EU/UK Competition Law Newsletter – January 2012

January 2, 2012

European Commission Consults on New Rules for Patents and Know-how Licencing

On Dec. 6, 2011, the European Commission (EC) started a consultation on the application of the EU competition law rules to “technology transfer agreements” (TTAs). TTA is the EC’s term for patent, know-how and software copyright licensing agreements, as well as similar agreements.

The current regime consists of a “block exemption regulation”, which creates a safe harbor under EU competition law for certain TTAs, plus guidelines on the application of the block exemption and on the assessment under EU competition law of agreements that fall outside the block exemption. These rules, which came into force in 2004, expire in May 2014, and the EC is seeking views on how to replace them.

This consultation is important for any business that is or might be a licensor or licensee under a TTA in the EU, because the results of the consultation will set in place the EC’s competition law enforcement policy in this area for several years to come.

EU Court Supports Cartel Damage Claimants

The EU’s General Court (its second highest court of appeal) has held that a party seeking damages for loss caused by the operation of a cartel is entitled to the EC’s index of its case file.

The EC fined the members of a hydrogen peroxide cartel in 2006. In 2008, in preparation for filing a private claim for damages in a national court, a third party representing purchasers sought access to the index. The request was made under EU Regulation 1049/2001, which allows for public access to certain documents held by EU bodies such as the EC. The EC rejected this request, on the basis that disclosure would negatively impact its ability to investigate cartels in the future.

In overturning this rejection, the court noted that “the purpose of Regulation 1049/2001 is to give the public the fullest possible right of access to documents held by the [EU] institutions”. The judgment is important because it strengthens the ability of claimants to obtain documents from the EC so as to substantiate claims for damages arising out of cartels. The EC will be very disappointed by the result.

European Commission Looks at Joint Development Agreement and Potential Ambush

On Dec. 16, 2011, the EC started a competition law investigation concerning agreements between Honeywell and DuPont for the development of a new refrigerant for air conditioning systems in cars, known as 1234yf. The previous refrigerant, R134a, no longer met EU rules due to its global warming potential. 1234yf was selected following a process conducted under the auspices of a trade body representing the automotive industry.

The EC is now investigating whether joint development, licensing and production arrangements entered into between Honeywell and DuPont in relation to the new refrigerant restrict competition. This is a reminder that horizontal agreements of this nature can raise concerns under EU competition law and need to be considered carefully.

The EC is also investigating whether Honeywell engaged in deceptive conduct during the evaluation of 1234yf, specifically by not disclosing its patents and patent applications while the refrigerant was being assessed and then by failing to grant licences on fair and reasonable (so called “FRAND”) terms. This would be, if ultimately upheld, a type of “patent ambush”.

Agency Under EU Competition Law; The EC Investigates E-books

It appears that the application of the agency principle under EU competition law will be tested in the online world as a result of an EC investigation, announced on Dec. 6, 2011, into sales of e-books in the EU. The EC stated that it is examining “the character and terms of the agency agreements entered into” by certain publishers and retailers for the sale of e-books in the EU.

Under EU competition law, a “true agent” is seen as part of the principal in whose name it sells. Therefore, the principal can control the prices at which the agent sells, as well as the customers it sells to and its other terms and conditions of trade. A true agent is essentially one that does not take on material risk when concluding or negotiating contracts for its principal.

The investigation is just the latest in a string of cases involving technology and related markets. The EC is watching these closely and continually stresses that competition law will continue to be applied, while taking into account the dynamic nature of the markets.

Additional EU/UK competition law news coverage can be found in our news section.

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