matters in one
member state should be investigated by thatstate.
In the future it is being watched with keeninterest how the EU Commission will confront
with these matters.
(2) The United States are a case-law country
whose legal system has been developed byaccumulating cases. This applies to the U.S.
Antitrust Guidelines as well. On the other hand,
new EU Guidelines are going toward more
economical-approach by minutely analyzing
market elements such as market share thresholds.
In this regard it is noteworthy how Japan and
Korea as Continental States, in which the
Guidelines in question seem to be greatly
influenced by U.S. Guidelines, respond to the new
EU Guidelines.
(3) Through comparison of four countries’
Guidelines we noticed that intellectual property
licensing agreements are closely related to eachcountry’s competition policy. We also realized in
the Guidelines that antitrust laws should not be
deviate from intellectual property laws. Paying
attention to these matters, any competition policy
should not be too much stressed than IP policy,
but be harmonized in the area of IP, at least in thearea of restraints of IP licensing agreements.

IIP Bulletin 2005

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