Source: EURLEX
Language: en
Format: md

No C 214/2 Official Journal of the European Communities 12.8.87

Communication pursuant to Article 5 of Council Regulation No 19/65/EEC of 2 March 1965
on the application of Article 85 (3) of the Treaty to certain categories of agreements, decisions

and concerted practices (')

(87/C 214/02)

In accordance with the terms of Article 5 of Regulation No 19/65/EEC the Commission
invites all interested parties to send their comments on the attached draft Commission Regulation (EEC) on the application of Article 85 (3) of the Treaty to certain categories of
know-how licensing agreements by no later than 1 November 1987 to the following address:

Commission of the European Communities,
Directorate-General for Competition,
Directorate for General Competition Policy,
200 rue de la Loi,
B-1049 Brussels.

Draft Commission Regulation on the application of Article 85 (3) of the Treaty to certain
categories of know-how licensing agreements

THE COMMISSION OF THE EUROPEAN
COMMUNITIES,

Having regard to the Treaty establishing the European
Economic Community,

Having regard to Council Regulation No 19/65/EEC of
2 March 1965 on the application of Article 85 (3) of the
Treaty to certain categories of agreements and concerted
practices (*), as last amended by the Act of Accession of
the Kingdom of Spain and the Republic of Portugal, and
in particular to Article 1 thereof,

After consulting the Advisory Committee on Restrictive
Practices and Dominant Positions,

Whereas:

1. Regulation No 19/65/EEC empowers the
Commission to apply Article 85 (3) of the Treaty by
Regulation to certain categories of bilateral agreements
and concerted practices falling within the scope of
Article 85 (1) which include restrictions imposed in
relation to the acquisition or use of industrial property
rights, in particular patents, utility models, designs or
trade marks, or to the rights arising out of contracts for
assignment of, or the right to use, a method of manufacture or knowledge relating to the use or application
of industrial processes.

O OJ No 36, 6. 3. 1965, p. 533/65.

2. The increasing economic importance of nonpatented technical information, commonly termed
'know-how', and the large number of agreements
currently being concluded by industry solely for the
exploitation of such information (so-called 'pure'
know-how licensing agreements) make it necessary to
provide greater legal certainty with regard to the status
of such agreements under the competition rules. In the
light of experience acquired so far, it is possible to define
a category of such know-how licensing agreements
which are capable of falling within the scope of Article
85 (1), because of their restrictive effects within the
common market, but which can normally be regarded as
satisfying the conditions laid down in Article 85 (3).
Since the Commission has already provided guidance
with respect to the legal assessment of patent licences in
the form of a block exemption regulation ( [x] ) and
know-how licences are in some respects similar to, and
may be combined with, patent licences, it is appropriate
that this Regulation should follow the structure of the
Patent Licensing Regulation.

3. For the purposes of this Regulation, pure
know-how licensing agreements are agreements whereby
one undertaking (the licensor), which holds a body of
non-patented technical information (e.g., descriptions of
manufacturing processes, recipes, formulae, designs or
drawings) that is secret and substantial (the know-how),
confers on another undertaking (the licensee) the
exclusive or non-exclusive right to exploit that information in particular in the production of goods or
services, use or sale. The term 'undertaking' also includes

(') Commission Regulation (EEC) No 2349/84 of 23 July 1984
on the application of Article 85 (3) of the Treaty to certain
categories of patent licensing agreements (OJ No L 219, 16.
8. 1984, p. 15).

12. 8. 87 Official Journal of the European Communities No C 214/3

public research facilities engaged in the licensing of
know-how.

The package of information may include related
software which is of assistance in achieving the object of
the licensed know-how, and also design features of
products which are physically concealed in the product
or cannot practically be determined from the product.

4. As well as pure know-how agreements, mixed
agreements in which a patent and/or trade-mark licence
is granted along with the transfer of know-how play an
increasingly important role in the transfer of technology.
It is therefore appropriate to include within the scope of
the Regulation:

— mixed know-how and patent licensing agreements in
which the know-how component is decisive for the
exploitation of the licensed technology and in which
the licensed patents (i.e. the patented invention) are
not necessary for that purpose, since such agreements
are not covered by the Patent Licensing Regulation;

— mixed patent and know-how licensing agreements in
which the patents are necessary for the exploitation
of the licensed technology and which restrict that
exploitation in Member States without patent
protection, since such agreements, too, are not
covered by the Patent Licensing Regulation;

— know-how agreements containing ancillary provisions
relating to trade-marks, except those in which the
licensing of the trade-mark is the main purpose of
the agreement.

However, such agreements, too, can only be regarded as
fulfilling the conditions of Article 85 (3) for the purposes
of this Regulation where the licensed technical
knowledge is secret and substantial.

5. The term 'secret' is not meant in the narrow sense

that each individual component of the know-how must
be totally unknown or unobtainable outside the licensor's
business, but in the sense that the know-how package as
a whole or in the precise configuration and assembly of
its components is not generally known or easily
accessible, so that part of its value consists in the leadtime the licensee gains when it is licensed to him.

As secrecy is of the essence of know-how, parties can be
expected to undertake efforts which are reasonable
under the circumstances to prevent the know-how from
becoming generally known to the public.

