European Commission adopts revised rules on horizontal cooperation agreements

On 14 December 2010 the European Commission published revised Guidelines and two block exemption regulations on horizontal cooperation agreements (see Newsletter 3/2010, p. 7 for background).

The revised rules address, in particular, R&D cooperation and standard-setting cooperation. R&D cooperation agreements may benefit from a safe harbor by virtue of an R&D block exemption regulation, provided tthe agreements lack certain hardcore restrictions and as long as the market share of the cooperating parties does not exceed a threshold of 25% (this initially only applies to product or technology market competitors). The IPR-specific conditions for a safe harbor include requirements that all parties must have full access to the results of the R&D, though exploitation rights may be limited in accordance of the parties’ so-called “specialization in exploitation” and a research institute exemption allows subsequent rights to be limited to further research. Certain no-challenge obligations and obligations not to grant licenses to third parties must, however, be assessed separately even when the block exemption covers the agreement. Guidance on the case-by-case assessment of R&D cooperation agreements is provided in the revised Guidelines.

A safe harbor is also provided for standard-setting cooperation, though only in the Guidelines. According to the Guidelines, standardization agreements do not normally restrict competition where participation in standard-setting is unrestricted and the procedure for adopting the standard is transparent, the agreements contain no obligation to comply with the standard, and the agreements provide access to the standard on fair, reasonable, and non-discriminatory (“FRAND”) terms. The FRAND commitments should be irrevocable, applicable to all third parties, given ex ante, and be accompanied by mechanisms that ensure that also transferees of IPRs are bound by them. Good faith disclosure of essential IPRs should also normally be required, unless, for instance, standards are developed under a royalty-free licensing policy.

The Guidelines also provide guidance on the case-by-case assessment of standard-setting cooperation outside of the safe harbor. In addition, the Guidelines discuss alternative methods for assessing whether royalties demanded by essential patent holders constitute an abuse of a dominant position by being excessively high in comparison to the economic value of the technologies concerned. The alternative methods mentioned include the comparison of ex ante and ex post licensing fees, the comparison to royalty rates for the same IPR in comparable standards, the use of an independent expert to assess the objective centrality and essentiality of an IPR portfolio, and licensing terms that may have been disclosed ex ante.

The Guidelines will become effective once published in the EU Official Journal and the Block Exemption Regulations will enter into force on 1 January 2011. [Juha Vesala]