* Attorney-at-Law Uría & Menéndez, Member of the Barcelona Bar (E.U.-Spain) (1996); LL.M. E.U. law, Center for Advanced Legal Studies, Katholieke Universiteit Leuven (E.U.-Belgium) (1995); LL.M. International Business and Trade Law, Fordham University School of Law (New York-U.S.A.) (2000). This Article is an updated version of the Graduate Thesis which, under the supervision of Professor Valentine Korah, was submitted in partial fulfillment of the requirements to obtain a Master Degree in International Business and Trade Law at Fordham University. The author received a Fulbright Scholarship from the Commission for Cultural Educational and Scientific Exchange between the United States and Spain to attend the Master Program at Fordham University. All opinions expressed in this Article are the author’s and do not necessarily reflect the views of Uría & Menéndez or anyone else.
1 U.S. Department of Justice and Federal Trade Commission Antitrust Guidelines for the Licensing of Intellectual Property (April 6, 1995), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,132 [hereinafter IP Guidelines].
2 Commission Regulation No. 240/96 on the Application of Art. 85(3) of the Treaty to Certain Categories of Technology Transfer Agreements, 1996 O.J. (L 31/2) [hereinafter indistinctly referred as the Regulation, the Technology Transfer Regulation, or Commission Regulation 240/96]. One of the most complete analyses of the Technology Transfer Regulation is found in V. Korah, Technology Transfer Agreements and the EC Competition Rules (1997) [hereinafter Reg. Monograph]. Less elaborated analyses can be found in Jianming Shen, Block Exemption for Technology Licensing Agreements Under Commission Regulation (EC) No. 240/96, 20 B.C. Int’l & Comp. L. Rev. 251 (1997), and in Pierre V.F. Bos & Marco M. Slotboom, The EC Technology Transfer Regulation—A Practitioners’ Perspective, 32 Int’l Law. 1 (1998).
3 Reg. Monograph, supra note 2, at 19–25.
4 Id. at 12–13.
5 Id. at 242.
6 Treaty establishing the European Community, Feb. 7, 1992, O.J. (C 224) 1 (1992), [1992] 1 C.M.L.R. 573, 626 [hereinafter EC Treaty], incorporating changes made by Treaty on European Union, Feb. 7, 1992, O.J. (C224) 1 (1992), [1992] 1 C.M.L.R. 719. The EC Treaty was amended by the Treaty of Amsterdam, Oct. 2, 1997, O.J. (C 340) 1 (1997). After the amendment introduced by the Treaty of Amsterdam, Articles 85 and 86 of the EC Treaty have become Articles 81 and 82 respectively. For the sake of clarity, this Article will refer only to former Article 85 as Article 81, unless former Article 85 is mentioned in the title of an official document.
7 See R. Joliet, Rule of Reason in Antitrust Law 174 (1967); see also M. Waelbroek, Antitrust Analysis Under Article 85(1) and Article 85(3), in 1987 Fordham Corp. L. Inst. 693, 697 (Barry Hawk ed., 1988).
8 See V. Korah, EC Competition Law and Practice 125 (6th ed. 1997) [hereinafter Introductory Guide].
9 Ian S. Forrester & Christopher Norall, The Laicization of Community Law: Self-Help and the Rule of Reason: How Competition Law Is and Could Be Applied, 21 Common Mkt. L. Rev. 11, 22 (1984).
10 Introductory Guide, supra note 8, at 63; Korah, From Legal Toward Economic Efficiency—Article 85(1) of the EEC Treaty in Contrast to U.S., Antitrust Bull., 1009, 1015 (1990).
11 Barry E. Hawk, System Failure: Vertical Restraints and the EC Competition Law, 32 C.M.L.R. 973, 974–75 (1995); Joliet, supra note 7, at 174.
12 Regulation 17/62 introduced a notification system and granted the Commission the exclusive power to grant individual exemptions under Article 81(3) of the EC Treaty, 1959–1962 O.J. Spec. Ed. 87.
13 D.G. Goyder, EEC Competition Law 57–58 (1988); Donald L. Holley, EEC Competition Practice; A Thirty-Year Retrospective, 16 Fordham Int’l L.J. 342, 358–59 (1992–93). Korah points out that the Commission received about 30,000 notifications of exclusive distribution agreements soon after Regulation 17/62 was passed. Introductory Guide, supra note 8, at 194.
14 See Sebastiano Gutusso, Technology Transfer Agreements Under EC Law, in 1994 Fordham Corp. L. Inst. 227, 236 (Barry Hawk ed., 1995); Holley, supra note 13, at 359–60.
15 Christopher Bright, A Comparison of the EC and the U.S. Proposals Relating to the Antitrust Treatment of Technology Licensing Agreements, in 2 1996 Int’l Intell. Prop. Law & Pol’y 33–1, 33–5 (Hugh C. Hansen ed., 1998).
16 Introductory Guide, supra note 8, at 71.
17 Regulation 19/65, on Application of Article 85(3) of the Treaty to Certain Categories of Agreements and Concerted Practices, 1965 O.J. 36/533.
18 The Commission has withdrawn the exemption only in one case. See Case T-7/93, Langnese-Iglo, 1995 E.C.R. II-1533, ¶¶ 209–10. The Commission is more likely to threaten the parties to withdraw an exemption than to persuade them to amend the agreement in accordance with its views. This approach was taken in Tetra Pak I. 88/501/EEC, 4 C.M.L.R. 479 (1990). The Commission’s decision was upheld on appeal by the C.F.I. Case T-51/89, Tetra Pak Rausing SA v. Commission, 1990 E.C.R. II-309; see D.G. Goyder, EC Competition Law 287 (3d ed. 1998).
19 Hawk, supra note 11, at 986.
20 Id. at 115. The leading case to understand how both the E.C.J. and the Commission have applied this rigid and formalistic approach towards vertical restraints is Cases 56 & 58/64, Etablissements Consten SA and Grundig-Verkaufs-GmbH v. EEC Commission, 1966 E.C.R. 299 [hereinafter Costen and Grundig]. In this case, the E.C.J. upheld a decision by the Commission prohibiting an exclusive distribution agreement without even inquiring into its possible pro-competitive effects in the market.
21 Hawk, supra note 11; Joliet, supra note 7; V. Korah, EEC Licensing of Intellectual Property, Fordham Intell. Prop. Media & Ent. L.J., 55, 79 (1993); see Forrester & Norall, supra note 9, at 37; Emmanuel P. Mastromanolis, Insights from U.S. Antitrust Law on Exclusive and Restricted Territorial Distribution: The Creation of a New Legal Standard for European Union Competition Law, 15 U. Pa. J. Int’l Bus. L. 559, 610–14 (1998).
22 In its “White Paper on Modernization of the Rules Implementing Articles 85 and 86 of the EC Treaty,” 1999 O.J. (C 132) 1 [hereinafter “White Paper”], the Commission explicitly refused to adopt a Rule of Reason approach. The Commission’s refusal was based on four arguments: (i) it would require a reform of the EC Treaty; (ii) Article 81(3) of the EC Treaty already contains the elements of a Rule of Reason; (iii) the modernization of the application of EC Competition law cannot be made dependant upon developments in decision-making practice; and (iv) a Rule of Reason approach could lead to the setting aside of competition rules because of political considerations. Id. at § 57.
23 See Gutusso, supra note 14, at 235–36.
24 See White Paper, supra note 22, point (iv).
25 Account must be taken of the fact that, even in the U.S., the Rule of Reason concept remains vague, despite being the dominant form of analysis for Section 1 Sherman Act cases. Thomas A. Piraino, Jr., Making Sense of the Rule of Reason: A New Standard for Section 1 of the Sherman Act, 47 Vand. L. Rev. 1753, 1764 (1994).
26 California Dental Ass’n v. FTC, 526 U.S. 756, 778–81 (1999); Indiana Fed’n of Dentists, 476 U.S. 447, 459–61 (1986); Nat’l Collegiate Athletic Ass’n v. Bd. of Regents, 468 U.S. 85, 104–13 (1984) [hereinafter NCAA]. See also Antitrust Guidelines for Collaborations Among Competitors (Oct. 1, 1999), ¶ 1.2, available at http://www.usdoj.gov/ [hereinafter Antitrust Guidelines].
27 In Continental T.V., Inc. v. GTE Sylvania, Inc., the Court held that, “[u]nder this rule the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition.” 433 U.S. 36, 49 (1977); see also Antitrust Guidelines, supra note 26, ¶ 1.2.
28 See Consten and Grundig, 1966 E.C.R. at 348; Case 258/78, Nungesser v. Commission, 1982 E.C.R. 2073, ¶ 77.
29 The Guidelines for Collaborations Among Competitors seem to indicate that, for the U.S. agencies, the ultimate aim of antitrust laws is to protect consumer welfare. See §§ 2.1., 3.2., and 3.36. In light of its judgment in the State Oil Co. v. Khan case, the Supreme Court also appears to consider consumer welfare as the ultimate goal of antitrust laws. 522 U.S. 3, 15 (1997).
30 See IP Guidelines, supra note 1, § 3.4; see also NCAA, 468 U.S. at 103–04.
31 Eleanor Fox, Maize Seed: A Comparative Comment, in 1982 Fordham Corp. L. Inst. 151, 157, 159 (Barry Hawk ed., 1983); V. Korah, The Effect of EEC Competition Rules on Distribution of Goods and Services in Europe, in 1 1996 Int’l Intell. Prop. Law & Pol’y 395, 398–99 (Hugh C. Hansen ed., 1996).
32 Fox, supra note 31, at 157.
33 This difference was highlighted by René Joliet in 1967. See Joliet, supra note 7, at 115.
34 For instance, in NCAA, the Supreme Court rejected the promotion of amateurism in college football as a valid justification for a television plan adopted by the National Collegiate Athletic Association which limited the number of games that any one team could televise and the price for the particular telecasts. 468 U.S. at 100–01; see also Jan Peeters, The Rule of Reason Revisited: Prohibition on Restraints of Competition in the Sherman Act and the EEC Treaty, 37 Am. J. Comp. L. 521, 530–31 (1989).
35 See California Dental Ass’n., 526 U.S. at 771 (the lower court should have used a “less quick look” Rule of Reason analysis because the restraints on advertising may have had pro-competitive effects by preventing misleading or false quality claims); United States v. Brown Univ., 5 F.3d 658, 669 (3rd Cir. 1993) (inappropriate use of the “quick look” Rule of Reason because lower court did not take into account the nature of higher education and pro-consumer features of the agreement); NCAA, 468 U.S. at 101 (inappropriate use of the per se analysis because restraints of competition are essential if the product—college football—is to be available at all).
36 For a detailed analysis of the development of the Rule of Reason by the Supreme Court and lower courts see Areeda & Hovenkamp, Antitrust Law Ch. 15 (1999 Supp.), and Daniel J. Gifford & Leo J. Raskind, Federal Antitrust Law Cases and Materials 37–97 (1998).
