Source: EURLEX
Language: en
Format: md

30 . 6 . 94 Official Journal of the European Communities No C 178 / 3

# 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 categories of agreements and concerted

practices

( 94 / C 178 / 03 )

( Text with EEA relevance )

The Commission invites all interested parties to send their comments on the attached draft

Commission Regulation ( EC ) on the application of Article 85 ( 3 ) of the Treaty to certain
categories of technology transfer agreements by no later than 28 August 1994 to the following
address :

Commission of the European Communities,
Directorate-General for Compétition,
Directorate for General Competition Policy and Coordination,

150 Avenue de Cortenberg,
B      - 1 049 Brussels .

Preliminary draft Commission Regulation ( EC ) of 30 September 1994 on the application of

Article 85 ( 3 ) of the Treaty to certain categories of technology transfer agreements

THE COMMISSION OF THE EUROPEAN

COMMUNITIES,

Having regard to the Treaty establishing the European
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 ( x ), as last amended by the Act of Accession of
Spain and Portugal, and in particular Article 1 thereof,

Having published a draft of this Regulation,

After consulting the Advisory Committee on Restrictive

Practices and Dominant Positions,

Whereas :

into a single Regulation covering technology transfer
agreements, and the rules governing patent licensing
agreements and agreements for the communication
of know-how to be harmonized and simplified as far
as possible, in order to encourage the dissemination
of technical knowledge in the Community and to
promote the manufacture of technically more sophis ­
ticated goods .

— in particular of 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 to the application of industrial processes .

2 . The Commission has made use of this power by
# adopting 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 ( 2 ), as amended by the Act of Accession
of Spain and Portugal, and Regulation ( EEC ) No
556 / 89 of 30 November 1988 on the application of
Article 85 ( 3 ) of the Treaty to certain categories of
know-how licensing agreements ( 3 ), both amended
by Commission Regulation ( EEC ) No 151 / 93 of 23
December 1992 ( 4 ).

3 . These two block exemptions ought to be combined

1 . Regulation No 19 / 65 / EEC empowers the of technical knowledge in
Commission to apply Article 85 ( 3 ) of the Treaty by promote the manufacture of
Regulation to certain categories of agreements and ticated goods .
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
( 2 ) OJ No L 219, 16 . 8 . 1984, p . 15 .

Corrigendum : OJ No L 280, 22 . 10 . 1985, p . 32 .
O OJ No L 61, 4 . 3 . 1989, p . 1 .
O OJ No 36, 6 . 3 . 1965, p . 533 / 65 . ( 4 ) OJ No L 21, 29 . 1 . 1993, p . 8 .

No C 178 / 4 Official Journal of the European Communities 30 . 6 . 94

The new Regulation should apply to the licensing of
Member States ' own patents, Community patents (*),
and European patents ( 2 ) (' pure ' patent licensing
agreements ). It should also apply to agreements for
the communication of non-patented technical infor ­
mation such as descriptions of manufacturing
processes, recipes, formulae, designs or drawings,
commonly termed ' know-how ' (' pure ' know-how
licensing agreements ), and to combined patent and
know-how licensing agreements, which are playing
an increasingly important role in the transfer of
technology (' mixed ' agreements ).

A number of terms are defined in Article 10 .

4 . Patent licensing agreements and agreements for the

communication of know-how are agreements
whereby one undertaking which holds a patent or
know-how (' the licensor ') permits another under ­
taking (' the licensee ' to exploit the patent thereby
licensed, or communicates the know-how to it, in
particular for purposes of manufacture, use or
putting on the market .

In the light of experience acquired so far, it is
possible to define a category of licensing agreements
covering all or part of the common market which are
capable of falling within the scope of Article 85 ( 1 )
but which can normally be regarded as satisfying the
conditions laid down in Article 85 ( 3 ), where patents
are ( essential ) for the achievement of the objects of
the licensed technology or where know-how —
whether it is ancillary to patents or independent of
them — is secret, substantial and identified in any
appropriate form . These definitions are intended
only to ensure that the communication of the
know-how or the grant of the patent licence justifies
a block exemption of obligations restricting the
exploitation of the technology in Community
Member States by the licensor or licensee, which
obligations must be wholly or partly related to the
exploitation of the licensed know-how or to patents
registered in Member States, and must satisfy the
other tests laid down in the Regulation .

5 . It is appropriate to extend the scope of this Regu ­

lation to pure or mixed agreements containing
ancillary provisions relating to intellectual property
rights other than patents ( in particular, trade marks,
copyright and design rights ).

However, such agreements, too, can only be
regarded as fulfilling the conditions of Article 85 ( 3 )
for the purposes of this Regulation where patents are
( essential ) for the achievement of the objects of the
licensed technology or the know-how is secret,
substantial and identified .

6 . Where such pure or mixed licensing agreements

contain not only obligations relating to territories
within the common market but also obligations
relating to non-member countries, the presence of
the latter does not prevent the present Regulation
from applying to the obligations relating to terri ­
tories within the common market .

However, where licensing agreements for
non-member countries or for territories which
extend beyond the frontiers of the Community have
effects within the common market which may fall
within the scope of Article 85 ( 1 ), such agreements
should be covered by the Regulation to the same
extent as would agreements for territories within the
common market .

To the extent that licensing agreements to which
undertakings in only one Member State are party are
capable of affecting trade between Member States, it
is appropriate to include them in the exempted

category .

7 . The objective being to facilitate the dissemination of

technology and the improvement of manufacturing
processes, the Regulation should apply only where
the licensee himself manufactures the licensed
products or has them manufactured for his account .
The scope of the Regulation should therefore
exclude agreements solely for the purpose of sale,
which are governed by Commission Regulation
( EEC ) No 1983 / 83 of 22 June 1983 on the
application of Article 85 ( 3 ) of the Treaty to
categories of exclusive distribution agreements ( 3 ),
except where the licensor undertakes for a
preliminary period before the licensee himself
commences production using the licensed technology
to supply the licensed products for sale by the
licensee . Also excluded from the scope of the regu ­
lation are agreements relating to marketing
know-how communicated in the context of fran ­
chising arrangements and licensing agreements
entered into in connection with arrangements such
as joint ventures or patent pools and other
arrangements in which a licence is granted in
exchange for other licenses not related to
improvements to or new applications of the licensed
technology ; such agreements pose different problems
which cannot at present be dealt with in one Regu ­
lation ( Article 5 ).

(') Convention for the European patent for the common market

( Community Patent Convention ) of 15 December 1975, OJ
No L 17, 26 . 1 . 1976, p . 1 .
( 2 ) Convention on the grant of European patents ( European

Patent Convention ) of 5 October 1973 . (') OJ No L 173, 30 . 6 . 1983, p . 1 .

30 . 6 . 94 Official Journal of the European Communities No C 178 / 5

8 . Given the similarity between sale and exclusive

licensing, and the danger that the requirements of
the Regulation might be evaded by presenting as
assignments what are in fact exclusive licences
restrictive of competition, the Regulation should
apply to agreements concerning the assignment and
acquisition of patents or know-how where the risk
associated with exploitation remains with the
assignor . It should also apply to licensing agreements
in which the licensor is not the holder of the patent
or know-how but is authorized by the holder to
grant the licence ( as in the case of sub-licences ) and
licensing agreements in which the parties ' rights or
obligations are assumed by connected undertakings
( Article 6 ).

9 . Exclusive licensing agreements, i.e . agreements in

which the licensor undertakes not to exploit the

licensed technology in the licensed territory himself
or to grant further licenses 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, of the increase in the
level of competition, in particular interbrand compe ­
tition, and of the competitiveness of the under ­
takings concerned resulting from the dissemination
of innovation within the Community . In so far as
agreements of this kind fall, in other circumstances,
within the scope of Article 85 ( 1 ), it is appropriate to

include them in Article 1 in order that they may also
benefit from the exemption .

In a similar way, export bans on the licensor and on
the licensees may not in themselves be incompatible
with Article 85 ( 1 ), by reason of the protection

afforded by national legislations on patents or by the
convention on the Community patent as from its
entry into force . The exemption of these bans does
not prejudice any developments in the jurisprudence
of the Court in relation to these agreements, notably
with respect to Articles 30 to 36 and 85 ( 1 ). This is

export the licensed product into, the licensed
territory in the case of the licensor and the territories
reserved for the licensor in the case of the licensee ;
and it is also true of an obligation on the licensee
not to manufacture or use the product or to conduct
an active marketing policy on the territories of other
licensees . Such obligations can be permitted under
the Regulation in respect of territories where the
licensed product is protected by parallel patents
which already exist when the agreement is concluded

or which are applied for within one year of that
date, and as long as the patents remain in force . The
Regulation should not apply to pure patent licensing
agreements containing obligations which limit the
exploitation of the technology in Member States
where there are no parallel patents .