6. The term 'substantial' is intended to exclude infor
mation that is trivial or self-evident. That is to say, the
licensed know-how must be necessary or of decisive
importance for the whole or a major part of (i) a manufacturing process or (ii) a product or (iii) for the
development thereof. Such know-how is thus capable of
improving the performance of the licensee who is
therefore willing to pay royalties for it.

7. To make it possible to verify that the transferred
know-how does indeed fulfil the criteria of secrecy and
substantiality, the parties should be required to identify
and describe the original know-how in as much detail as
practical in the agreement or in a separate document or
in the most appropriate form and to keep detailed
records of any subsequent improvements to it relating to
the purpose for which the original know-how was
transferred. This should apply even where the know-how
consists of accumulated practical experience, since it is
the ability to specify and communicate the know-how in
written or graphic form which distinguishes a know-how
licence from a mere provision of services. This
requirement will also help to ensure that the licensee is
not unduly restricted in his exploitation of his own
technology or his improvements to the licensed
know-how and to avoid subsequent disputes arising from
uncertainty about the content of the licensed technology
which may affect the competitive position of the parties
or third persons.

8. It is not appropriate to include within the scope of
the Regulation agreements solely for the purpose of sale,
except where the licensor undertakes for a preliminary
period before the licensee himself commences production
using the licensed technology to supply the contract
products for sale by the licensee. The same applies
to agreements relating to marketing know-how
communicated in the context of commercial franchising
arrangements or to know-how agreements entered into
in connection with arrangements such as joint ventures
or patent pools and other cross-licensing arrangements,
as such agreements pose different problems which cannot
at present be dealt with in one regulation. Reciprocal
agreements which do not involve any territorial
restrictions within the common market and agreements
between non-competitors entered into in connection with
joint ventures may, however, be included (Article 5).

9. Exclusive licensing agreements, i. e. agreements in
which the licensor undertakes not to exploit the licensed
technology, i.e. the licensed know-how and any patents
or trade-marks accompanying it, in the licensed territory

No C 214/4 Official Journal of the European Communities 12. 8. 87

himself or to grant further licences there, may not be in
themselves incompatible with Article 85 (1) where they
are concerned with the introduction and protection of a
new technology in the licensed territory, by reason of the
scale of the research which has been undertaken and of

the increase in the level of competition and in the
competitiveness of the undertakings concerned resulting
from the dissemination of innovation within the

Community.

Insofar as agreements of this kind may in other circumstances possibly fall within the scope of Article 85 (1), it
is useful for the purposes of legal certainty to include
them among the obligations listed in Article 1, in order
that they may also benefit from the exemption.

10. Both these and the other obligations listed in
Article 1 encourage the transfer of technology and thus
generally contribute to improving the production of
goods and to promoting technical progress, by increasing
the number of production facilities and the quality of
goods produced in the common market and expanding
the possibilities of further development of the licensed
technology. This is true, in particular, of obligations on
the licensor and on the licensee to refrain not only from
active but also from passive competition, in the licensed
territory, in the case of the lincensor, and in the
territories reserved for the licensor or other licensees in

the case of the licensee. The marketing of techologically
new or improved products requiring major investment
does not usually depend on sales promotion as the users
are often not final consumers but intermediate industries,
which are well-informed about prices and alternative
sources of supply of the products within the Community.
Hence, protection against active competition only would
not afford the parties and other licensees the security
they needed, especially during the initial period of
exploitation of the licensed technology when they would
be investing in tooling up and developing a market for
the product and so increasing demand.

In view of the absence of a statutory period of protection,
of know-how, the difficulty of determining the point at
which know-how can be said to be no longer secret, and
the frequent licensing of a continuous stream of knowhow, especially where technology in the industry is
rapidly evolving, it is appropriate to limit to a fixed
number of years the periods of territorial protection of
the licensor and the licensee from one another and of

other licensees from the licensee that are automatically
covered by the exemption, as long as the know-how
remains secret and substantial. Since, as distinguished

from patent licences, know-how licences are frequently
negotiated after the goods or services incorporating the
licensed technology ('the licensed product') has proved
successful on the market, it is appropriate to take the
date of signature of the first licence agreement entered
into in the EEC in respect of the same know-how by the
licensor as the starting point for the permitted periods of
territorial protection of the licensor and licensee from
one another and of other licensees from manufacture,
use or active sales by the licensee, whereas the starting
point for the period of protection of other licensees
against passive sales of the licensee should be the first
marketing of the licensed product in the EEC. Further
periods of territorial protection may be allowed only
where new substantial and secret improvements have
been added and only by conclusion of new agreements in
which the improvements are described in detail.
However, where the licensed technology is partly
covered by valid patents, the exemption of these contractual territorial restrictions only for a limited period
of time is without prejudice to the right of the patentee
or a licensee to exercise, consistent with the case law of
the Court of Justice, his rights under national patent law
against the manufacture, use or sale which infringes
those rights.

11. By way of exception from the above, it is appropriate in cases where the same technology is also licensed
to licensees in other Member States in which it is

protected by necessary patents so that the agreements
with those other licensees are covered by the Patent
Licensing Regulation to exempt under this Regulation
territorial restrictions on manufacture, use and active
sales by the know-how licensee in the other licensees'
territories for the full life of the patents existing there.

