No C 134/10 Official Journal of the European Communities 24. 5. 88 
unnecessary if the product is moving to further process­
ing and not for direct sale to the customer. 
Chapter V 
Whilst it is accepted that some form of microbiological 
testing may be needed, it is considered that the pro­
cedures proposed are impractical and unrealistic. 
The proposals are directed at the product and not at 
the production process and its environment. The prod­
uct will have reached its point of sale before its test 
results are available. 
A microbiological control system based on hazard 
analysis and the monitoring of critical control points is 
the only effective means of controlling the safety and 
Done at Brussels, 23 March 1988. 
1. General considerations 
1.1. The Committee supports the Commission's plan 
to adopt a block exemption Regulation for know-how 
agreements. 
It agrees with the Commission that the increasing econ­
omic importance of non-patented technical information 
(!) OJ No C 214, 12. 8. 1987, p. 2. quality of minced meat. The proposals should develop 
these. It would be more realistic if applied to check the 
incoming raw material. A microbiological end product 
specification can give a false sense of assurance. The 
proposals should develop this approach. 
Chapter VI, 22 
After 'seasonings' add 'and/or additives'. 
Add date of freezing, or in the case of chilled meat a 
'last consumption' date. 
Chapter V1I1 
The health certificate should be designed to be suitable 
for completion with word processing equipment. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT 
makes it necessary to give greater legal certainty to 
agreements governing the transfer of such knowledge. 
1.2. However, the Commission has been too restric­
tive in its definition of the purpose of the block exemp­
tion Regulation, which should not merely serve to pro­
vide greater legal certainty. It is at least just as important 
for the Regulation to expressly encourage and simplify 
the signing of know-how agreements. The main reasons Additional Opinion on the draft Commission Regulation on the Application of Article 85(3) 
of the Treaty to certain categories of know-how licensing agreements (!) 
(88/C 134/06) 
On 20 October 1987 the Bureau of the Economic and Social Committee, acting under the 
third paragraph of Article 20 of the Rules of Procedure, decided in connection with the 
Committee Opinion on the Commission's Sixteenth Report on Competition Policy to draw 
up an Opinion on the abovementioned draft Commission Regulation. 
The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing 
the Committee's work on the subject, adopted its Opinion on 2 March 1988. The rapporteur 
was Mr. Petersen. 
At its 254th plenary session (meeting of 23 March 1988) the Economic and Social Committee 
adopted the following Opinion by a unanimous vote. 
24. 5. 88 Official Journal of the European Communities NoC 134/11 
for this have already been given by the Commission in 
working document 86/EM-l. The Committee particu­
larly deplores the fact that no reference to this is made 
any more in the draft Regulation's preamble. 
1.3. The content of the block exemption Regulation 
should be determined by the following considerations: 
— The cross-frontier transfer of technology within 
Europe puts the Community as a whole on a much 
better competitive footing than third countries, and 
is of great importance as such. 
— The transfer of know-how strenghtens competition 
within the Community. To this extent it is far 
superior to other ways of exploiting technical infor­
mation, the export of products or direct investment. 
— The transfer of know-how is necessary for the econ­
omy as a whole, because it helps to avoid the 
inefficient duplication of R&D work. 
— Research, development and innovation costs are 
constantly rising. The transfer of know-how is vital 
for strenghtening the competitiveness of small and 
medium-sized enterprises in particular and hence 
for safeguarding existing jobs and creating new 
ones. 
It is therefore in the Community's utmost interest to 
encourage the transfer of know-how, which helps to 
increase competition, improves the competitiveness of 
European firms and is vital for the establishment of a 
technological community in Europe as part of the plan 
to complete the internal market by 1992. 
1.4. The Committee is convinced that the planned 
Regulation should make special allowance for the 
interests of small and medium-sized enterprises. Because 
of their limited resources these enterprises rely heavily 
on being able to recoup a part of their high R&D costs. 
In addition, the acquisition of know-how from others 
is the most economical—and often the sole—way of 
keeping abreast of technical progress. 
1.5. The Commission states in the preamble that it 
is appropriate that the Regulation should follow the 
structure of the Patent Licensing Regulation. The Com­
mittee agrees with the Commission that the frequent 
combining of patent and know-how licensing in a single 
agreement makes it necessary to align the content of 
these two Regulations. However, it considers that it is 
neither necessary nor advisable in all cases to incorpor­
ate large chunks of the Patent Licensing Regulation in 
the Know-how Licensing Regulation, as the Com­
mission does in its draft. In particular, the granting of patents differs from the 
transfer of know-how in the following ways: 
— Know-how is not protected in law in the way that 
a patent is; it is a de facto advance in knowledge of 
immense economic value. The preservation of this 
asset depends on the licensee's compliance with the 
agreement and the agreement's ability to stand up 
in law. Legal certainty and legal clarity are therefore 
far more important for trading in know-how than 
for patent licensing. 