The point at which know-how ceases to be secret
can be difficult to determine, so that in the case of
territories where the licensed technology comprises
know-how only, either because there never were any
patents there or because the necessary patents have
expired, 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
the licensee against manufacture, use or active sale
by other licensees . Exemption under Article 85 ( 3 ) of
longer periods of territorial protection, in particular
to protect expensive and risky investment or where
the parties were not already competitors before the
grant of the licence, can only be granted by indi ­
vidual decision . On the other hand, parties are free
to extend the term of their agreements to exploit any
subsequent improvements and to provide for the
payment of additional royalties . However, in such
cases, further periods of territorial protection,
starting from the date of licensing of the
improvements in the Community, may be allowed
only by individual decision, in particular where the
improvements to or new applications of the licensed
technology are substantial and not of significantly
less importance than the technology initially granted
or require new expensive and risky investment .

also the case, in particular, regarding the limitation
of the exemption to only a few years of a prohibition
on the licensee from selling the licensed product in
territories granted to other licensees ( passive compe ­
tition ) foreseen by the present Regulation .

on the licensee from selling the licensed product in Since licensing agreements are frequently negotiated
territories granted to other licensees ( passive compe ­ after the goods or services incorporating the licensed
tition ) foreseen by the present Regulation . technology have proved successful on the market, it

is appropriate to take as the starting-point for such a
period in each licensed territory the date on which
the product is first put on the market in the
10 . The obligations listed in Article 1 generally Community .
contribute to improving the production of goods and
to promoting technical progress . They make the
holders of patents or know-how more willing to
grant licences and licensees more inclined to The Regulation should also allow an obligation on
undertake the investment required to manufacture, the licensee not to put the product on the market in
use and put on the market a new product or to use a the territories of other licensees in a period which
new process . This is true, in particular, of obligations should be limited to a few years from the date on
on the licensor and on the licensee not to exploit the which the licensed product is put on the market in
licensed technology in, and in particular not to the Community, irrespective of whether the licensed

The Regulation should also allow an obligation on
the licensee not to put the product on the market in
the territories of other licensees in a period which
should be limited to a few years from the date on
which the licensed product is put on the market in
the Community, irrespective of whether the licensed

No C 178 / 6 Official Journal of the European Communities 30 . 6 . 94

technology comprises know-how, patents or both in
the territories concerned ( this obligation would ban
not just active competition but passive competition
too ).

The exemption of territorial protection should apply

for the whole duration of the periods thus permitted,
as long as the patents remain in force or the
know-how remains secret and substantial, enabling
the parties to a mixed patent and know-how
licensing agreement to take advantage in a particular
territory of the period of protection conferred by a
patent application or by the use of know-how,
whichever is the longer .

11 . 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 . To safeguard
this effect, however, it is right to exclude from the
application of Article 1 cases where the parties agree
to refuse to meet demand from users or resellers
within their respective territories who would resell
for export, or to take other steps to impede parallel
imports, or where the licensee is obliged to refuse to
meet unsolicited demand from the territory of other
licensees (' passive ' sales ). The obligations referred to
above thus do not impose restrictions which are not
indispensable to the attainment of the abovemen ­
tioned objectives . However, if dominant under ­
takings were to secure exclusive licenses they might
prevent access by third parties to the market of the
technology and eliminate competition in respect of a
substantial part of the products in question ; in order
to ensure that this does not happen, the block
exemption should not apply where the licensor
undertakes to grant no other licenses for the
licensee's territory, and the licensee's share of the
market in the licensed products and goods
considered by consumers to be similar exceeds a
certain threshold at the time the agreement is
concluded, or the parties are operating on an oligo ­
polistic market . It can be presumed that there is such
a market where the parties and one other competitor
hold together more than 50 % of the market . In
such cases an obligation of this kind on the licensor
may be exempted only by an individual decision . In a
similar way, undertakings that have a strong market
position must also be excluded from the possibility
of benefitting from the automatic exemption of
export bans, thus contributing to a substantial
apportionment of the markets .

or where there are other competing technologies on
the market, since the territorial exclusivity may lead
to greater market integration and stimulate Com ­
munity-wide interbrand competition .

12 . It is desirable to list in the Regulation a number of

obligations that are commonly found in licensing
agreements but are normally not restrictive of
competition, and to provide that in the event that
because of the particular economic or legal circum ­
stances they should fall within Article 85 ( 1 ), they
too will be covered by the exemption . This list, in
Article 2, is not exhaustive .