12. The obligations listed in Article 1 also generally
fulfil the other conditions for the application of Article
85 (3). Consumers will as a rule be allowed a fair share
of the benefit resulting from the improvement in the
supply of goods on the market. Nor do the obligations
impose restrictions which are not indispensable to the
attainment of the abovementioned objectives. Finally,
competition at the distribution stage is safeguarded by
the possibility of parallel imports, which may not be
hindered by the parties in any circumstances. The
exclusivity obligations covered by the Regulation thus do
not normally entail the possibility of eliminating
competition in respect of a substantial part of the
products in question. This also applies in the case of
agreements which grant exclusive licences for a territory
covering the whole of the common market where there is
the possibility of parallel imports from third countries, or
where there are other competing technologies on the
market, since then the territorial exclusivity may lead to
greater market integration by stimulating Communitywide interbrand competition.

12. 8. 87 Official Journal of the European Communities No C 214/5

13. It is desirable to list in the Regulation a number of
obligations that are commonly found in know-how
licensing agreements but are normally not restrictive of
competition and to provide that in the event that because
of the particular economic or legal circumstances they
should fall within Article 85 (1), they also would be,
covered by the exemption. This list, in Article 2, is not
exhaustive.

14. The Regulation must also specify what restrictions
or provisions may not be included in know-how licensing
agreements if these are to benefit from the block
exemption. The restrictions, which are listed in Article 3,
may fall under the prohibition of Article 85 (1), but in
their case there can be no general presumption that they
will lead to the positive effects required by Article 85 (3),
as would be necessary for the granting of a block
exemption, and consequently an exemption can be
granted only on an individual basis.

15. Agreements which are not automatically covered
by the exemption because they contain provisions that
are not expressly exempted by the Regulation and not
expressly excluded from exemption, including those
listed in Article 4 (2) of the Regulation, may nonetheless
generally be presumed to be eligible for application of
the block exemption. It will be possible for the
Commission rapidly to establish whether this is the case
for a particular agreement. Such agreements should
therefore be deemed to be covered by the exemption
provided for in this Regulation where they are notified
to the Commission and the Commission does not oppose
the application of the exemption within a specified
period of time.

16. The list of obligations normally not restrictive of
competition in Article 2 includes, first, an obligation to
keep the know-how secret since confidentiality is of the
essence of know-how and of crucial importance for the
conclusion of a know-how agreement, and an obligation
not to sub-license the know-how since this is inherent in

the licensor's right to keep possession of the know-how
and to transfer it only to persons of his choice (Article
2 (1) (1) and (2)).

17. The list in Article 2 also includes an obligation on
the licensee to cease using the licensed know-how after
the termination of the agreement ('post-term use ban')
(Article 2 (1) (3)). Such an obligation may be regarded as
a normal feature of the licensing of know-how as
otherwise the licensor would be forced to transfer his

know-how in perpetuity and this could inhibit the
transfer of technology. However, this does not apply
where the know-how only consists of practical
experience in working an expired patent previously
licensed to the licensee as in that case the licensee would

be obliged to discontinue his previous method of
working the invention, which would place him at a
disadvantage compared with competitors who were free
to develop and use the same know-how in working the
patent once it expired (Article 3 (1)).

18. Arrangements for the reciprocal non-exclusive
communication between licensor and licensee of

improvements to the original know-how on a royaltyfree basis or otherwise are likewise generally not
restrictive of competition, provided that the right of the
licensor to use the licensee's improvements is not of
longer duration than the licensee's right to use the
original know-how. Furthermore, where such
improvements can only be used in connection with the
original know-how for which an exclusive licence was
granted, an obligation on the parties to grant each other
an exclusive licence for such improvements may be
restrictive of competition but in that case should be automatically exempted (Article 2 (2)).

On the other hand, the block exemption should not be
available for an obligation on the licensee to transfer to
the licensor the title in his own improvements or to grant
him an exclusive licence which would prevent the
licensee from using the improvements or licensing them
to third parties where licensing to third parties would not
disclose the original know-how of the licensor that is still
secret. This is so because if the licensee were denied a

possibility of benefitting from his own improvements
after the termination of the agreement he would have
less incentive to improve the technology, and potential
improvements which could increase efficiency and
competition on the market might therefore not be made.
Such a restrictive effect on competition also arises where
the agreement contains both a post-term use ban and an
obligation on the licensee to make his improvements to
the know-how available to the licensor, even on a nonexclusive and reciprocal basis, and to allow the licensor
to continue using them even after the expiry of the
agreement. This is so because in such a case the licensee
has no possibility of inducing the licensor to authorize
him to continue exploiting the originally licensed knowhow, and hence the licensee's own improvements as well,
after the expiry of the agreement. Without the right to
exploit the licensee's improvements after expiry of the
agreement, however, the licensor would have an
incentive to renegotiate the contract with the licensee in
order to continue exploiting the improved technology
and in return the licensee would have the means of

obtaining the licensor's consent to his own continued
exploitation of the original know-how.

No C 214/6 Official Journal of the European Communities 12. 8. 87

19. Obligations on the licensee to observe quality
specifications or to procure goods or services from the
licensor are also not caught by Article 85 (1), provided
that such specifications, goods or services are necessary
for a technically satisfactory exploitation of the licensed
technology (Article 2 (1) (5) and (6)).

