Short Reads

Court of Justice clarifies the legality of royalty payments in the event of revocation

Court of Justice clarifies the legality of royalty payments in the event of revocation

Court of Justice clarifies the legality of royalty payments in the event of revocation

02.08.2016 NL law

On 7 July 2016, the Court of Justice ruled on a request for a preliminary ruling from the Paris Appeal Court. The question arose in the context of a dispute between two pharmaceutical companies, Genentech Inc. ("Genentech") and Hoechst GmbH ("Hoechst").

The Court ruled that, in specific circumstances, Article 101 TFEU permits the conclusion of a license agreement under which running royalties have to be paid even if the licensed patent is revoked or not infringed, as long as the licensee is freely able to terminate the agreement upon reasonable notice.

In 1992, Hoechst granted a worldwide non-exclusive license to Genentech for the use of a patented technology. As consideration, Genentech undertook to pay a one-off fee, an annual fixed fee and running royalties over the sale of certain 'finished products'. Although Genentech paid the one-off and annual fixed fees, it did not pay any running royalties. Litigation ensued, and in 2012 the sole arbitrator ruled that running royalty fees were due even if patents had been revoked or were not infringed by Genentech’s activities. According to the arbitrator, Genentech had entered into the license agreement with the commercial purpose to avert patent litigation and to benefit from a ‘temporary truce’ with Hoechst for the duration of the license agreement.

Genentech subsequently brought an action before the Paris Appeal Court seeking annulment of the arbitral ruling by claiming that the license agreement infringed Article 101 TFEU. In 2014, the national court referred a preliminary question on this matter to the Court of Justice.

The Court of Justice first recalled its judgment in Ottung, in which it ruled that the obligation to pay running royalties after the licensed patent has expired may be permissible if the licensee is able to freely terminate the agreement upon reasonable notice. In Genentech, the Court found that the same rule applies by analogy to a requirement to pay a royalty in the event of the revocation or non-infringement of the licensed patent. It is still open to debate if this ruling can also be applied to license agreements which have a different commercial purpose than to avert patent litigation.

The ruling of the Court in Ottung and Genentech can be contrasted to the US Supreme Court ruling in Kimble et al v. Marvel. In that judgment, the Supreme Court confirmed that an obligation to pay royalties beyond the term of a patent is illegal per se. Following the judgments in Ottung and Genentech, it is clear that, in specific circumstances, post-expiry running royalty payments may be permissible under article 101 TFEU.

This article was published in the Competition Law Newsletter of August 2016. Other articles in this newsletter:

  1. Court of Justice clarifies the legality of royalty payments in the event of revocation or non-infringement of the licensed patent 
  2. General Court confirms fines imposed on the basis of economic continuity in maritime hose cartel 
  3. European Commission imposes record cartel fine on truck manufacturers for price fixing 
  4. European Commission deems support measures in favour of Dutch football clubs in line with State aid rules 
  5. Dutch District Court ruled that parent companies cannot be held liable for damages arising from antitrust infringements committed by their subsidiaries 
  6. ACM lowered fines in the pepper cartel case 
  7. Dutch Supreme Court confirms the availability of a passing-on defence in antitrust damages litigation 
  8. Brussels Court of Appeal rules that concerted lobbying efforts of cement producers do not breach competition law 
  9. Belgian competition authority upholds licence refusal to football club White Star

Source: Competition Law Newsletter August 2016

Team

Related news

10.10.2018 NL law
Ongevraagd advies Raad van State: normering van geautomatiseerde overheidsbesluitvorming

Short Reads - Op 31 augustus 2018 heeft de Afdeling advisering van de Raad van State (hierna: "Afdeling advisering") een 'Ongevraagd advies over de effecten van de digitalisering voor de rechtsstatelijke verhoudingen' betreffende de positie en de bescherming van de burger tegen een "iOverheid" uitgebracht. Het gebeurt niet vaak dat de Afdeling advisering zo een ongevraagd advies uitbrengt. Dit onderstreept het belang van de voortdurend in ontwikkeling zijnde technologie en digitalisering in relatie tot de verhouding tussen de overheid en de maatschappij.

Read more

01.10.2018 EU law
UK Court upholds fine against Ping for online sales ban

Short Reads - On 7 September 2018, the UK Competition Appeal Tribunal (CAT) upheld the UK Competition and Market Authority's (CMA) decision fining Ping Europe Limited, a manufacturer of golf clubs, for violating EU and UK competition law by prohibiting two UK retailers from selling Ping golf clubs online. While the CAT reduced the fine from £1.45 million to £1.25 million, it confirmed that outright online sales bans in the context of selective distribution agreements are restrictive of competition by object.

Read more

01.10.2018 EU law
Court of Justice refers case against Infineon in relation to smart card chips cartel back to the General Court

Short Reads - On 26 September 2018, the European Court of Justice partially set aside the judgment of the General Court in the smart card chips cartel case. Infineon had argued that the General Court wrongfully assessed only five out of eleven allegedly unlawful contacts. The Court agreed with Infineon insofar as its argument related to the amount of the fine imposed. Philips had also appealed the General Court judgment but that appeal was dismissed in its entirety meaning that the Court of Justice upheld the European Commission's decision and fine.

Read more

01.10.2018 EU law
Dutch Trade and Industry Appeals Tribunal annuls mail market analysis decision

Short Reads - On 3 September 2018, the Trade and Industry Appeals Tribunal (CBb) annulled the market analysis decision regarding 24-hour business mail issued by the Dutch Authority for Consumers and Markets (ACM) on 27 July 2017. In appeal proceedings filed by PostNL, the CBb ruled that the ACM had failed to demonstrate that digital mail was not part of the relevant market for 24-hour business mail.

Read more

26.09.2018 EU law
Algemene bepalingen inzake oneerlijke handelspraktijken wijken voor specifiekere regelgeving

Articles - In geval van strijdigheid tussen de Richtlijn Oneerlijke Handelspraktijken[1] (en bij uitbreiding de omzettingsbepalingen in Boek VI WER) en andere Europeesrechtelijke voorschriften betreffende specifieke aspecten van oneerlijke handelspraktijken, hebben deze laatste voorrang (zie artikel 3, lid 4 van de Richtlijn Oneerlijke Handelspraktijken). Dat dit tot interessante discussies kan leiden, bleek uit een recent arrest van het Hof van Justitie[2].

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring