On 14 December 2010, the European Commission (Commission)
adopted new Research and Development (R&D) and Specialisation
Block Exemption Regulations (BERs). The Commission also published
revised Guidelines for the assessment of co-operation agreements
between competitors, so called horizontal co-operation
agreements.
In 2008, the Commission began considering how, and if, the legal
framework relating to horizontal agreements should be amended prior
to the expiry of the current BERs on 31 December 2010. In May
2010, the Commission published draft revised Regulations and
Guidelines. See our previous
Law-Now for further details.
The new block exemptions will replace the existing BERs (Commission
Regulation 2659/2000 on R&D agreements and Commission
Regulation 2658/2000 on specialisation agreements) from 1 January
2011, with a transitional period of two years for pre-existing
agreements that meet the conditions of Regulations 2659/2000 and
2658/2000. The Specialisation BER is largely unchanged from
the existing Regulation, although a number of changes have been
made to the approach in the new R&D BER from that contained in
the existing Regulation.
The Guidelines, which retain the same format as those first
published in 2000, provide detailed and expanded guidance on a
range of agreements between competitors including R&D,
production, commercialisation, purchasing and standardisation
agreements, as well as setting out very comprehensive guidance on
the circumstances when the exchange of information between
competitors may infringe EU competition law.
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On 14 December 2010, the European Commission (Commission) adopted new Research and Development (R&D) and Specialisation Block Exemption Regulations (BERs). The Commission also published revised Guidelines for the assessment of co-operation agreements between competitors, so called horizontal co-operation agreements.
In 2008, the Commission began considering how, and if, the legal framework relating to horizontal agreements should be amended prior to the expiry of the current BERs on 31 December 2010. In May 2010, the Commission published draft revised Regulations and Guidelines. See our previous Law Now for further details.
The new block exemptions will replace the existing BERs (Commission Regulation 2659/2000 on R&D agreements and Commission Regulation 2658/2000 on specialisation agreements) from 1 January 2011, with a transitional period of two years for pre-existing agreements that meet the conditions of Regulations 2659/2000 and 2658/2000. The Specialisation BER is largely unchanged from the existing Regulation, although a number of changes have been made to the approach in the new R&D BER from that contained in the existing Regulation.
The Guidelines, which retain the same format as those first published in 2000, provide detailed and expanded guidance on a range of agreements between competitors including R&D, production, commercialisation, purchasing and standardisation agreements, as well as setting out very comprehensive guidance on the circumstances when the exchange of information between competitors may infringe EU competition law.
The new Research & Development BER
There are a number of differences in the adopted Regulation from the version consulted on in May this year. The Commission has extended the scope of the BER to cover "paid-for research" agreements where one party finances the R&D activities carried out by the other party. The BER will therefore cover:
- paid-for R&D of contract products or contract technologies and joint exploitation of the results of that R&D;
- joint exploitation of the results of paid-for R&D of contract products or contract technologies pursuant to a prior agreement between the same parties;
- paid-for R&D of contract products or contract technologies excluding joint exploitation of the results.
A number of conditions for exemption have also been changed from the draft regulation:
- The draft regulation included a condition that the block exemption would only apply where the parties agreed that prior to starting the research and development all the parties would disclose all their existing and pending IP rights in as far as they were relevant for the full exploitation of the results by the other parties. During the consultation it was concluded that such a disclosure obligation was not necessary as potential patent ambushes can be addressed through contractual agreements between the parties.
- The R&D agreement must stipulate that all the parties have full access to the final results of the joint R&D or paid-for R&D (the draft regulation referred to 'equal access', while Regulation 2659/2000 simply referred to 'access').
- Where parties limit their rights of exploitation, for instance where they specialise in the context of exploitation, access to the results for the purposes of exploitation may legitimately be limited. Indeed, research institutes, academic bodies, or undertakings that supply research and development as a commercial service without normally being active in the exploitation of results may agree to confine their use of the results for the purposes of further research.
- The new BER contains specific provisions allowing for parties to compensate each other for giving access to the results for the purposes of further research or exploitation. However, such compensation must not be so high as to effectively impede access. Furthermore, where the R&D agreement provides for joint R&D or paid-for R&D, the agreement must provide for access by all parties to any pre-existing know-how belonging to the other parties.
The new hardcore restrictions are set out in Article 5 of the new BER and remain largely unchanged from the draft regulation.
The new Specialisation BER
There have not been any significant changes made to the new Specialisation BER from what was proposed in the draft regulation, which itself was very similar to the existing Regulation 2658/2000.
The new regulation does clarify that the block exemption will continue to apply even where one of the parties to the agreement only partly ceases production. This means, for instance, that a company with more than one production plant for a certain product may close down one of its plants and outsource the output of the closed plant and still benefit from the Specialisation BER.
One change to note is that the definition of relevant market has been revised to include, where the specialisation products are intermediary products which one or more of the parties fully or partly use solely for the production of downstream products, the relevant product and geographic market(s) to which the downstream products belong. The exemption is also conditional on a 20% market share threshold downstream.
The new Horizontal Guidelines
The final Horizontal Guidelines are not substantially different from the draft guidelines published in May 2010, although certain sections have been expanded. In general, the Guidelines are much improved from the original guidelines published in 2000 and provide very detailed guidance on a range of horizontal arrangements including R&D, production, purchasing and commercialisation agreements.
The most significant changes from the original guidelines concern the inclusion of an expanded section on information exchange between companies and a revised section on standardisation agreements.
The section on information exchange now provides some very detailed guidance. This gives parties useful direction on how to manage information exchange issues in the current uncertain climate, given the various ongoing investigations by the Commission and other national regulators into information exchange issues. The Commission recognises that information exchange can be pro-competitive when it enables companies to gather general market data that allow them to become more efficient and better serve customers. It does, however, acknowledge that there are situations where the exchange of market information can be harmful for competition, particularly when that information is used to co-ordinate behaviour. Comprehensive guidance is given on the situations where this may arise.
The purpose of the standardisation section is to give guidance on how to ensure that the process of selecting industry standards is competitive and that, once the standard is adopted, access is given on fair, reasonable and non-discriminatory (FRAND) terms to interested users. Experience over the last 10 years has shown that many of the cases related to standard setting arise because of a lack of transparency during the selection process. The Guidelines set out the criteria which must be met to ensure that a standard-setting agreement does not give rise to competition concerns, which include:
- that the procedure for adopting the standard is unrestricted with participation open to all relevant competitors in the market;
- that the process is transparent to ensure that stakeholders are able to inform themselves of upcoming, ongoing and finalised work and for standards involving IP rights; and
- a balanced IP rights policy with good faith disclosure of those IP rights that are essential for the implementation of a standard, and a requirement for all IP rights holders that wish to have their technology included in the standard to provide an irrevocable commitment to license their IP rights on FRAND terms.
Timings
Both the R&D and Specialisation BERs will enter into force on 1 January 2011 and will expire on 31 December 2022. There is a transitional period from 1 January 2011 to 31 December 2012 for agreements already in force on 1 May 2010, which do not satisfy the conditions for exemption in the new regulations but which, as at 31 May 2010, did satisfy the conditions for exemption in Regulation 2659/2000 and Regulation 2658/2000. The draft regulation had only provided for a transitional period of one year.
The new R&D BER can be found here, the new Specialisation BER can be found here and the new Guidelines can be found here.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 17/12/2010.
