The German Association for the Protection of Intellectual Property (GRUR)

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1 The German Association for the Protection of Intellectual Property (GRUR) Position Paper The German Association for the Protection of Intellectual Property (GRUR) Konrad-Adenauer-Ufer 11. RheinAtrium Köln European Commission Directorate-General for Competition Antitrust Registry 1049 Bruxelles Konrad-Adenauer-Ufer 11 RheinAtrium Köln Phone +49 (221) Fax +49 (221) BELGIQUE Initially by May 7, 2013 Reference Number: HT ID number of German Association for the Protection of Intellectual Property: Comments of the German Association for the Protection of Intellectual Property on the Commission consults on proposal for revised competition regime for technology transfer agreements The German Association for the Protection of Intellectual Property ( Deutsche Vereinigung für gewerblichen Rechtsschutz und Urheberrecht e.v., GRUR) is a scientific association of academics and practitioners active in the field of protection of industrial property, copyright and competition law. According to its statutes it is its object to promote scientific education and further development of the protection of industrial property and copyright at the levels of the German, European and international law. 1 / 5 The GRUR trademarks and the green colour are registered trademarks of the Association.

2 The Association comments as follows on the draft Commission regulation on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements and its guidelines: The Association appreciates the starting point of the Commission that the intellectual property rights promote dynamic competition by encouraging undertakings to invest in developing new or improved products and processes and that in the assessment of licence agreements under Article 101 it must be kept in mind that the creation of intellectual property rights often entails substantial investment and that it is often a risky endeavour so that the innovator must not be unduly restricted in the exploitation of intellectual property rights that turn out to be valuable in order not to reduce dynamic competition and to maintain the incentive to innovate. Moreover, the Association appreciates the statements of the Commission that there is no presumption that intellectual property rights and licence agreements as such give rise to competition concerns and that most licence agreements do not restrict competition and create pro-competitive efficiencies. The Association shares the view of the Commission that this Regulation provides adequate legal security to the undertakings and that this Regulation and its application should be simplified, where possible, in its amended version. In the opinion of the Association the possibility of a simplified application of the TTBER is given in a new formulation of the technology transfer agreement term, in which it is essential that the provisions included about intellectual property rights are related directly and exclusively to the production of contract products; in practice, the earlier provision concerning the actual object of the agreement had led to difficulties. However, the opinion expressed in the last sentence of paragraph 52 of the draft guidelines that the Commission will as a general rule apply the principles set out in the TTBER and these guidelines when assessing licensing of copyright (other than software copyright) under Article 101 seems to be questionable. Compared with the licensing of patents or other intellectual property rights differing questions arise for licensing of copyright that does not relate to technology transfer in the sense of paragraph 52 of 2 / 5

3 the draft guidelines due to the object of the copyright, which is characterised by a special relation between the originator and his work. As regards the differentiation between competing and not competing undertakings the Association appreciates the clarification in Article 4 paragraph 3 of the draft TTBER that the rule on not competing undertakings (Article 4 paragraph 2 of the draft TTBER) shall apply for the full life of the agreement to undertakings that are not competing undertakings at the time of the conclusion of the agreement, but become competing undertakings afterwards (unless the agreement is subsequently amended in any material respect). In the opinion of the Association the prohibition of termination in the event of challenges to the industrial property right, which was not contained in the TTBER of 2004, seems to be too broadly formulated in Article 5 paragraph 1 (b) of the amended draft version of the TTBER and should be restricted to standard-essential patents. In this case the generally usual termination rights of the licensor in the event of challenges of the licensee to the industrial property right would not be exempted in a block anymore. The Association is of the opinion that the individual assessment intended in the amended version and the related legal uncertainty in respect of the cartel law can have an impeding effect on the award of licences. As regards the special case of licensing standard-essential patents the intended more critical assessment of the termination rights as against the TTBER of 2004 constitutes a step in the right direction in the opinion of the Association. By definition standard-essential patents have to be used by each market player for the production and distribution of standards-compliant products. In case of such industrial property rights the possibility of the patent holder and the licensor of terminating the licence agreement if the licensee attacks the validity has typically got the same effect as a non-challenge clause given in the agreement because a claim might be made on the licensee to discontinue the production and because the licensee then has to stop his business activities as a whole within the scope of the industrial property right to the industry standard in question for lack of a technical alternative due to the standardessentiality of the patent if it is not possible to use a single standard-essential patent 3 / 5

4 upon the termination of the licence agreement. This is even more true in view of the dual system in Germany, where infringement claims can lead to drastic measures (and often also do so) before the challenged industrial property right is destroyed. Termination rights in the event of challenge to standard-essential patents therefore constitute the risk that the licensee, and thus in principle all undertakings active on the market in question, is not in a financial position to have these property rights assessed in respect of their validity, which can have particularly severe consequences as a number of important industry standards involve many (supposedly) standardessential patents that do not usually withstand validity challenges. Just in this field there is a particular interest in keeping the markets free from invalid industrial property rights combined with the increased risk of not being able to do so if such termination rights would be accepted. Therefore, the Association proposes that an appropriate clarification of this special case of licensing is included in the guidelines. Especially paragraph 125 of the draft guidelines is suited for such a clarification as it already describes a case in which such a termination right can have the same effect as a non-challenge clause. Moreover, the Association is of the opinion that reference should be made to this special case of standard-essential patents in the chapter Non-challenge clauses in settlement agreements (paragraph 226 ff of the draft guidelines). Particularly the raising of an objection in the sense of the licensing or antitrust law in patent infringement proceedings should not be combined with the condition that the defendant has to accept non-challenge clauses or corresponding termination rights of the patent holder taking legal action. Such a clarification is not least also meaningful in view of the recent statements of the Commission published on in connection with the case Motorola vs. Apple (press release IP 13/406 and memorandum MEMO 13/403), in which it is stressed that it has to be possible for the user of standards requesting a licence to challenge the validity (and thus the infringement/essentiality) of the patents. The Association appreciates the position of the Commission on agreements outside the safe harbour of the TTBER mentioned in paragraph 167 ff of the draft guidelines. 4 / 5

5 As regards the statements on settlement agreements the Association finds the statement positive that licensing including cross licensing is generally not as such restrictive of competition and that such licensing has to be treated like other licence agreements within the scope of the assessment according to Article 101. As regards the antitrust assessment of technology pools the Commission states in paragraph 239 of the draft guidelines that it is unlikely that the conditions of Article 101(3) will be fulfilled in the case of pools comprising to a significant extent substitute technologies. In the opinion of the Association the number of substitute technologies is less important. Not quantitative, but qualitative aspects have to be decisive. The Commission also expresses this opinion itself as it mentions the inclusion of significant substitute technologies in its previous sentence. The convincing arguments of the Commission in the final sentences also indicate the emphasis on qualitative aspects. The qualitative aspect could also be expressed by referring to the unnecessary inclusion of substitute technologies from technical or economic points of view. Dr. Kunz-Hallstein President Prof. Dr. Loschelder General Secretary 5 / 5