Where the effect of an agreement is to obtain absolute territorial protection for the licensee by preventing parallel imports, there will generally be a breach of competition law (Consten and Grundig v Commission), the Court of Justice held that absolute territorial protection granted to a licensee in order to enable parallel imports to be controlled and prevented results in the artificial maintenance of separate national markets, contrary to the Treaty.
However, in Nungesser KG v Commission an exclusive licence of plant variety rights (Regulation 2100/94 on Community plant variety rights, 1994) that granted the licensee rights to market over hybrid maize seeds throughout the territory of Germany was saved by the exemption within the TFEU as serving to promote technical progress, while also allowing consumers a fair share of the benefits (Article 101(3) TFEU).
Alternatively, a selective distribution network within a licensing agreements would not incur liability under competition law, where the manufacturer supplies only selected distributors or retailers who meet certain qualitative criteria, and who in turn are not to sell outside the authorised network (Copad SA v Christian Dior couture SA); regarding online distribution: (Coty Germany GmbH v Parfümerie Akzente GmbH). Nevertheless, where licensing agreements seek to restrict not only active but also unsolicited cross-border sales of licensed products, it will breach EU competition law (Nike v Commission).
Secondly, certain kinds of clauses in patent licences are considered more likely to adversely affect inter-technology competition, in particular non-challenge clauses that attempt to prohibit the licensee from challenging the validity of the licensed patent. Historically, the Court of Justice has sought to promote competition by taking a restrictive approach to no-challenge clauses (Windsurfing International Inc. v Commission), an approach that is now reflected in the Technology Transfer Block Exemption Regulation (TTBER, Regulation 316/2014), whereby a clause preventing the licensee from challenging the validity of the licensed intellectual property, will only be exempted from liability under competition law if the clause is included in an exclusive licensing agreement. Similarly, the TTBER takes a stringent approach to exclusive grant backs to the licensor of improvements to the patented technology. While requiring the licensee to grant back to the licensor improvements on a non-exclusive basis, a clause requiring the licensee to exclusively license all improvements to the licensor would breach competition law. (Art. 101; TTBER, Art.5(1)(a)).
In the event the holder of intellectual property acquires a dominant position in the technology or product market, there is no general obligation to grant a licence (Volvo v Veng). While EU Competition law prohibits any abuse by one or more undertakings of a dominant position within the internal market ‘as incompatible with the internal market in so far as it may affect trade between Member States’, there must be evidence that a firm has leveraged its dominance in the market enabling it to behave to an appreciable extent independently of its competitors and customers (Hoffmann-La Roche v Commission). For example, Microsoft abused its dominant position in the personal computer market by refusing to provide its competitors with interoperability information that would have enabled the development of competing products in the operating system market (Microsoft Corp. v European Commission).
Nevertheless, in the case of standards for mobile telecommunications industry (such as 4G or 5G telephony), holders of standard essential patents (SEPs) essential to the technology’s operation, are required to allow implementers of that standard to obtain a licence to use the relevant patents on fair, reasonable and non-discriminatory (FRAND) terms. It may breach competition law if the holder of a SEP brings suit for patent infringement against a prospective licensee (a) without notice; and (b) assuming the infringer is willing to negotiate, without having offered a licence on FRAND terms (Huawei Technologies v ZTE Corp.; Unwired Planet v Huawei).
