73.

The principles set out above can be illustrated by the following examples: Licensing between non-competitors Example 1Company A is specialised in developing bio-technological products and techniques and has developed a new product Xeran. It is not active as a producer of Xeran, for which it has neither the production nor the distribution facilities. Company B is one of the producers of competing products, produced with freely available non-proprietary technologies. In year one, B was selling EUR 25 million worth of products produced with the freely available technologies. In year two, A gives a licence to B to produce Xeran. In that year B sells EUR 15 million produced with the help of the freely available technologies and EUR 15 million of Xeran. In year three and the following years B produces and sells only Xeran worth EUR 40 million annually. In addition in year two, A is also licensing to C. C was not active on that product market before. C produces and sells only Xeran, EUR 10 million in year two and EUR 15 million in year three and thereafter. It is established that the total market of Xeran and its substitutes where B and C are active is worth EUR 200 million in each year.In year two, the year the licence agreement is concluded, A’s market share on the technology market is 0 % as its market share has to be calculated on the basis of the total sales of Xeran in the preceding year. In year three A’s market share on the technology market is 12,5 %, reflecting the value of Xeran produced by B and C in the preceding year 2. In year four and thereafter A’s market share on the technology market is 27,5 %, reflecting the value of Xeran produced by B and C in the preceding year.In year two B’s market share on the product market is 12,5 %, reflecting B’s EUR 25 million sales in year one. In year three B’s market share is 15 % because its sales have increased to EUR 30 million in year two. In year four and thereafter B’s market share is 20 % as its sales are EUR 40 million annually. C’s market share on the product market is 0 % in year one and two, 5 % in year three and 7,5 % thereafter.As the licence agreements are between non-competitors and the individual market shares of A, B and C are below 30 % each year, the agreements fall within the safe harbour of the TTBER. Example 2The situation is the same as in example 1, however now B and C are operating in different geographic markets. It is established that the total market of Xeran and its substitutes is worth EUR 100 million annually in each geographic market.In this case, A’s market share on the technology market has to be calculated for each of the two geographic markets. In the market where B is active A’s market share depends on the sale of Xeran by B. As in this example the total market is assumed to be EUR 100 million, i.e. half the size of the market in example 1, the market share of A is 0 % in year two, 15 % in year three and 40 % thereafter. B’s market share is 25 % in year two, 30 % in year three and 40 % thereafter. In year two and three both A’s and B’s market share does not exceed the 30 % threshold. The threshold is however exceeded from year four and this means that, in line with Article 8(2) of the TTBER, after year six the licence agreement between A and B can no longer benefit from the safe harbour but has to be assessed on an individual basis.In the market where C is active A’s market share depends on the sale of Xeran by C. A’s market share on the technology market, based on C’s sales in the previous year, is therefore 0 % in year two, 10 % in year three and 15 % thereafter. The market share of C on the product market is the same: 0 % in year two, 10 % in year three and 15 % thereafter. The licence agreement between A and C therefore falls within the safe harbour for the whole period. Licensing between competitors Example 3Companies A and B are active on the same relevant product and geographic market for a certain chemical product. They also each own a patent on different technologies used to produce this product. In year one A and B sign a cross licence agreement licensing each other to use their respective technologies. In year one A and B produce only with their own technology and A sells EUR 15 million of the product and B sells EUR 20 million of the product. From year two they both use their own and the other’s technology. From that year onward A sells EUR 10 million of the product produced with its own technology and EUR 10 million of the product produced with B’s technology. B sells from year two EUR 15 million of the product produced with its own technology and EUR 10 million of the product produced with A’s technology. It is established that the total market of the product and its substitutes is worth EUR 100 million in each year.To assess the licence agreement under the TTBER, the market shares of A and B have to be calculated both on the technology market and the product market. The market share of A on the technology market depends on the amount of the product sold in the preceding year that was produced, by both A and B, with A’s technology. In year two the market share of A on the technology market is therefore 15 %, reflecting its own production and sales of EUR 15 million in year one. From year three A’s market share on the technology market is 20 %, reflecting the EUR 20 million sale of the product produced with A’s technology and produced and sold by A and B (EUR 10 million each). Similarly, in year two B’s market share on the technology market is 20 % and thereafter 25 %.The market shares of A and B on the product market depend on their respective sales of the product in the previous year, irrespective of the technology used. The market share of A on the product market is 15 % in year two and 20 % thereafter. The market share of B on the product market is 20 % in year two and 25 % thereafter.As the agreement is between competitors, their combined market share, both on the technology and on the product market, has to be below the 20 % market share threshold in order to benefit from the safe harbour. It is clear that this is not the case here. The combined market share on the technology market and on the product market is 35 % in year two and 45 % thereafter. This agreement between competitors will therefore have to be assessed on an individual basis.