37 Forrester & Norall, supra note 9, at 20–1.
38 85 F. 271 (6th Cir. 1898), aff’d, 175 U.S. 211 (1899).
39 Id.
40 Id. at 282.
41 Reg. Monograph, supra note 2, at 14.
42 85 F. at 284.
43 221 U.S. 1, 69–70 (1911).
44 221 U.S. 106, 180–81 (1911).
45 Herbert Hovenkamp, Federal Antitrust Policy, 227–28 (1994).
46 Green Paper on Vertical Restraints in EC Competition Policy, COM(96) 721 final, Brussels, 22.01.1997, [1997] 4 C.M.L.R. 519, 522, ¶ 10.
47 See Gifford & Raskind, supra note 36, at 147–59.
48 In the U.S., the leading cases in this respect are Sylvania, 433 U.S. 36 (non-price vertical restraints) and State Oil Co., 522 U.S. 3 (maximum vertical price fixing).
49 Robert H. Bork, The Antitrust Paradox 290 (1978/1993).
50 Carey R. Ramos & Aidan Synnott, Antitrust Issues in the Licensing of Intellectual Property, 519 PLI/Pat 7, 10 (1998).
51 Bork, supra note 49, at 290.
52 Id. at 289.
53 Id. at 290.
54 Id. at 295–97.
55 Id. at 291; Richard A. Posner, The Next Step in the Antitrust Treatment of Restricted Distribution: Per Se Legality, 48 U. Chi. L. Rev. 6, 8 (1981); Frank Easterbrook, Vertical Arrangements and the Rule of Reason, 53 Antitrust L.J. 135, 169 (1984).
56 Philip E. Areeda, Antitrust Law 165–66 (1989).
57 Id. at 164, 166.
58 Id. at 166.
59 Id. at 167; see also S. Comanor, Vertical Price-Fixing, Vertical Restrictions and the New Antirust Policy, 98 Harv. L. Rev. 983, 990, 999, 1001 (1985). According to Comanor, “[e]conomic theory alone cannot predict whether the imposition of vertical restraints—and dealer’s provision of additional services—will benefit and enhance efficiency. Whether consumers benefit depends on whether gains to . . . [service seeking] consumers outweigh losses to . . . [price-seeking consumers].” In the E.U., some economists also have endorsed the idea that both non-price and price vertical restraints may either promote or reduce economic efficiency. David Deacon, Vertical Restraints Under EU Competition Law: New Directions, in 1995 Fordham Corp. L. Inst. 307, 317–18 (Barry Hawk ed., 1996).
60 Areeda, supra note 56, at 167–68.
61 Sylvania, 433 U.S. at 58.
62 United States v. Arnold Schwinn & Co., 388 U.S. 365 (1967).
63 Sylvania, 433 U.S. at 59.
64 Id. at 52.
65 Id. On remand, the district court held that the territorial location clause that was in dispute was reasonable because the restraint was more likely to promote than supress interbrand competition. The Court of Appeals affirmed and, despite recognizing that Sylvania did check intrabrand competition, it considered that this was an “inevitable incident to Sylvania’s attempt to promote and maintain interbrand competition . . . [I]t is important to emphasize that . . . in a market dominated by a single company (RCA), Sylvania possessed only a minor fraction of the total market, that many other brands were available to the consumer . . . [and] that Sylvania dealers could and did carry competing brands.” GTE Sylvania Inc. v. Continental T.V. Inc., 537 F.2d 980, 1000–01 (9th Cir. 1976).
66 Robert L. Steiner, Intrabrand Competition—Stepchild of Antitrust, 36 Antitrust Bull. 155, 177 (1991).
67 Id. at 177.
68 Id. at 179.
69 Robert Steiner, Sylvania Economics—A Critique, 60 Antitrust, L. J. 41, 44 (1991).
70 See Deacon, supra note 59, at 308. In explaining the Commission’s approach to vertical restraints, Deacon states: “territorial exclusivity in particular was considered as contrary to one of the fundamental aims of the Community—the creation of a real internal/single market. Such restrictions appeared to contribute both to the continued division of the market along national lines and the maintenance of price differences between Member States.”
71 See Mastromanolis, supra note 21, at 560–61; Ronald W. Davis & Eric Gastinel, Avoiding the Pitfalls of EC Distribution Law, 7-SUM Antitrust 33, 33 (1993).
72 See Articles 28, 29, 30 of the EC Treaty as amended by the Treaty of Amsterdam (ex Articles 30, 34, 36), supra note 6.
73 See Case 15/74, Centrafarm BV v. Sterling Drug, Inc., 1974 E.C.R. 1147. In this case, the E.C.J. enunciated the so-called exhaustion doctrine. The E.C.J. held that it was contrary to Articles 28 and 30 of the Treaty for a patentee to assert its patent rights in one Member State to prevent parallel imports of patented products placed in the market of another Member State by the patentee or with its consent.
74 Gutusso, supra note 14, at 237. The goal of market integration explains the restrictive approach towards vertical restraints and the fact that the leading case in this field, Consten and Grundig, has not been overruled. In Consten and Grundig, the E.C.J. reasoned that “[t]he principle of freedom of competition concerns the various stages and manifestations of competition. Although competition between producers is generally more noticeable than that between distributors of the same make, it does not thereby follow that an agreement tending to restrict the latter kind of competition should escape the prohibition of Article 85(1) merely because it might increase the former.” (Emphasis added.) Consten and Grundig, 1966 E.C.R. at 342; see also Green Paper on Vertical Restraints in EC Competition Policy, COM(96) 721 final, Brussels, 22.01.1997, [1997] 4 C.M.L.R. 519, 520, ¶1.