13 . The Regulation must also specify what restrictions

or provisions may not be included in licensing
agreements if these are to benefit from the block
exemption . The restrictions 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 . Such restrictions can be
declared exempt only by an individual decision,
taking account of the scale of the undertakings
concerned and the degree of concentration on the
relevant market .

The fact that an agreement contains restrictive

clauses which fall outside Articles 1 and 2 of the
Regulation but which are not listed in Article 3 does
not prevent the exemption from covering any obli ­
gations which do fall within the scope of Articles 1
and 2, without prejudice to the application of
national provisions on total or partial invalidity of
contracts . These clauses however remain subject to
the prohibition in Article 85 ( 1 ), and must, in
accordance with the provisions of Council Regu ­
lation 17 / 62 ('), be notified to benefit from the
protection afforded by Article 15 ( 5 ) of Regulation

17 / 62 and, where applicable, from the application of
Article 85 ( 3 ). In the assessment of licensing
agreements between parties whose market shares are
relatively small, special attention will be paid to the
beneficial effects such agreements can have on
competition . But if the parties have appreciable
market shares it will have to be considered carefully
whether the adverse effects on competition outweigh
the positive ones . This will be so particularly where
the parties are competitors, or where the relevant
market is an oligopolistic one, or where the
agreement is between dominant undertakings .

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

30 . 6 . 94 Official Journal of the European Communities No C 178 / 7

14 . If individual agreements exempted by this Regu ­

lation nevertheless have effects which are incom ­
patible with Article 85 ( 3 ), the Commission may
withdraw the benefit of the block exemption ( Article

7   

15 . The list in article 2 includes obligations on the

licensee to cease using the licensed technology after
the termination of the agreement (' post-term use
ban ') ( Article 2 ( 1 ) ( 3 )) and to make improvements
available to the licensor (' grant-back clause ') ( Article
2(1 ) ( 4 )). The post   - term use ban may be regarded as
a normal feature of licensing, as otherwise the
licensor would be forced to transfer his know-how
or patents in perpetuity and this could inhibit the
transfer of technology . Moreover, undertakings by
the licensee to grant back to the licensor a licence
for improvements to the licensed know-how and / or
patents are generally not restrictive of competition if
the licensee is entitled by the contract to share in
future experience and inventions made by the
licensor and the licensee retains the right to disclose
experience acquired or grant licences to third parties
where to do so would not disclose the licensor's

know-how .

On the other hand, a restrictive effect on compe ­
tition arises where the agreement contains an obli ­
gation on the licensee to assign to the licensor, rights
to improvements of the originally licensed tech ­
nology that he himself has brought about ( Article

Article 85 ( 1 ) either ( Article 2 ( 1 ) ( 8 )). This obli ­
gation is not restrictive of competition since the
licensor can be regarded as having the right to
transfer the technology only for a limited purpose .
Such a restriction must however not constitute a
disguised means of customer allocation .

18 . Restrictions whereby the parties allocate 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 through
an obligation with an equivalent effect, would also
render the agreement ineligible for the block
exemption ( Article 3 ( 4 )).

This does not apply to cases where the patent or
know-how licence is granted in order to provide a
single customer with a second source of supply . In
such a case, a prohibition on the licensee from
supplying persons other than the customer
concerned is necessary for the grant of a licence to
the second supplier, since the purpose of the trans ­
action is not to create an independent supplier in the
market . The same applies to limitations on the quan ­
tities the licensee may supply to the customer
concerned ( Article 2 ( 1 ) ( 14 )).

3 ( 6 )). 19 . Besides the clauses already mentioned, the list in

16 . The list in Article 2 also includes an obligation on

the licensee to keep paying royalties until the end of
the agreement or the regular expiry of the patents,
independently of whether or not the licensed
know-how or patents have entered into the public
domain through the action of third parties ( Article
2 ( 1 ) ( 7 )). As a rule, parties do not need to be
protected against the foreseeable financial conse ­
quences of an agreement freely entered into, and
should therefore not be restricted in their choice of
the appropriate means of financing the technology
transfer and sharing between them the risks of
exploitation, and particularly the risk that patents
might be invalidated before the expiry of the period
of protection conferred by the patent .

However, the setting of rates of royalty so as to
achieve a restrictive objective which is excluded
pursuant to Article 3 of the Regulation, and in
particular the choice of methods of calculating
royalties which are neither directly nor indirectly
related to the exploitation of the licensed tech ­
nology, would render the agreement ineligible for
the block exemption .