Where these requirements are not met and the licensee
has been induced to accept such specifications, goods or
services he did not want, such obligations constitute
restrictions of competition which may not be automatically exempted (Article 3 (3)).

20. An obligation to assist the licensor in any legal
action against misappropriation or misuse of the licensed
know-how is also not restrictive of competition, provided
that the licensee remains free to challenge the secrecy of
the licensor's know-how except where he himself has in
some way contributed to its disclosure (Article 2(1) (7)).

A no-challenge clause which prevented the licensee from
claiming that the know-how had become generally
known to the public, except by his own action, would
render the agreement ineligible for the block exemption
(Article 3 (4)).

21. The list in Article 2 also includes an obligation on
the licensee to keep paying royalties for a limited period
after the licensed know-how has become publicly known
through the action of third parties (Article 2 (1) (9)). As
a rule, parties do not need to be protected against the
foreseeable financial consequences of an agreement
freely entered into and should therefore not be restricted
in their choice of the appropriate means of financing the
technology transfer. This applies especially where
know-how is concerned since here there can be no

question of an abuse of a legal monopoly and, under the
legal systems of the Member States, the licensee may
have a remedy in the form of a national court action for
frustration or other relief. It is however necessary, in
order to avoid unfair and restrictive situations, to
provide that the period of continued payments after the
know-how has become publicly known should not be
unlimited or unreasonably long, i.e. more than three
years. Cases in which the lead time acquired through the
grant of know-how because of the headstart in
production and marketing exceeded that period of three
years, thus possibly justifying longer periods of
payments, should however be eligible for examination
under the expedited opposition procedure (Article 4 (2)).

Where the know-how becomes publicly known through
the action of the licensor, the licensee should be freed
from his obligation to pay royalties (Article 3 (5)).

22. Finally, the list in Article 2 includes, among other
obligations, an obligation on the licensee to restrict his
exploitation of the licensed technology to one or more
technical fields of application ('fields of use') (Article
2 (1) (10). This obligation also is not restrictive of
competition since the licensor can be regarded as having
the right to transfer the know-how only for a limited
purpose. Such a restriction must however not constitute a
disguised means of customer sharing.

23. Restrictions whereby the parties share customers
within the same technological field of use or the same
product market, either by an actual prohibition on
supplying certain classes of customer or an obligation
with an equivalent effect, cannot be exempted under the
block exemption (Article 3 (6)).

An exception might be allowed in special circumstances.
These include cases where the know-how licence is

granted in order to provide a second source of supply at
the customer's insistence or because the first supplier is
unable to satisfy the totality of the customer's
requirements himself. In such a case, a prohibition on the
licensee from supplying others than the customer
concerned may appear, on its face, to be indispensable
for the grant of a licence to the second supplier since the
purpose of the transaction is not to create an
independent supply on the market. The same applies to
restrictions on the quantities the licensee may supply to
the customer concerned. Not allowing the grant of a
limited licence for the opening of a second source of
supply could result in undue pressure by a powerful
customer on the developer of the know-how to grant the
customer itself a licence with the right to have the
product manufactured by a sub-contractor. However,
given the complexity of the situations involved, it is
appropriate in the present state of experience of the
Commission to make such clauses subject to the
opposition procedure (Article 4 (2)).

24. Besides the clauses already mentioned, the list of
restrictions precluding application of the block
exemption in Article 3 also includes restrictions
regarding the selling prices of the licensed product or the
quantities to be produced or supplied since they limit the
extent to which the licensee can exploit the licensed
know-how (Article 3 (7) and (8)). This also applies
where a licence is given for use of the technology in
specified production facilities and the licensee is not
allowed to increase the capacity of the facilities or to set
up further facilities on normal commercial terms.

12. 8. 87 Official Journal of the European Communities No C 214/7

However, quantity restrictions resulting from a licence to
cover the licensee's own requirements, as freely
determined by the licensee, are no more than a use
licence which is not in itself caught by Article 85.

25. The list in Article 3 also includes obligations
which restrict the freedom of one party to compete with
the other in respect of techniques other than those
licensed in view of the effect of such obligations of
excluding the development of competing technologies,
without prejudice to the right of the licensor to terminate
the exclusivity granted to the licensee in that event.
Given the greater vulnerability of know-how, the
prohibition of an obligation not to compete must be
reconciled with the legitimate interest of the licensor not
only in having his know-how exploited to the full but
also in a manner which does not breach the contract, in
particular for the production of goods and services other
than those licensed; the burden of proof that the licensed
know-how had not been so used should be on the

licensee (Article 3 (9)).

26. To protect both the licensor and the licensee from
being tied into agreements whose duration may be automatically extended beyond a reasonable term through a
continuous stream of improvements obtained by the
licensor, it is appropriate to exclude agreements with
such a clause from the block exemption (Article 3 (10)).
In the absence of a statutory mandated term to which a
know-how agreement may be limited, it is appropriate to
limit the maximum term of such agreements, if they are
to be eligible for the block exemption, to seven years.
Such a term could assure the licensor against the danger
that the licensee will quickly terminate the agreement
and — since know-how once transmitted is often irrec
overable because of the practical difficulties of enforcing
a post-term use ban — continue using the know-how
made available to him. It will also assure the licensee that

he will have access to a continuous flow of know-how,
which is the essence of the agreement, and a chance of
recouping his investment without running the risk that
the licensor may terminate the agreement prematurely.
Furthermore, the parties are free at any time to extend
their contractual relationship by entering into new
agreements concerning new improvements.