75 IP Guidelines, supra note 1, § 3.4.
76 Id. § 2.3.
77 Id.
78 Reg. Monograph, supra note 2, at 19–25.
79 IP Guidelines, supra note 1, § 3.3.
80 James Venit, In the Wake of Windsurfing: Patent Licensing in the Common Market, in 1986 Fordham Corp. L. Inst. 517, 529 (Barry Hawk ed., 1987). Venit points out that “in Maize Seeds, the European Court appears to have implicitly rejected the Commission’s assumptions concerning the importance to be attached to the fact that both licensor and licensee are manufacturers . . . .” Id.
81 Reg. Monograph, supra note 2, at 23.
82 This comprehensive analysis of the market is somehow mitigated when courts rely on the so-called “Quick Look” Rule of Reason. See California Dental Ass’n, 526 U.S. at 778–81; see also Fox, supra note 31, at 156; Korah, supra note 31, at 396.
83 Article 7(1) of the Technology Transfer Regulation empowers the Commission to withdraw the exemption where it finds that an exempted agreement nevertheless has certain effects which are incompatible with the conditions laid down in Article 81(3) of the EC Treaty and, in particular, when the effect of the agreement is to prevent the licensed products from being exposed to competition in the licensed territory from identical or interchangeable goods or services “which may in particular occur where the licensee’s market share exceeds 40%.” It is not clear, however, whether one has to assess the licensee’s market share at the date of the license or at the time the Commission is deciding whether to withdraw the exemption. See Reg. Monograph, supra note 2, at 242.
84 The licensed products must not exceed 20% or 10% in the market for the licensed products depending on whether the license covers production or distribution and production respectively. Commission Regulation 240/96, art. 5(2), 1996 O.J. (L 31) 2.
85 Ronald W. Davis & M. Elaine Johnston, Contrast or Convergence? The IP Guidelines and the New EU Technology Transfer Block Exemption, 9 Antitrust 16, 17 (1995).
86 See Forrester & Norall, supra note 9, at 25.
87 Gutusso, supra note 14, at 235. The Commission has, however, mitigated the broad prohibition of Article 81(1) by introducing a “de minimis” rule, see the last version of the “de minimis” rule in Commission Notice on Agreements of Minor Importance, 1997 O.J. (C 372) 13, and by deciding some cases under the ancillary restraints doctrine. See Commission Decision No. 90/410 EEC, 1990 O.J. (L209) 15 (Elopak/Metal Box-Odin).
88 Davis & Johnston, supra note 85, at 16.
89 See Case 234/89, Stergios Delimitis v. Henninger Bräu, 1991 E.C.R. 935. In Delimitis, the E.C.J. ruled that an agreement has to be analyzed within its “legal and economic context” in order to show whether it has the effect of restricting competition. Id. Therefore, the Court in Delimitis stressed the importance of looking in a realistic way at the anti-competitive effect of an agreement as opposed to the formalistic approach often followed by the Commission in many of its decisions. Id.; see also Langnese, 1995 E.C.R. II-1533; Case T- 9/93, Schöller Lebensmittel v. Commission, 1995 E.C.R. II-1611. In Lagnese and Schöller, two ice-cream manufacturers operated in the German market through a substantial number of exclusive purchase agreements concluded with their retail outlets. The Commission denied an individual exemption for the agreements on the grounds that, given the substantial percentage of the market controlled by Lagnese and Schöller through their tied outlets and the length of the exclusive purchase obligations imposed upon retailers, the agreements had the effect of foreclosing a third competitor, Mars, from access to the German market of “impulse” ice-creams. Both producers appealed the Commission’s decisions before the C.F.I. The C.F.I. upheld the position of the Commission not to grant the exemptions. What it is interesting is that, unlike the Commission which only began to analyze the market under Article 81(3), the C.F.I. applied Delimitis and analyzed the effect of the agreements on the market under Article 81(1). See Lagnese, E.C.R. II-1572–1573, ¶¶ 99–101. See the latest application of the Delimitis doctrine in Case 214/99, Neste, Judgment of the E.C.J. of 7 December 2000 (not yet published).
90 See Commission Decision No. 87/17 (EEC) (Pronuptia) confirmed by the E.C.J. in Case 161/84, Pronuptia de Paris GmbH v. Pronuptia de Paris Irmgard Schillgalis, 1996 E.C.R. 353; Commission Decision No. 94/894 (EC), 1994 O.J. (L 354) 66 (Eurotunnel), and Commission Decision No. 90/410 (EEC), 1990 O.J. (L209) 15 (Elopak/Metal Box-Odin). The decision of the Commission in Elopak/Metal Box-Odin is considered a landmark decision in the development of an ancillary restraints doctrine under Article 81(1). It was a sign that the Commission was more willing to treat the restrictive elements of an agreement that has, overall, a pro-competitive aim, as falling outside Article 81(1). Indeed, it was the first case in which the Commission explicitly applied the ancillary restraints doctrine in a negative clearance decision to a number of restrictions on the commercial freedom of action of the parties to a joint venture. See Enrique González Díaz, Some Reflections on the Notion of Ancillary Restraints Under EC Competition Law, in 1995 Fordham Corp. L. Inst. 325, 345–46 (Barry Hawk ed., 1996). In this case, the Commission held that the agreement between Elopak and Metal Box to establish a R&D joint venture (Odin) was not contrary to Article 81(1) because the parent companies were not actual or potential competitors. The Commission found that any of the parent companies would have been able to undertake the huge investment that the joint venture required. Moreover, the Commission also declared compatible with Article 81(1) a number of restrictions ancillary to the establishment of Odin, such as the grant of an exclusive license to exploit the parents’ know-how. The Commission considered this exclusivity necessary to guarantee that each parent company would devote its full efforts to the project. See Christopher Bellamy & Graham D. Child, Common Market Law of Competition 88 (1993). See also Commission Decision No. 98/531 (EC), 1998 O.J. (L 246) 1 (Van den Bergh Foods) as an example that the Commission is moving towards a more economic approach.