17 . An obligation on the licensee to restrict his exploi ­

tation of the licensed technology to one or more
technical fields of application (' fields of use ') or to
one or more product markets is not caught by

Article 3 also includes restrictions regarding the
selling prices of the licensed product or the quan ­
tities to be manufactured or sold, since they limit the
extent to which the licensee can exploit the licensed
technology and particularly since quantity
restrictions may have the same effect as export bans
( Article 3 ( 1 ) and ( 5 )). This does not apply where a
licence is granted for use of the technology in
specific production facilities and where both a
specific know-how is communicated for the
setting-up, operation and maintenance of these
facilities and the licensee is allowed to increase the
capacity of the facilities or to set up furhter facilities
for its own use on normal commercial terms . On the

other hand, the licensee may lawfully be prevented
from using the licensor's specific know-how to set
up facilities for third parties, since the purpose of the
agreement is not to permit the licensee to give other
producers access to the licensor's technology while it
remains secret or protected by patent ( Article
2 ( 1 ) ( 13 )).

20 . 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, under ­
takings will still have the right to apply in individual
cases for negative clearance pursuant to Article 2 of
Regulation No 17 or for exemption pursuant to
Article 85 ( 3 ),

No C 178 / 8 Official Journal of the European Communities 30 . 6 . 94

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
patent licensing or know-how licensing agreements and
to mixed patent and know-how licensing agreements,
including those agreements containing ancillary
provisions relating to intellectual property rights other
than patents, to which only two undertakings are party
and which include one or more of the following obli ­
gations :

1, an obligation on the licensor not to license other

undertakings to exploit the licensed technology in the
licensed territory ;

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 ;

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 terri ­
tories 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 ;

7, an obligation on the licensee to use only the licensor's

trade mark or get up to distinguish the licensed
product during the term of the agreement, provided
that the licensee is not prevented from identifying
himself as the manufacturer of the licensed products ;

8, an obligation on the licensee to limit his production of

the licensed product to the quantities he requires in
manufacturing his own products and to sell the
licensed product only as an integral part of or a
replacement part for his own products or otherwise in
connection with the sale of his own products,
provided that such quantities are freely determined by
the licensee .

2 . Where the agreement is a pure patent licensing
agreement, the exemption of the obligations referred to
in paragraph 1 is granted only to the extent that and for
as long as the licensed product is protected by parallel
patents, in the territories respectively of the licensee
( points 1, 2, 7 and 8 ), the licensor ( point 3 ) and other
licensees ( points 4 and 5 ). ( The exemption of the obli ­
gation referred to in paragraph 1 ( 6 ) is granted for a
period not exceeding five years from the date when the
product is first put on the market within the common
market by the licensor or one of his licensees, inasmuch
and for as long as, in these territories, this product is
protected by parallel patents .)

3 . Where the agreement is a pure know-how licensing
agreement, the period for which the exemption of the
obligations referred to in paragraph 1 ( 1 ) to ( 5 ) is
granted may not exceed 10 years from the date when the
licensed product is first put on the market in the
Community by the licensor or one of his licensees .

The exemption of the obligation referred to in paragraph

1 ( 6 ) is granted for a period not exceeding five years
from the date when the product is first put on the
market within the common market by the licensor or one
of his licensees .

The obligations referred to in paragraph 1 ( 7 ) and ( 8 )

are exempted for the lifetime of the agreement .

However, the exemption in paragraph 1 shall apply only
where the parties have identified in any appropriate form

the initial know-how and any subsequent improvements
to it, which become available to one party and are
communicated to the other party pursuant to the terms
of the agreement and for the purpose thereof, and only
for as long as the know-how remains secret and
substantial .

4 . Where the agreement is a mixed patent and
know-how licensing agreement, the exemption of the
obligations referred to in paragraph 1 ( 1 ) to ( 5 ) shall
apply in Member States in which the licensed technology
is protected by ( essential ) patents for as long as the
licensed product or process is protected in those Member
States by such patents if the duration of such protection
exceeds the periods specified in paragraph 3 .

( The duration of the exemption provided under
paragraph 1 ( 6 ) cannot exceed the five year period .)

However, these agreements qualify for the exemption in
paragraph 1 only for as long as the patents remain in
force and provided the know-how is identified and for as
long as it remains secret and substantial .

5 . The exemption in paragraph 1 ( 1 ) of the obligation
on the licensor not to grant other licences shall apply
only provided :

— that the products manufactured by the licensee which

are capable of being improved or replaced by the
contract products and other goods manufactured by

30 . 6 . 94 Official Journal of the European Communities No C 178 / 9

him which are considered by users to be equivalent in
view of their characteristics, price and intended use
account for no more than 40 % of the entire market
in those products in the common market or a
substantial part of it, and

— that the licensee is not operating on an oligopolistic

market ; for purposes of this regulation the market is
to be considered as an oligopolistic one if on the
relevant product and geographic market three under ­
takings or less hold together a market share of more
than 50 %, or if five undertakings or less hold
together a market share of more than two thirds and
provided that the licensee is one of the undertakings
which make up this group of companies and that it
holds a market share of more than 10 % .

5, an obligation on the licensee to observe minimum

quality specifications for the licensed product or to
procure goods or services from the licensor or from
an undertaking designated by the licensor, in so far
as such quality specifications, products or services
are necessary for :

( a ) a technically satisfactory exploitation of the

licensed technology ; or

( b ) for ensuring that the product of the licensee

conforms to the quality standards that are
respected by the licensor and other licensees ;

and to allow the licensor to carry out related checks ;
6 . The exemption of the obligations referred to in
paragraph 1 ( 2 ) to ( 6 ) shall apply only where the party
which is protected by such obligations holds a market 6, obligations :
share of no more than 20 % .

7 . 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 that paragraph .

( a ) to inform the licensor of misappropriation of the

know-how or of infringements of the licensed

patents ; or

( b ) to take or to assist the licensor in taking legal

action against such misappropriation or
Article 2 infringements ;

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
sub-licences or assign the licence ;

3, an obligation on the licensee not to exploit the

licensed know-how or patents after termination of
the agreement in so far and as long as the
know-how is still secret, or the patents are still in
force ;

4, an obligation on the licensee to communicate to the

licensor any experience gained in exploiting the
licensed technology and to grant him a licence in
respect of improvements to or new applications of
that technology, provided that the communication or
licence is not exclusive and that the licensor has
accepted an obligation, whether exclusive or not, to
communicate his own improvements to the licensee ;

7 . an obligation on the licensee, in the event of the

know-how becoming publicly known or the patents
prematurely losing their validity other than by action
of the licensor, to continue paying the royalties until
the end of the agreement or the regular expiry of the
patents, in the amounts, for the periods and
according to the methods freely determined by the
parties, without prejudice to the payment of any
additional damages in the event of the know-how
becoming publicly known or the patents losing their
validity by the action of the licensee in breach of the

agreement ;

8, an obligation on the licensee to restrict his exploi ­

tation of the licensed technology to one or more
technical fields of application covered by the licensed
technology or to one or more product markets ;

9, an obligation on the licensee to give the licensor the

option to continue to use the improvements after the
licensee's right to exploit the licensor's know-how
comes to an end, if at the same time the licensor
relinquishes the post-term use ban or agrees, after
having had an opportunity to examine the licensee's
improvements, to pay appropriate royalties for their

use ;

No C 178 / 10 Official Journal of the European Communities 30 . 6 . 94

10 . 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 ;

11 . 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 ;

12 . an obligation on the licensee to mark the licensed

product with an indication of the licensor's name or
of the licensed patent ;

13 . an obligation on the licensee not to use the licensor's

know-how to construct facilities for third parties ;
this is without prejudice to the right of the licensee
to increase the capacity of his facilities or to set up
additional facilities for his own use on normal
commercial terms, including the payment of
additional royalties ;

14 . an obligation on the licensee to supply only a limited

quantity of the licensed product to a particular
customer, where a know-how licence was granted at
that customer's request so that he might have a
second supplier inside a licensed territory ; this
provision shall also apply where the customer is the
licensee, and the licence which was granted in order
to provide a second source of supply provides that
the customer is himself to manufacture the licensed
products or to have them manufactured by a subcon ­

tractor .

2 . In the event that, because of particular circum ­
stances, 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 .

3 . The exemption 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, one party is restricted in the determination of prices,

components of prices or discounts for the licensed
products ;

2, 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, use or distribution of products deriving
from research and development or from the exploi ­
tation of the interested party's own processes, without
prejudice to an obligation on the licensee to use his
best endeavours to exploit the licensed technology ;

3, 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
intellectual 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
lawfully 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 ;

4, 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 2 ( 1 ) ( 14 );

5, 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

1 ( 1 ) ( 8 ) and Article 2 ( 1 ) ( 14 ).