27. The Regulation should apply with retroactive
effect to know-how licensing agreements in existence
when the Regulation comes into force where such
agreements already fulfil the conditions for application
of the Regulation or are modified to do so (Articles 6 to
8). Under Article 4 (3) of Regulation No 19/65/EEC,

the benefit of these provisions may not be claimed in
actions pending at the date of entry into force of this
Regulation, nor may it be relied on as grounds for claims
for damages against third parties.

28. Agreements which come within the terms of
Articles 1 and 2 and which have neither the object nor
the effect of restricting competition in any other way
need no longer be notified. Nevertheless, undertakings
will still have the right to apply in individual cases for
negative clearance under Article 2 of Council Regulation
No 17 (') or for exemption under Article 85 (3),

HAS ADOPTED THIS REGULATION:

_Article 1_

1. Pursuant to Article 85 (3) of the Treaty and subject
to the provisions of this Regulation, it is hereby declared
that Article 85 (1) of the Treaty shall not apply to pure
know-how licensing agreements, and agreements
combining the licensing of know-how which is decisive
for the exploitation of the licensed technology and of
patents which are not necessary for that purpose or the
licensing of substantial know-how and necessary patents
for territories including Member States without patent
protection, to which only two undertakings are party
and which include one or more of the following
obligations:

(1) an obligation on the licensor not to license other
undertakings to exploit the licensed technology in
the licensed territory, covering all or part of the
common market;

(2) an obligation on the licensor not to exploit the
licensed technology in the licensed territory himself;

(3) an obligation on the licensee not to exploit the
licensed technology in territories within the common
market which are reserved for the licensor;

(4) an obligation on the licensee not to manufacture or
use the licensed product, or use the licensed process,
in territories within the common market which are

licensed to other licensees;

O OJ No 13, 21. 2. 1962, p. 204/62.

No C 214/8 Official Journal of the European Communities 12.8.87

(5) an obligation on the licensee not to pursue an active
policy of putting the licensed product on the market
in the territories within the common market which

are licensed to other licensees, and in particular not
to engage in advertising specifically aimed at those
territories or to establish any branch or maintain any
distribution depot there;

(6) an obligation on the licensee not to put the licensed
product on the market in the territories licensed to
other licensees within the common market for a

period not exceeding five years from the date when
the product is first put on the market within the EEC
by the licensor or one of his licensees;

(7) an obligation on the licensee to use only the
licensor's trademark or the get-up determined by the
licensor to distinguish the licensed product, provided
that the licensee is not prevented from identifying
himself as the manufacturer of the licensed product.

2. The exemption provided for in paragraph 1 shall
extend for a period not exceeding seven years from the
date of signature of the first licence agreement entered
into by the licensor in the EEC in respect of the same
technology for the obligations referred to in paragraph 1
(1) to (5).

3. The exemption provided for in paragraph 1 shall
apply only where the parties have described in as much
detail as practical in the agreement or in a separate
document or in the most appropriate form the initial
know-how and keep detailed records of any subsequent
improvements thereto and only for as long as the
know-how remains secret and substantial.

4. Where the obligations referred to in paragraph 1
(4) and (5) concern territories within the common
market for which the same technology is licensed to
other licensees pursuant to agreements covered by the
Patent licensing Regulation, the exemption provided for
in paragraph 1 shall extend for as long as the licensed
product is protected in those territories by valid patents.

5. The exemption of restrictions on putting the
licensed product on the market resulting from the
obligations referred to in paragraph 1 (2), (3), (5) and
(6) shall apply only if the licensee manufactures the
licensed product himself or has it manufactured by a
connected undertaking or by a subcontractor.

6. The exemption provided for in paragraph 1 shall
also apply where in a particular agreement the parties
undertake obligations of the types referred to in that
paragraph but with a more limited scope than is
permitted by the paragraph.

_Article 2_

1. Article 1 shall apply notwithstanding the presence
in particular of any of the following obligations, which
are generally not restrictive of competition:

(1) an obligation on the licensee not to divulge the
know-how communicated by the licensor; the
licensee may be held to this obligation after the
agreement has expired;

(2) an obligation on the licensee not to grant sublicences or assign the licence;

(3) an obligation on the licensee not to exploit the
licensed know-how after termination of the

agreement in so far and as long as the know-how is
still secret and does not only consist of practical
experience gained in working an expired patent
previously licensed to the licensee;

(4) an obligation on the parties to communicate to one
another any experience gained in exploiting the
licensed technology and to grant one another a
licence in respect of improvements to or new
applications of the licensed know-how, provided
that the licensee is not prevented from using his
own improvements or licensing them to third
parties where licensing to third parties does not
disclose the original know-how of the licensor that
is still secret and provided that the licensor's right
to use the licensee's improvements is not of a longer
duration than the licensee's right to use the original
know-how;

(5) an obligation on the licensee to observe
specifications concerning the quality of the licensed
product, provided that such specifications are
necessary for a technically satisfactory exploitation
of the licensed technology and to allow the licensor
to carry out related checks;

(6) an obligation on the licensee to procure goods or
services from the licensor or from an undertaking
designated by the licensor, in so far as such
products or services are necessary for a technically
satisfactory exploitation of the licensed technology;

(7) obligations:

(a) to inform the licensor of misappropriation or
abuse of the know-how, or

(b) to take or to assist the licensor in taking legal
action against such misappropriation or abuse,

12. 8. 87 Official Journal of the European Communities No C 214/9

provided that these obligations are without
prejudice to the licensee's right to contest the
secrecy of the licensed know-how except where he
himself has in some way contributed to its
disclosure;

(8) an obligation on the licensee to continue paying
turnover-related royalties until the end of the
agreement if the know-how has become publicly
known by his action or to pay contractual damages
in such an event;

(9) an obligation on the licensee to continue paying
turnover-related royalties for up to three years after
the know-how has become publicly known through
the action of third parties, without prejudice to
arrangements whereby payment of a fixed sum is
spread over a given period, independently of the
point at which the know-how may become publicly
known;

(10) an obligation on the licensee to restrict his
exploitation of the licensed technology to one or
more technical fields of application covered by the
licensed technology or to one or more product
markets;

(11) an obligation on the licensee to pay a minimum
royalty or to produce a minimum quantity of the
licensed product or to carry out a minimum number
of operations exploiting the licensed technology;

(12) an obligation on the licensor to grant the licensee
any more favourable terms that the licensor may
grant to another undertaking after the agreement is
entered into;

(13) an obligation on the licensee to mark the licensed
product with the licensor's name.

2. In the event that, because of particular circumstances, the obligations referred to in paragraph 1 fall
within the scope of Article 85 (1), they shall also be
exempted even if they are not accompanied by any of the
obligations exempted by Article 1. This shall in particular
apply to an obligation on the licensor to grant the
licensee an exclusive licence for improvements which can
only be used with the original know-how for which an
exclusive know-how licence has been granted to the
licensee.

3. The exemption provided for in paragraph 2 shall
also apply where in an agreement the parties undertake
obligations of the types referred to in paragraph 1 but
with a more limited scope than is permitted by that
paragraph.

_Article 3_

Articles 1 and 2 (2) shall not apply where:

(1) the licensee is prevented from continuing to use the
licensed know-how after the termination of the

agreement where the know-how has meanwhile
become publicly known, other than by the action of
the licensee, or where it only consists of practical
experience gained in working an expired patent
previously licensed to the licensee;

(2) the licensee is obliged either:

(a) to assign in whole or in part to the licensor
rights to improvements to or new applications
of the licensed technology,

(b) to grant the licensor an exclusive licence for
improvements to or new applications of the
licensed technology which would prevent the
licensee during the currency of the agreement
and/or thereafter from using his own
improvements or licensing them to third parties,
where such licensing would not disclose the
original know-how of the licensor that is still

secret, or

(c) in the case of an agreement which also includes
a post-term use ban, to grant back to the
licensor licences for improvements which can
only be used in connection with the original
know-how, even on a non-exclusive and
reciprocal basis, if the licensor's right to use the
improvement is of a longer duration than the
licensee's right to use the original know-how;

(3) the licensee is induced at the time the agreement is
entered into to accept quality specifications he does
not want or to agree to procure goods or services
he does not want, unless such quality specifications,
goods or services are necessary for a technically
satisfactory exploitation of the licensed technology;

(4) the licensee is prohibited from contesting the
secrecy of the licensed know-how or from
challenging the validity of any accompanying
patents within the common market belonging to the
licensor or undertakings connected with him,
without prejudice to the right of the licensor to
terminate the licensing agreement in the event of
such a challenge;

No C 214/10 Official Journal of the European Communities 12. 8. 87

(5) the licensee is charged royalties on goods or
services which are not entirely or partially produced
by means of the licensed technology or for the use
of know-how which has become publicly known by
the action of the licensor or an undertaking
connected with him;

(6) one party is restricted within the same technological
field of use or within the same product market as to
the customers he may serve, in particular by being
prohibited from supplying certain classes of user,
employing certain forms of distribution or, with the
aim of sharing customers, using certain types of
packaging for the products, save as provided in
Article 1 (1) (7) and Article 4 (2);

(7) the quantity of the licensed products one party may
manufacture or sell or the number of operations
exploiting the licensed technology he may carry out
are subject to limitations, save as provided in Article
4(2);

(8) one party is restricted in the determination of
prices, components of prices or discounts for the
licensed products;

(9) one party is restricted from competing with the
other party, with undertakings connected with the
other party or with other undertakings within the
common market in respect of research and
development, production or use of competing
products and their distribution, without prejudice to
an obligation on the licensee to use his best
endeavours to exploit the licensed technology and
without prejudice to the right of the licensor to
terminate the exclusivity granted to the licensee in
the event of the licensee's engaging in any such
competing activities and to check that the licensed
know-how is not used for the production of goods
and services other than those licensed;

(10) the initial duration of the licensing agreement is
automatically prolonged beyond a period of seven
years by the inclusion in it of any new
improvements obtained by the licensor, unless the
licensee has the right to refuse such improvements
or each party has the right to terminate the
agreement at the expiry of the initial seven-year
period and at least every three years thereafter;

(11) without prejudice to Article 1 (1) (5), the licensee is
required, for a period exceeding that permitted
under Article 1 (1) (6), not to put the licensed
product on the market in territories licensed to

other licensees within the common market or does

not do so as a result of a concerted practice
between the parties;

(12) one or both of the parties are required:

(a) to refuse without any objectively justified
reason to meet demand from users or resellers

in their respective territories who would market
products in other territories within the common
market;

(b) to make it difficult for users or resellers to
obtain the products from other resellers within
the common market, and in particular to
exercise industrial or commercial property
rights or take measures so as to prevent users or
resellers from obtaining outside, or from
putting on the market in, the licensed territory
products which have been put on the market
within the common market by the licensor or
with his consent; or do so as a result of a
concerted practice between them.

_Article 4_

1. The exemption provided for in Articles 1 and 2
shall also apply to agreements containing obligations
restrictive of competition which are not covered by those
Articles and do not fall within the scope of Article 3, on
condition that the agreements in question are notified to
the Commission in accordance with the provisions of
Commission Regulation No 27 (') as last amended by
Regulation (EEC) No 2526/85 ( [2] ), and that the
Commission does not oppose such exemption within a
period of six months.

2. Paragraph 1 shall in particular apply to the
following obligations:

(a) an obligation on the licensee to continue paying
turnover-related royalties for more than three years
after the licensed know-how has become publicly
known;

(b) an obligation on a licensee to supply only a fixed
quantity of the licensed product to a particular
customer, where the know-how licence is granted in
order to provide a second source of supply within a
licensed territory.

O OJ No 35, 10. 5. 1962, p. 1118/62.
(*) OJ No L 240, _7.9._ 1985, p. 1.

12.8.87 Official Journal of the European Communities N o C 2 1 4 / l l

3. The period of six months shall run from the date
on which the notification is received by the Commission.
Where, however, the notification is made by registered
post, the period shall run from the date shown on the
postmark of the place of posting.

4. Paragraphs 1 and 2 shall apply only if:

(a) express reference is made to this Article in the
notification or in a communication accompanying it;
and

(b) the information furnished with the notification is
complete and in accordance with the facts.

5. The benefit of paragraphs 1 and 2 may be claimed
for agreements notified before the entry into force of
this Regulation by submitting a communication to the
Commission referring expressly to this Article and to the
notification. Paragraphs 3 and 4 (b) shall apply _mutatis_
_mutandis._

6. The Commission may oppose the exemption. It
shall oppose exemption if it receives a request to do so
from a Member State within three months of the

transmission to the Member State of the notification

referred to in paragraph 1 or of the communication
referred to in paragraph 5. This request must be justified
on the basis of considerations relating to the competition
rules of the Treaty.

7. The Commission may withdraw the opposition to
the exemption at any time. However, where the
opposition was raised at the request of a Member State
and this request is maintained, it may be withdrawn only
after consultation of the Advisory, Committee on
Restrictive Practices and Dominant Positions.

8. If the opposition is withdrawn because the undertakings concerned have shown that the conditions of
Article 85 (3) are fulfilled, the exemption shall apply
from the date of notification.

9. If the opposition is withdrawn because the undertakings concerned have amended the agreement so that
the conditions of Article 85 (3) are fulfilled, the
exemption shall apply from the date on which the
amendments take effect.

10. If the Commission opposes exemption and the
opposition is not withdrawn, the effects of the
notification shall be governed by the provisions of Regulation No 17.

_Article 5_

1. This Regulation shall not apply to:

(1) agreements between members of a patent or
know-how pool which relate to the pooled
technologies;

(2) know-how licensing agreements between competitors
who hold interests in a joint venture or between one
of them and the joint venture, if the licensing
agreements relate to the activities of the joint
venture; the Regulation may, however, apply to such
agreements where, on the basis of a realistic
economic analysis, the parties are deemed not to be
competitors;

(3) agreements under which one party grants the other a
know-how licence and the other party, albeit in
separate agreements or through connected undertakings, grants the first party a patent, trademark or
know-how licence or sales rights, where the parties
are competitors in relation to the products covered
by those agreements;

(4) agreements only related to the licensing of
intellectual property rights, in particular copyright
and design rights or related to the licensing of
software except where the software is of assistance in
achieving the object of the licensed know-how.

2. However, this Regulation shall apply to reciprocal
licences of the types referred to in paragraph 1 (3) where
the parties are not subject to any territorial restriction
within the common market on the manufacture, use or
putting on the market of the products covered by the
agreement or on the use of the licensed technology.

_Article 6_

1. As regards agreements existing on 13 March 1962
and notified before 1 February 1963 and agreements,
whether notified or not, to which Article 4 (2) (2) (b) of
Regulation No 17 applies, the declaration of inapplicability of Article 85 (1) of the Treaty contained in
this Regulation shall have retroactive effect from the
time at which the conditions for application of this Regulation were fulfilled.

2. As regards all other agreements notified before this
Regulation entered into force, the declaration of inapplicability of Article 85 (1) of the Treaty contained in
this Regulation shall have retroactive effect from the
time at which the conditions for application of this Regulation were fulfilled, or from the date of notification,

whichever is the later.