— When know-how is passed on, the licensee becomes 
the fully-fledged rival of the licensor within no time 
at all. The granting of a patent licence, on the other 
hand, normally has no effect on competition. Know-
how licensors must be able to take precautions to 
protect themselves and other licensees if trading in 
know-how is to be financially worthwhile. 
— The owner of know-how does not have any right 
whatsoever to stop third parties from developing 
or exploiting comparable technical knowledge. By 
comparison, the owner of a patent enjoys this right 
for the full duration of the patent (twenty years 
under Article 63 (1) of the European Patent Conven­
tion). Therefore, markets in know-how cannot 
become fully watertight as they can in the case of 
patents. 
— The content of know-how—unlike the content of a 
patent—cannot be precisely defined and is not laid 
down officially. Know-how is constantly being 
developed further and updated. It is therefore diffi­
cult to say whether the same technology already 
exists (Article 1 (2) of the draft). However, this term 
plays an important role. 
1.6. The legal framework governing the admissibility 
of agreements granting territorial protection is decisive 
for the parties to a know-how agreement. The acqui­
sition of new technology is not financially worthwhile 
if the licensee is exposed from the outset to competition 
from the licensor or other licensees in possession of the 
same technology. This is the only way in which a 
licensee will have the chance to write off the investment 
involved in switching over to a new process or product. 
Equally, the licensor must be able to protect himself 
against competition from the licensee. He will not make 
his know-how available to other firms if, in so doing, 
he endangers his own markets. The licensor's willing­
ness to pass on know-how is, however, the key to the 
spread of know-how in the Community. 
The Commission's draft does not cater sufficiently for 
the parties' legitimate needs. It restricts the possibilities 
No C 134/12 Official Journal of the European Communities 24. 5. 88 
for agreements granting territorial protection to such 
an extent that in many cases neither the licensor nor the 
licensee has any incentive to enter into an agreement. 
The Commission should consider, however, that small 
and medium-sized enterprises are particularly interested 
in the transfer of know-how as either licensors or 
licensees. 
1.7. The Committee wonders whether the draft's 
provisions can provide the legal certainty which the 
Commission considers to be the purpose of the Regu­
lation. The Commission makes the exemption of know-
how agreements conditional on the observance of vague 
requirements, viz.: 
— the requirement that the know-how is to be 'sub­
stantial' (end of fourth recital plus the sixth recital), 
— the scope of the documentation required under 
Article 1 (3), 
— the admissibility of territorial limitations depending 
on whether the 'same technology' is involved 
[Art. 1 (2)]. 
The economic significance and violability of know-how 
requires that agreements preserve their legal validity to 
the fullest extent. 
2. Specific comments 
2.1. Definition of know-how 
The Committee proposes that the definition of know-
how be aligned on the definition given in the draft 
Regulation on the application of Article 85 (3) of the 
Treaty to categories of franchising agreements (OJ No 
C 229 of 27.8.1987, p. 3), insofar as the subject-matter 
of both Regulations is comparable. 
2.2. Recitals 4 to 6 (Substantiality of know-how) 
Only agreements about secret and substantial technical 
information are to be exempted. This shows that the 
Commission obviously wishes to make sure that agree­
ments about worthless know-how do not qualify for 
an exemption. In order to be able to check whether 
know-how is 'substantial', the Commission calls for 
detailed up-to-date documentation which is in 'as much 
detail as practical' [Art. 1 (3)]. 
The Committee shares the Commission's concern that 
agreements about worthless know-how should not 
qualify for an exemption. However, such agreements 
are extremely rare. The Commission is also able to 
withdraw an exemption in individual cases (Art. 9). The requirement that know-how has to be 'essential' 
also raises problems of definition and undermines legal 
certainty. Should the question of whether technical 
knowledge is substantial be decided from the licensee's 
point of view or with reference to the general state-
of-the-art? The Committee also doubts whether the 
Commission has the requisite expertise to provide a 
swift and fitting answer. 
2.3. Article I (1) (scope) 
2.3.1. Support should be given to the Commission's 
wish to make a clear distinction between the fields of 
application of the Know-how Licensing Regulation and 
the Patent Licensing Regulation. 
