Licensing intellectual property rights may affect competition in the EU and therefore article 101(1) of TFEU which could result in restriction in the right of the exercise.
Article 101(1) prohibits agreements between undertakings which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition between member states.
If an IP licence does not come within NAAT (Non-Appreciable Affectation of Trade rule – where the combined market share of the undertakings does not exceed 5%) or under the Notice of Agreements of Minor Importance (market share of both undertakings is less than 10% combined) or does not come under article 101(3) (in that it does not unduly restrict competition) it must fall within a block exemption to avoid infringing article 101(1).
A block exemption provides for agreements which appear to infringe article 101 but do not cause major restrictions on competition.
Block exemption 772/2004 relates to intellectual Property licensing and covers categories of technology transfer agreements.
Certain types of technology transfer agreements (such as IP licensing) actually improve economic activity and their protection provides for the possibility of public availability allowing for quicker development and marketing of technologies.Â
Therefore, where an agreement does not contain ‘hardcore’ anti-competitive restrictions and the market share of the undertakings does not exceed 30%, under block exemption 772/2004 technological transfer agreements can qualify for exemption from article 101(1).Â
The block exemption will not apply where competitors licence insignificant technologies to each other and agree not to compete with each other in those fields.Â This is an agreement not to compete and is has as its object the restriction of competition.