_Article 7_

If agreements existing on 13 March 1962 and notified
before 1 February 1963 or agreements to which Article 4
(2) (2) (b) of Regulation No 17 applies and notified
before 1 January 1967 are amended before 1 April 1988
so as to fulfil the conditions for application of this Regulation, and if the amendment is communicated to the
Commission before 1 July 1988 the prohibition in Article
85 (1) of the Treaty shall not apply in respect of the
period prior to the amendment. The communication shall
take effect from the time of its receipt by the

No C 214/12 Official Journal of the European Communities 12. 8. 87

Commission. Where the communication is sent by
registered post, it shall take effect from the date shown
on the postmark of the place of posting.

_Article 8_

1. As regards agreements to which Article 85 of the
Treaty applies as a result of the accession of the United
Kingdom, Ireland and Denmark, Articles 6 and 7 shall
apply except that the relevant dates shall be 1 January
1973 instead of 13 March 1962 and 1 July 1973 instead
of 1 February 1963 and 1 January 1967.

2. As regards agreements to which Article 85 of the
Treaty applies as a result of the accession of Greece,
Articles 6 and 7 shall apply except that the relevant dates
shall be 1 January 1981 instead of 13 March 1962 and
1 July 1981 instead of 1 February 1963 and 1 January
1967.

3. As regards agreements to which Article 85 of the
Treaty applies as a result of the accession of Spain and
Portugal, Articles 6 and 7 shall apply except that the
relevant dates shall be 1 January 1986 instead of 13
March 1962 and 1 July 1986 instead of 1 February 1963
and 1 January 1967.

_Article 9_

The Commission may withdraw the benefit of this Regulation, pursuant to Article 7 of Regulation No 19/65/
EEC, where it finds in a particular case that an
agreement exempted by this Regulation nevertheless has
certain effects with are incompatible with the conditions
laid down in Article 85 (3) of the Treaty, and in
particular where:

1. such effects arise from an arbitration award;

2. the licensed products are not exposed to effective
competition in the licensed territory from identical
products or products considered by users as
equivalent in view of their characteristics, price and
intended use;

3. the licensor does not have the right to terminate the
exclusivity granted to the licensee at the latest five
years from the date the agreement was entered into
and at least annually thereafter if, without legitimate
reason, the licensee fails to exploit the licensed
technology or to do so adequately;

4. without prejudice to Article 1 (1) (6), the licensee
refuses, without objectively valid reason, to meet
unsolicited demand from users or resellers in the

territory of other licensees;

5. one or both of the parties:

(a) without objectively justified reason, refuse to meet
demand from users or resellers in their respective
territories who would market the products in
other territories within the common market; or

(b) make it difficult for users or resellers to obtain the
products from other resellers within the common
market, and in particular where they exercise
industrial or commercial property rights or take
measures so as to prevent resellers or users from
obtaining outside, or from putting on the market
in, the licensed territory products which have
been put on the market within the common
market by the licensor or with his consent;

6. the period for which turnover-related royalties
payments continue after the know-how has become
publicly known substantially exceeds either the reverse
engineering period necessary in the circumstances or
the lead time acquired because of the head-start in
production and marketing.

_Article 10_

This Regulation shall also apply to:

1. know-how licensing agreements where the licensor is
not the developer of the know-how but is authorized
by the developer to grant a licence or a sub-licence;

2. assignments of know-how where the sum payable in
consideration of the assignment is dependent upon the
turnover attained by the assignee in respect of
products made using the know-how, the quantity of
such products manufactured or the number of
operations carried out employing the know-how;

3. know-how licensing agreements in which rights or
obligations of the licensor or the licensee are assumed
by undertakings connected with them.

_Article 11_

1. 'Connected undertakings' for the purposes of this
Regulation means:

(a) undertakings in which a party to the agreement,
directly or indirectly;

— owns more than half the capital or business

assets, or

12.8.87 Official Journal of the European Communities No C 214/13

— has the power to exercise more than half the
voting rights, or

— has the power to appoint more than half the
members of the supervisory board, board of
directors or bodies legally representing the undertaking, or

— has the right to manage the affairs of the undertaking;

(b) undertakings which directly or indirectly have in or
over a party to the agreement the rights or powers
listed in (a);

(c) undertakings in which an undertaking referred to in
(b) directly or indirectly has the rights or powers
listed in (a).

2. Undertakings in which the parties to the agreement
or undertakings connected with them jointly have the
rights or powers set out in paragraph 1 (a) shall be
considered to be connected with each of the parties to
the agreement.

_Article 12_

1. Information acquired pursuant to Article 4 shall be
used only for the purposes of the Regulation.

2. The Commission and the authorities of the

Member States, their officials and other servants shall
not disclose information acquired by them pursuant to
this Regulation of the kind covered by the obligation of
professional secrecy.

3. The provisions of paragraphs 1 and 2 shall not
prevent publication of the general information or surveys
which do not contain information relating to particular
undertakings or associations of undertakings.

_Article 13_

This Regulation shall enter into force on 1 July 1988.

It shall apply until 31 December 1999.

This Regulation shall be binding in its entirety and
directly applicable in all Member States.

Recapitulation of current tenders, published in the _Supplement to the Official Journal of the_
_European Communities,_ financed by the European Economic Community under the European

Development Fund (EDF) or the European Communities budget

(week: 4 to 8 August 1987)

(87/C 214/03)

tion to
tender

No

2633

Number and date
of 'S' Journal

S 151,7. 8. 1987

Country

Mozambique

Subject

MZ-Maputo: various supplies

Final date
for submission

of bids

13. 10. 1987