6, the licensee is obliged to assign in whole or in part to

the licensor rights to improvements to or new
applications of the licensed technology .

Article 4

If a pure or mixed licensing agreement includes obli ­
gations within the scope of Articles 1 and 2 and obli ­
gations which restrict competition but which do not fall
within the scope either of Articles 1 and 2 or of Article

3, the presence of those restrictive obligations shall not
prevent this Regulation from applying to the obligations

30 . 6 . 94 Official Journal of the European Communities No C 178 / 11

which do fall within the scope of Articles 1 and 2 . The 1 ( 3 ), provided the parties are not subject to any terri ­
obligations which are not thus exempted shall continue torial restriction within the common market with
to be governed by Articles 85(1 ) and ( 2 ) of the Treaty . regard to the manufacture, use or putting on the

market of the licensed products or on the use of the
licensed or pooled technologies .

Article 5

1 . This Régulation shall not apply to : Article 6

1, agreements between members of a patent or
know-how pool which relate to the pooled techno ­
logies ;

2, licensing agreements between competing undertakings

which 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 ;

3, agreements under which one party grants the other a

patent and / or know-how licence and the other party,
albeit in separate agreements or through connected
undertakings, grants the first party a patent, trade
mark or know-how licence or exclusive sales rights,
where the parties are competitors in relation to the
products covered by those agreements ;

4, agreements including the licensing of intellectual
property rights other than patents ( in particular trade
marks, copyright and design rights ) or the licensing of
software except where these rights or the software are
of assistance in achieving the object of the licensed
technology and there are no obligations restrictive of
competition other than those also attached to the
licensed know-how or patents and exempted under
the present Regulation .

2 . This Regulation shall nevertheless apply :

1, to agreements to which paragraph 1 ( 2 ) applies, under

which a parent undertaking grants the joint venture a
patent or know-how licence, provided that the
licensed products and the other products of the
participating undertakings which are considered by
users to be equivalent in view of their characteristics,
price and intended use represent :

— in case of a licence limited to production not more

than 20 %, and

— in case of a licence covering production and distri ­

bution not more than 10 %,

of the market for all such products in the common
market or a substantial part thereof ;

2, to agreements to which paragraph 1 ( 1 ) applies and to

reciprocal licences within the meaning of paragraph

This Régulation shall also apply to :

1, agreements where the licensor is not the holder of the

know-how or the patentee, but is authorized by the
holder or the patentee to grant a licence or a
sub-licence ;

2, assignments of know-how, patents or both where the

risk associated with exploitation remains with the
assignor, in particular where the sum payable in
consideration of the assignment is dependent on the
turnover obtained by the assignee in respect of
products made using the know-how or the patents,
the quantity of such products manufactured or the
number of operations carried out employing the
know-how or the patents ;

3, licensing agreements in which rights or obligations of

the licensor or the licensee are assumed by under ­
takings connected with them .

Article 7

The Commission may withdraw the benefit of this Regu ­

lation, 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 which are incompatible with the
conditions laid down in Article 85 ( 3 ) of the Treaty, and
in particular where :

1, the effect of the agreement is to prevent the licensed

products from being 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 ;

2, without prejudice to Article 1 ( 1 ) ( 6 ), the licensee
refuses, without valid reason, to meet unsolicited
demand from users or resellers in the territory of
other licensees ;

3, the parties :

( a ) without any 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

No C 178 / 12 Official Journal of the European Communities 30 . 6 . 94

# ( b ) make it difficult for users or resellers to obtain the Regulation ( EEC ) No 556 / 89 shall not apply to

products from other resellers within the common agreements which come into force after 1 January 1995 .

products from other resellers within the common
market, and in particular where they exercise
intellectual 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
lawfully put on the market within the common
market by the licensor or with his consent ;

Article 10

For purposes of this Regulation the following terms shall
have the following meanings :

1, ' know-how ' means a body of technical information

that is secret, substantial and identified in any appro ­
priate form ;

2, the term ' secret ' means that the know-how package

as a body 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 lead which the licensee gains when it is
communicated to him ; it is not limited to the narrow
sense that each individual component of the
know-how should be totally unknown or unob ­
tainable outside the licensor's business ;

4, the parties were already competitors before the grant

of the licence and obligations on the licensee to
produce a minimum quantity or to use his best
endeavours as referred to in Article 2 ( 1 ) ( 10 ) and
Article 3 ( 2 ) have the effect of preventing the licensee
from using competing technologies .

Article 8

1 . For purposes of this Régulation :

( a ) patent applications ;

( b ) Utility models ;

( c ) applications for registration of utility models ;

( d ) certificats d' utilité and certificats d' addition under

French law ; '
3, the term ' substantial means that the know-how
( e ) applications for certificats d'ulité and certificats includes information which is of importance for the
d'addition under French law ; and whole or a significant part of :

( f ) supplementary protection certificates for medicinal

products or other products for which such
supplementary protection certificates may be
obtained ;

shall be deemed to be patents .

2 . This Regulation shall also apply to agreements
relating to the exploitation of an invention if an
application within the meaning of paragraph 1 is made in
respect of the invention for a licensed territory within
one year from the date when the agreement was entered
into .

Article 9

The prohibition in Article 85 ( 1 ) of the Treaty shall not
apply in the period :

— 1 January to 30 June 1995 to agreements in force on

1 January 1995 and which satisfied the exemption
conditions of Regulation ( EEC ) No 2349 / 84,

— 1 January 1995 to 31 December 1999 to agreements

in force on 1 January 1995 and which satisfy the
# exemption Regulation ( EEC ) No 556 / 89 .

( a ) a manufacturing process ; or

( b ) a product or service ; or

( c ) for the development thereof ;

and excludes information which is trivial ; such
know-how must thus be useful, i.e . can reasonably
be expected at the date of conclusion of the
agreement to be capable of improving the
competitive position of the licensee, for example by
helping him to enter a new market or giving him an
advantage in competition with other manufacturers
or providers of services who do not have access to
the licensed secret know-how or other comparable
secret know-how ;

4, the term ' identified ' means that the know-how is

described or recorded in such a manner as to make it
possible to verify that it fulfils the criteria of secrecy
and substantiality and to ensure that the licensee is
not unduly restricted in his exploitation of his own
technology ; to be identified the know-how can
either be set out in the licence agreement or in a
separate document or recorded in any other appro ­
priate form at the latest when the know-how is
transferred or shortly thereafter, provided that the
separate document or other record can be made
available if the need arises ;

30 . 6 . 94 Official Journal of the European Communities No C 178 / 13

5, necessary patents are patents which contribute to the

putting into effect of the licensed technology in so
far as, in their absence, the realization of the
licensed technology would not be possible or would
only be possible to a lesser extent or in more difficult
or costly conditions ;

6, the term ' licensed technology ' means the initial

know-how or the necessary patents, or both, existing
at the time the first licensing agreement is
concluded, and improvements subsequently made to
the know-how or patents, irrespective of whether
and to what extent they are exploited by the parties
or by other licensees ;

7, ' the licensed products ' are goods or services the

production or provision of which requires the use of
the licensed technology ;

8, ' market share ' means the proportion which the
licensed products, products capable of being
improved or replaced by the contract products and
other goods or services provided by the licensor or
the licensee which are considered by users to be
equivalent in view of their characteristics, price and
intended use account for in all such products or
services in the common market or a substantial part
of it ;

9, the term ' exploitation ' refers to any use of the

licensed technology in particular in the production,
active or passive sales in a territory even if not
coupled with manufacture in that territory, or
leasing of the licensed products ;

10 . ' the licensed territory ' is the territory covering all or

at least part of the common market where the
licensee is entitled to exploit the licensed technology ;

11 . ' territory reserved for the licensor ' means territories

in which the licensor has not granted any licences
for patents he holds there or for his know-how ;

12 . ' parallel patents ' means patents for the same
invention as the term has been used by the Court of
Justice ;

13 . ' connected undertakings ' means :

( a ) undertakings in which a party to the agreement

directly or indirectly :

— owns more than half the capital or business

assets, or

— 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 );

( d ) undertakings in which the parties to the
agreement or undertakings connected with them
jointly have the rights or powers listed in ( a ):
such jointly controlled undertakings are
considered to be connected with each of the
parties to the agreement .

14 . ' ancillary provisions relating to intellectual property

rights other than patents ' are provisions relating to
rights which contribute to the putting into effect of
the licensed technology, where there are no obli ­
gations restrictive of competition other than those
also attached to the licensed know-how or patents
and exempted under the present Regulation .

Article 11

This Regulation shall enter into force on 1 January 1995 .

It shall apply until 31 December 2002 .

This Regulation shall be binding in its entirety and

directly applicable in all Member States .