In cases where the conditions for applying the Patent 
Licensing Regulation are not met, agreements granting 
both know-how and patent licenses should be exempted 
under the Know-know Licensing Regulation. The defi­
nition of the field of application given in the draft 
Regulation is hard to understand and should be simpli­
fied where possible. 
2.3.2. Know-how agreements often include the 
licensing of trade-marks. Recital 4 points out that such 
agreements shall only be covered by the draft Regu­
lation when such a licence is an 'ancillary' part of 
the agreement. The Commission is asked to examine 
whether this restriction, which may produce additional 
definition problems, is essential. The draft Regulation 
already precludes the risk of exempting know-how 
agreements whose main purpose is the licensing of 
trade-marks. Recital 4 expressly states that the draft 
Regulation shall not apply to agreements 'in which the 
licensing of the trade-mark is the main purpose of the 
agreement'. 
2.4. Article 1 (1)(6) and 1 (2) (territorial protection) 
2.4.1. Territorial protection caters for the legitimate 
needs of licensor and licensee. This fact has been recog­
nized by the Commission, as its remarks in working 
document 86/EM-l demonstrate. A licensee will not 
switch over to a new process or a new product without 
having the chance to build up a market of his own. His 
investment needs to be protected. The licensor, on the 
other hand, will pass on know-how only if he does not 
have to fear competition from the licensee straightaway 
on his own markets. 
2.4.2. The Commission proposes that agreements 
granting know-how territorial protection should be 
valid for no more than a total of seven years, starting 
on the date of signature of the first agreement. Once 
the first agreement has been signed, the period over 
which other licensees could be granted territorial pro­
tection for the same know-how would therefore dimin-
24. 5. 88 Official Journal of the European Communities No C 134/13 
ish day by day. After seven years protection would 
lapse completely. The Commission has thus failed to 
make sufficient allowance for the interests of licensors 
and licensees. 
2.4.3. The Commission's strategy is based on the 
belief that as a rule know-how is out of date after seven 
years. This is certainly not generally true. There are 
numerous cases of know-how still being secret after 
seven or more years and giving its owner a considerable 
competitive edge. 
The transfer of out-of-date know-how does not qualify 
for a block exemption because it is common knowledge 
and no longer a secret. A firm will not conclude a 
know-how agreement and make payments to the 
licensor unless it gains a tangible competitive advan­
tage. 
2.4.4. Appropriate territorial protection must be 
possible for each individual agreement. The Regulation 
should specify that such protection may be agreed on 
for a period of up to ten years, reckoned from the 
individual agreement's date of signature {cf. Point 4 of 
this Opinion). 
2.4.5. As a rule, a licensee invests heavily in being 
able to manufacture the product to which the know-
how applies, or use a certain process. It must be possible 
to write off this investment. However, this is scarcely 
possible unless the licensee is protected against compe­
tition from the licensor or other licensees for an appro­
priated period of time. It must therefore be possible 
to agree on territorial protection for each individual 
agreement. A period of ten years in each case would 
seem appropriate for protecting the licensee's interests. 
The proposed rule is necessary for the licensor because 
he will not trade in know-how if either his own markets 
or the markets of other licensees are at risk. 
2.4.6. Laying down a rule for each individual know-
how agreement can mean that agreements with earlier 
licensees have already expired, leaving these licensees 
to compete with later licensees. It can, however, be left 
to the licensee to decide on economic grounds whether 
he is prepared to enter into a know-how agreement 
under these circumstances. 
So that a firm interested in acquiring know-how is able 
to bear this in mind, the licensor should be expressely 
obliged to disclose all relevant information. The Com­
mittee proposes that the exemption of territorial protec­
tion agreements should also be made conditional on 
the licensor notifying writing the licensee of existing 
agreements covering the same technology and how long 
these agreements have to run. 2.4.7. The rule proposed by the Committee does not 
clash with the fact that know-how in the high-tech field 
is usually out of date in less than ten years. It is in fact 
common practice for the licensor to let the licensee 
share in all improvements. Throughout the lifetime of 
the agreement the licensee is therefore kept constantly 
supplied with the most up-to-date know-how. 
2.4.8. Finally, the proposed rule should also apply 
to licensees enjoying territorial protection from other 
licensees. The Commission's restriction on passive com­
petition amongst licensees [Art. 1 (1)(6)] should be 
rejected. In the case of advanced technology both active 
and passive competition needs to be protected equally. 
In the high-tech sector the interested parties know 
where to obtain products, and there is no need for an 
active sales policy. 
2.4.9. The Commission points out in the final para­
graph of recital 10 that further periods of territorial 
protection as a result of improvements to know-how 
are justified only in cases where these improvements 
are both substantial and secret. Subject to its reser­
vations over the use of the term 'substantial', the Com­
mittee expressly supports the Commission's view and 
proposes that it be incorporated in the Regulation at 
an appropriate place. 
2.5. Article 1 (3) (obligation to supply documentation) 
2.5.1. Agreements affording territorial protection are 
to be exempted, according to the Commission, unless 
the know-how is described 'in as much detail as is 
practical'. 
However, this obligation is the source of considerable 
legal uncertainty. It is not possible to say beforehand 
whether a particular description has been given 'in 
as much details as is practical'. The legal status of 
agreements affording territorial protection should not 
depend on such a vague requirement. Furthermore, 
the comprehensive documentation stipulated by the 
Commission jeopardizes the secrecy of the know-how 
thereby detracting from its value to the licensor. 
2.5.2. The obligation to provide documentation 
imposes an unjustifiable burden of paperwork on firms. 
Small and medium-sized enterprises will be the main 
sufferers, since they have less chance to cushion this 
burden. Recent studies conducted on behalf of the 
Commission have reaffirmed this. This obligation to 
provide detailed documentation is not commensurate 
with general Community policy. 
It should also be borne in mind that in many firms 
the transfer of know-how consists mainly of practical 
training for the licensee's staff; this training is not, and 
in many cases cannot be, defined in writing. 
No C 134/14 Official Journal of the European Communities 24. 5. 88 
2.5.3. Detailed documentation is not needed either 
for checking the 'substantiality' of know-how. The 
Commission can acquire reliable information about the 
content of know-how by other means. Article 11 et seq. 
of Regulation No 17 of 6 February 1962 gives it exten­
sive rights to demand information and carry out checks 
on individual firms. 
2.6. Article 2 (1)(4) (improvements in know-how) 
The provision about the exchange of information on 
improvements during the lifetime of an agreement can 
be dispensed with. It cannot cover the many possible 
forms of cooperation between licensor and licensee. 
The parties to an agreement should be left to settle this 
matter themselves. Furthermore, there is no need for 
the sake of competition to deal with this matter in the 
Regulation. 
2.7. Article 2 (1)(5) (specificiations about the quality 
of the licensed product) 
There is equally no need to specify which agreements 
the parties are to conclude about the quality of the 
product that is to be manufactured by applying the 
know-how. 
Furthermore, the restriction to specifications which 'are 
necessary for a technically satisfactory exploitation of 
the licensed technology' is too narrow. The high-tech 
field is one field where the licensor must be able to 
lay down above-average and unusually high quality 
specifications. 
2.8. Article 2 (1)(8) and (9) (royalties) 
The intrinsic fairness of an agreement—which is the 
point being dealt with here—can be left to Member 
States' laws, which include suitable provisions. 
On grounds of competition too, there is no need to 
specify the form of any agreement on royalties. 
Done at Brussels, 23 March 1988. 2.9. Article 3 (7) (quantity restrictions) 
The Patent Licensing Regulation's ban on quantity 
restrictions should not be extended to the Know-how 
Licensing Regulation. 
Small and medium-sized enterprises will hardly be will­
ing to pass on know-how to enterprises of a similar or 
larger size if they have to fear that these enterprises will 
destroy the market by ruthlessly exploiting the know-
how. Such a risk exists in particular in cases where 
know-how contracts cover supply of turnkey pro­
duction plant. 
3. Article 4 (opposition proceedings) 
3.1. The Commission's readiness to oppose certain 
types of agreements is to be welcomed in principle. 
3.2. However, the case of the 'second source of sup­
ply' [Art. 4 (2)(b)] should not be opposable but should 
always be exempted. 
Customers frequently demand a second source of sup­
ply from suppliers in order to reduce the risk of a loss 
of production. This compels the supplier to pass on his 
know-how to a third party. His interest in imposing 
certain restrictions on this third party is therefore worth 
protecting. 
4. Article 8 (transitional provisions) 
The transitional provisions applying to firms in Greece, 
Portugal and Spain, set out in Article 8 (2) and (3), 
are unclear. In many cases firms in these countries 
concluded know-how agreements incorporation terri­
torial protection before the countries joined the Com­
munity. The draft Regulation does not specify from 
which date the stipulated time limits are to apply at the 
moment of the Regulation's entry-into-force. Clarifi­
cation of this point is particularly necessary in respect 
of territorial protection. 
It is proposed that these time limits apply from the date 
of conclusion of each know-how agreement irrespective 
of when the Member State in question joined the Com­
munity. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT