Author Definition



The licensing of intellectual property (notably, patents, copyright and trademarks) may incur liability under European competition law when either the exercise of the intellectual property rights or the restrictive terms of the contract are considered to have an adverse impact on trade. To this end, the competition law of the European Union (EU) prohibits licensing agreements which may affect trade between Member States and which have as their object or effect the prevention or restriction of competition (Arts. 101 and 102 Treaty on the Functioning of the European Union (TFEU); c.f. sections 1 and 2 of the Sherman Act).



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).



GE Evans ‘Negotiating FRAND Encumbered Patent Licences’ Oxford Journal of Intellectual Property Law & Practice, Volume 16, Issue 10, October 2021, Pages 1091–1108.

GE Evans ‘Strategic Patent Licensing for Public Research Organizations: Deploying Restriction and Reservation Clauses to Promote Medical R&D in Developing Countries’ (2008) 43:2-3 American Journal of Law and Medicine pp.175-223.

Richard Davis; Tom St Quintin; Guy Tritton, Tritton on Intellectual Property in Europe (5th Edition Sweet & Maxwell 2020) Chapter 9.

Richard Whish & David Bailey, Competition Law (10th edition OUP Oxford 2021) Chapter 19.



Gail Elizabeth Evans, Licensing, Global Dictionary of Competition Law, Concurrences, Art. N° 85406

Visites 1304

Publisher Concurrences

Date 1 January 1900

Number of pages 500


Institution Definition

Refers to granting legal permission to do something, such as produce a product. The license confers a right which the person or firm did not previously possess. Some licenses are granted free of charge, but most require payment. Licenses are legal agreements which may contain restrictions as to how the license is employed. There are two broad cases of licensing which are relevant to competition policy. The first is licenses granted by governments to entrants in specific industries. Licensing systems exist in many communication industries (radio and T.V. broadcasting), professions (doctors) and services (banking, liquor outlets). The terms of licenses vary, but they are often accompanied by various restrictions on the firm. Those restrictions (or regulations) may apply to price, quality or amount of service. Government licensing represents an important barrier to entry in these industries. The second use of licensing is in patent, copyright and trademark cases whereby authority (in the form of a license) is granted by the owner to another party to make, reproduce, buy or sell the item. Copyright, trademark and patent holders may license others to use or produce the good, usually in return for a fixed payment and a royalty rate. In most cases, a patent holder has no preference between licensing and producing his invention himself because he can maximize his return through payment of the licensing fees. However, patent holders are not required to either use or license their technology. Thus, there may be a restriction of technology diffusion which also acts as a barrier to entry. In many countries there is a provision for revoking patents or imposing compulsory licensing when it can be proved that the patent has been abused through non-use or anticompetitive restrictions on licensing. In practice, compulsory licensing is seldom used. © OECD

See FRAND and Compulsory license

a b c d e f g h i j k l m n o p r s t u v w