91 Nungesser, 1982 E.C.R. 2015. For a contemporary analysis of Maize Seed, see V. Korah, Exclusive Licenses of Patent and Plant Breeders’ Rights Under EEC Law After Maize Seed, Antitrust Bull. 699 (1983); Oliver Axster, Restrictive License Agreements Under EEC Law of Competition: The Maize Seed Case, Bus. Lawyer, 165 (1983); and J.D.C. Turner, Competition and the Common Market After Maize Seed, 8 Eur. L. Rev. 103 (1983).
92 Nungesser, 1982 E.C.R. 2068, ¶ 53. An open exclusive license also can be defined as a license that does not affect the position of third parties such as parallel importers and licensees in other territories. Id. at 2069, ¶ 58. In other words, it is a license that does not confer absolute territorial protection to the licensee. Id. at 2070, ¶ 61.
93 Id. at 2057, ¶ 11.
94 Id.
95 Id. at 2071, ¶ 64.
96 Nungesser, 1982 E.C.R. 2070, ¶ 60.
97 Id. at 2069, ¶ 52–58.
98 Id. at 2069, ¶ 45.
99 Id. at 2069, ¶ 57.
100 Id. at 2069, ¶¶ 56–57.
101 Reg. Monograph, supra note 2, at 88. Not all the authors share this view. Sebastiano Gutusso of the EC Commission believes that dissemination of a new technology is an essential factor if an open exclusive license is to be considered compatible with Article of 81(1). See Gutusso, supra note 14, at 237.
102 Nungesser, 1982 E.C.R. 2070, ¶ 61. Korah has pointed out that the reasoning of the E.C.J. in Nungesser seems to be inconsistent in certain points. In ¶ 53, the E.C.J. seems to extend the concept of open exclusive licenses to those clauses which prevent a licensee from selling in another territory, whereas ¶ 77 holds that this clause is contrary to Article 81. According to Korah, the inconsistency and vagueness of the judgment “indicates that there must have been profound disagreement between the judges.” Reg. Monograph, supra note 2, at 49–50. Thereafter, in Boussois/Interpane, [1988] 4 C.M.L.R, ¶ 16a, the Commission held that a license containing a clause which prevents a licensee from selling in another territory does not qualify as open exclusive license. Introductory Guide, supra note 8, at 244.
103 See Nungesser, 1982 E.C.R. 2073–74, ¶ 77.
104 Case 262/81, Coditel SA et al. v. Cine Vog Films SA and Others, 1982 E.C.R. 3381.
105 Id. ¶ 16.
106 See id. ¶¶ 16, 19.
107 Id.
108 85 F. 271.
109 Case 27/87, Erauw-Jacquéry Sprl v. La Hesbignonne Société Coopérative, 1988 E.C.R. 1919.
110 Id. at 1938–39, ¶ 10.
111 Opinion of Advocate General Mischo in Case 27/87, Erauw-Jacquéry, 1988 E.C.R. at 1928 n.3.
112 Opinion of Advocate General Rozès in Case 258/78, Nungesser, 1982 E.C.R. at 2082–83.
113 See Erauw-Jacquéry, 1988 E.C.R. at 1938–39, ¶¶ 10–11; Case 27/87, Opinion of Advocate General Mischo, 1988 E.C.R. 1927, ¶¶ 11–12.
114 See Reg. Monograph, supra note 2, at 50.
115 Id. at 50. See, however, Article 2(3) of Commission Regulation (EC) No. 2790/99 on the Application of Article 81(3) of the Treaty to Categories of Vertical Agreements and Concerted Practices, O.J. [1999] L 336/21. Article 2(3) states that Regulation 2790/99 applies to vertical agreements containing intellectual property provisions provided that those provisions do not constitute the “primary object” of the vertical agreement and are directly related to the use, sale, or resale of goods or services. Article 2(3) could be extended to exempt exclusive software licenses by arguing that the “primary object” of the license is the dissemination of the software rather than the license as such. This approach, however, is risky since, to date, Article 2(3) and its application to exclusive software licenses has not been subject to the analysis of EC Community Courts. See Valentine Korah, The New EC Vertical Restraint Block Exemption, 8th Annual Conference on International Intellectual Property Law and Policy, Fordham University School of Law, Apr. 28, 2000, at 6 (on file with author).
116 Maurits Dolmans, Software Licensing in Europe—Do We Need a Block Exemption?, in 1 1996 Int’l Intell. Prop. Law & Pol’y 409 (Hugh C. Hansen ed., 1998).
117 Introductory Guide, supra note 8, at 246.
118 V. Korah, Technology Transfer Regulation, in 3 1996 Int’l Intell. Prop. Law & Pol’y 46–1, 46–2 n.7 (Hugh C. Hansen ed., 1998).
119 See Introductory Guide, supra note 8, at 240–41; Reg. Monograph, supra note 2, at 49, 56–71, 138–39.
120 Korah opines that the E.C.J. did not want to limit the scope of its holding to plant breeders’ rights. Instead, the judgment has to be interpreted as applicable to all those situations where open exclusivity is necessary to induce useful investment. See Reg. Monograph, supra note 2, at 48–49.
121 Korah, supra note 118, at 46–2, n.4.
122 Nungesser, 1982 E.C.R. at 2071–72, ¶ 68.
123 Korah, supra note 31, at 398; see also Peeters, supra note 34, at 556, 560.
124 Korah, supra note 31, at 398.
125 Id.
126 Under the Technology Transfer Regulation, prohibition of passive sales is permitted for a period of five years. Commission Regulation 240/96, arts. 1(1)(6) and 1(2)(3), 1996 O.J. (L 31) 2.
127 See, however, Article 5(2) which provides that the Regulation applies to agreements between a parent company and the joint venture that relate to the activities of the joint venture if certain thresholds are not exceeded. The licensed products must not exceed 20% or 10% of the market for the licensed products depending on whether the license covers production, or distribution and production respectively.
128 Commission Regulation (EC) No. 2790/99 on the Application of Article 81(3) of the Treaty to Categories of Vertical Agreements and Concerted Practices, 1999 O.J. (L 336) 21. The Commission’s view is that Regulation 2790/99 only applies to franchising and not to industirial franchising. See Commission Notice, Guidelines on Vertical Restraints, 2000 O.J. (C 291/1) ¶¶ 42-44.
129 Industrial Franchising describes an agreement whereby the franchisor communicates to the franchisee instructions on how to produce something (know-how) and licenses to it a trademark. Unlike a pure franchising agreement, in an industrial franchising agreement intellectual property rights are related to production rather than to marketing products or services.
130 Commission Regulation (EEC) No. 556/89 on the Application of Article 85(3) of the Treaty to Certain Categories of Know-how Licensing agreements, 1989 O.J. (L 61) 1 as amended by Commission Regulation (EEC) No. 151/93, 1993 O.J. (L 2) 18.
131 Commission Regulation No. 90/1986/EEC, 4 C.M.L.R. 391 (1991).
132 Id. at 394–95, ¶¶ 7–8.
133 Id. at 395, ¶ 9.
134 Id. at 398, ¶ 15(3).
135 See id. at 399, ¶ 15(4)(b).
136 Id. at 399, ¶ 16. The Commission, however, exempted the agreements notified by Moosehead and Whitebread pursuant to Article 81(3).
137 Reg. Monograph, supra note 2, at 117–18.
138 See id. at 118.
139 Christopher Kerse, Block Exemptions Under Article 85(3): The Technology Transfer Regulation—Procedural issues, 6 E.C.L.R. 331, 335 (1996).
140 Id. at 335.
141 Id.
142 Reg. Monograph, supra note 2, at 118–19. Also in favor of this second approach are Bos & Slotboom, supra note 2, at 23.
143 Korah, supra note 118, at 46–5, 46–6.
144 Form A/B requests the notifying party to indicate if it is willing to accept a comfort letter. A positive answer normally speeds up the process because, unlike a formal decision granting an individual exemption, a comfort letter does not require the approval of the “college” of Commissioners. However, a comfort letter technically is not binding either upon the Commission or the national courts and authorities. On the problems which arise from comfort letters, see C.S. Kerse, E.C. Antitrust Proc., 275–76 (1998); Introductory Guide, supra note 8, at 147–48.
145 See V. Korah, Panel Discussion: The Technology Transfer Regulation in 3 1996 Int’l Intell. Prop. Law & Pol’y 47–1 (Hugh C. Hansen ed., 1998).
146 Commission Regulation (CE) No. 240/96 of 31 of January 1996 on the Application of Art. 85(3) of the Treaty to Certain Categories of Technology Transfer Agreements, 1996 O.J. (L 31) 2, at art. 1(1).
147 Case 170/83, Hydroterm Geratebau GmbH v. Compact del Dott. Ing. Mario Andreoli & C Sas, 1984 E.C.R. 2999.
148 Centrafarm, 1974 E.C.R. 1147, ¶ 16 (Ruling).
149 Case C-73/95, Viho Europe BV v. Commission, 1996 E.C.R. I-5457, ¶ 16.
150 “Connected undertakings” are defined in Article 10(14) of Commission Regulation 240/96.
151 Commission Regulation 240/96, Recital 7, 1996 O.J. (L 31) 2.
152 Kevin Coates & John Finnegan, Intellectual Property, in The EC Law of Competition, 600–01 (Jonathon Faull & Ali Nikpay eds., 1999). See Case C-306/96, Javico International and Javico v. Yves Saint Laurent Parfurms, 1998 E.C.R. I-1983, ¶ 38. In this case, the E.C.J. held that Article 81(1) precluded a supplier established in one Member State from imposing on a distributor established in another Member State to which the supplier entrusted the distribution of his products in a territory outside the EC a prohibition on making any sales outside the third country in question, including the EC, either by direct marketing or re-exportation from the contractual territory, if that prohibition had the effect of preventing, restricting, or distorting competition within the EC. This “might” be the case where the EC market in the products in question is characterized by an oligopolistic structure or by an appreciable difference between the prices charged for the contractual product within the common market and those charged outside the EC and where, in view of the supplier’s market position for production and sales in the EC, the prohibition entails a risk that it “might” have an appreciable effect on the pattern of trade between Member States as to undermine the attainment of the objectives of the common market.
153 Coates & Finnegan, supra note 152, at 601.
154 Recital 7 provides, “[w]here licensing agreements for non-member countries or for territories which extend beyond the frontiers of the Community have effects within the common market which may fall within the scope of Article 81(1), such agreements should be covered by this Regulation to the same extent as would agreements for territories within the common market.” See Commission Regulation, supra note 151.
155 Coates & Finnegan, supra note 152, at 600.
156 Joined Cases, 89, 114, 116, 117 and 125–129/85, Ahlström Osakeyhtiö and others v. Commission (Woodpulp I), 1988 E.C.R. 5193, ¶ 16.
157 Passive sales are those made in the territories licensed to other licensees within the common market in response to unsolicited orders. Commission Regulation 240/96, art. 1(1)(6).
158 Commission Regulation 240/96, arts. 1(1)(5), 1(1)(6), 1996 O.J. (L 31) 2.
159 It must be noted, however, that although officials of the Commission refer to “absolute territorial protection” as between licensor and licensee, in fact, this protection is always limited. Under the rules of free movement of goods and, more specifically under the doctrine of exhaustion as developed by the E.C.J., those to whom either party sells the protected product cannot be restrained through the exercise of national intellectual property rights from selling it throughout the common market. See Introductory Guide, supra note 8, at 249.
160 The E.C.J. in Italy v. Council and Commission held that an agreement that falls within an exempted category does not necessarily fall within the prohibition of Article 81(1). Case 32/65, 1966 E.C.R. 389, 406. According to the E.C.J., granting exemptions by categories cannot amount, even by implication, to passing a pre-conceived judgment on any agreement considered individually. Id.
161 Davis & Johnston, supra note 85, at 19.
162 Reg. Monograph, supra note 2, at 141.
163 Id. at 88.
164 Article 10(13) of the Technology Transfer Regulation defines parallel patents as “patents which, in spite of the divergences which remain in the absence of any unification of national rules concerning industrial property, protect the same invention in various Member States.”
165 Commission Regulation 240/96, art. 1(2) 1996 O.J. (L 31) 2.
166 Id. art. 1(3).
167 Id. art. 1(4). Necessary patents are “patents where a license under the patent is necessary for the putting into effect of the licensed technology in so far as, in the absence of such a license, the realization of the licensed technology would not be possible or would be possible only to a lesser extent or in more difficult or costly conditions. Such patents must therefore be of technical, legal or economic interest to the licensee.” Commission Regulation 240/96, art. 10(5), 1996 O.J. (L 31) 2.
168 Reg. Monograph, supra note 2, at 152.
169 Commission Regulation 240/96, Recital 11, 1996 O.J. (L 31) 2.
170 Maurits Dolmans, Commentary: Territorial Restrictions and the EC Technology Transfer Regulation, in 3 1996 Int’l Intell. Prop. Law & Pol’y 48–1, 48–2 (Hugh C. Hansen ed., 1998).
171 Id. at 48–2.
172 Commission Regulation 1983/83 on Application of Article 85(3) of the Treaty to Categories of Exclusive Distribution Agreements, 1983 O.J. (L 173) 1.
173 See Commission Regulation 2790/99, art. 4(b), 1999 O.J. (L 336) 21.
174 Both the E.U. Technology Transfer Regulation and the U.S. IP Guidelines share the same economic rationale to allow certain restraints in licensing agreements. The Technology Transfer Regulation states that technology transfer agreements
encourage the dissemination of technical knowledge in the Community and [] promote the manufacture of technically more sophisticated products. [Therefore], [t]he obligations listed in Article 1 generally contribute to improving the production of goods and to promoting technical progress. They make holders of patents or know-how more willing to grant licenses and licensees more inclined to undertake the investment required to manufacture, use, and put on the market a new product or to use a new process.
Commission Regulation 240/96, Recitals 3 and 12, 1996 O.J. (L 31) 2.
175 See Van De Walle De Guelcke & Van Gerven, Competition Law of the European Community, 9–56 (1996); Reg. Monograph, supra note 2, at 140.
176 See Reg. Monograph, supra note 2, at 135 n.20.
177 Commission Decision, 1975 O.J. (L 249) 27 (Bronbemaling v. Heidemaatschappij). See Reg. Monograph, supra note 2, at 100, 135.
178 Article 3 of the Technology Transfer Regulation states that the exemption does not apply if the agreement contains provisions preventing parallel imports, i.e., one or both of the parties are required without any objectively justified reason: (a) to refuse to meet orders from users or resellers in their respective territories who would market products in other territories within the common market; (b) to make it difficult for users or resellers to obtain the products from other resellers within the common market and, in particular, to exercise intellectual property rights or take measures so as to prevent users or resellers from obtaining outside, or from putting on the market in the licensed territory, products which have been lawfully placed in the common market by the licensor or with his consent.
179 Centrafarm, 1974 E.C.R. 1147.
180 In the GEMA case, the Commission intervened to deter the German copyright protection society from requesting the payment of royalties to the manufacturers of sound recordings in Germany working to order and on account of sound recording suppliers licensed by one of the copyright protection societies of the various Member States. According to the Commission’s Press Release announcing the settlement of the case, a license granted by a Community copyright protection society is valid throughout the Community and authorizes manufacture in any Member State. In other words, for the Commission the grant of a license exhausted the copyright right of the licensor in the country of import. See Commission’s Press Release, February 6, 1985, [1985] 2 C.M.L.R. 1, 1.
181 Enrique González Díaz, Comments of the Draft EC Block Exemption, in 2 Int’l Intell. Prop. Law & Pol’y 34–1, 34–1, 34–2 (Hugh C. Hansen ed., 1998); Introductory Guide, supra note 8, at 241.
182 See Notice on Patent Licensing Agreements, 2922/62, 1962 O.J. (commonly known as the “Christmas Message,” partly because of its date and partly because of the good news that many exclusive licenses would not infringe Article 81(1) and need not be brought to the attention of the Commission); see also Reg. Monograph, supra note 2, at 72–73 n.46. Notice that in none of its formal decisions on patent licenses did the Commission accept the view announced in its “Christmas Message.” Reg. Monograph, supra note 2, at 72–73.
183 “[1] The Commission took the view in this case that, within the Community, freedom to choose where to manufacture records and other sound recordings (pre-recorded cassettes, tapes and compact discs) should not be restricted by the application of national copyrights laws. [ . . . ] [3] A separate requirement to pay royalties to the national copyright protection society having ‘jurisdiction’ over the place of manufacture according to the rates applicable there would in practice mean the re-erection of national barriers by contractual means between Member-States. [ . . . ] [9] This action is part of the Commission’s efforts to ensure the complete freedom of competition and eliminate national barriers in this sector.” Commission’s Press Release, supra note 180, [1985] 2 C.M.L.R. at 2, 3.
184 This Commission decision rejecting the complaint related to Belgium and was never published. The Commission, however, published a decision regarding a similar complaint but related to Germany. [1996] 5 C.M.L.R. 320, PMI-DSV. The Belgian complaint related both to a refusal of PMU (Pari Mutuel Urbain) and PMI (Pari Mutuel International) to grant the Belgian subsidiary of the Ladbroke Group (Tiercé Ladbroke) a license for the Belgian market, and also to a refusal by DSV (PMI’s German licensee) of a sub-license also for the Belgian market. The German decision related both to the refusal of PMI to grant the German subsidiary of the Ladbroke Group (Ladbroke Deutschland) a sub-license for use in the horse races betting market for Germany on the ground that it was not allowed by its agreement with PMU, and also to the refusal of DSV to grant a sub-license for the same market also on the ground that it was banned to do so by its agreement with PMI. The Commission’s decision related to Belgium was appealed by Ladbroke before the C.F.I., and the C.F.I. upheld the rejection of the complaint by the Commission. Case T-504/93, Tiercé Ladbroke v. Commission, 1997 ECR II-927, ¶¶ 146 151, 152, 153. The C.F.I. ruled that “the mere fact that the owner of the copyright has granted to a sole licensee an exclusive right over the territory of a Member State, while prohibiting the grant of sub-licenses for a specific period, is not sufficient to justify a finding that such a contract must be regarded, as the purpose, the means or the result of an agreement prohibited by the Treaty.” ¶ 149. See a critical commentary on the Ladbroke case in V. Korah, The Ladbroke Saga, 3 E.C.L.R. 169 (1998).
185 Commission’s Press Release, supra note 180, [1985] 2 C.M.L.R. 1.
186 Ladbroke, 1997 ECR II-927, ¶ 34. In its decision related to Germany, the Commission held that the provision limiting the exclusive operating license to Germany was not caught by Article 81. The holders of the copyright to the pictures of French races, the racing associations, were entitled in granting [its subsidiary] PMI the right to use such pictures and commentaries to require it to seek their approval whenever PMI wished to exercise those rights abroad. Likewise, the Commission found that an obligation imposed on DSV to refrain from sub-licensing the licensed pictures outside the licensed territory was not caught by Article 81(1) because “it forms part of the rights granted to copyright holders under present Community rules.” According to the Commission, if such a clause were not included, the license would become a European license under which the licensor would no longer be free, in particular, to choose his sub-licensees for the other Member States. PMI-DSV [1996] 5 C.M.L.R. 320, ¶¶ 11–12.
187 Concepción Fernández Vicién, Why Parallel Imports of Pharmaceutical Products Should be Forbidden, 4 E.C.L.R. 219, 222 (1996).
188 Reg. Monograph, supra note 2, at 206.
189 Commission Regulation No. 2790/99, 1999 O.J. (L 336) 21.
190 Id., art. 4(b), 1999 O.J. (L 336) 21. Article 4(b) §1 exempts only “the restriction of active sales into the exclusive territory or to an exclusive customer group reserved to the supplier or allocated by the supplier to another buyer, where such a restriction does not limit sales by the customers of the buyer.”
191 1983 O.J. (L 173) 1.
192 Article 10(12) defines the “territory of the licensor” as the “territories in which the licensor has not granted any licenses for patents and/or know-how covered by the licensed technology.”
193 Commission Regulation No. 2790/99, Recitals 6, 7, and 8, 1999 O.J. (L 336) 21.
194 Commission Regulation 240/96, Recital 12, 1996 O.J. (L 31) 2.
195 Id., Recital 3, 1996 O.J. (L 31) 2.
196 For a more elaborated analysis on the different schools of thought regarding ancillary restraints see González Díaz, supra note 90.
197 Id. at 327.
198 Introductory Guide, supra note 8, at 318–19.
199 González Díaz, supra note 90, at 327–28.
200 Case 5/69, 1969 E.C.R. 295, 295.
201 Council Regulation 19/65, which empowers the Commission to make regulations exempting certain classes of agreements, provides that block exemptions shall be made for a specific period. Art. 2, 1965 O.J. (36) 533, amended by Council Regulation (EC) No. 1215/1999, 1999 O.J. (148) 1.
202 Commission Regulation 240/96, Recital 13, 1996 O.J. (L 31) 2.
203 Explanatory Statement to the Motion for a Resolution of the Committee on Economic and Monetary Affairs and Industrial Policy, adopted with eleven votes in favor and one abstention at its meeting of 23–24 March 1988 (rapporteur Mr. Mühlen). Eur. Parl. Doc. A2–36/88 (30 March 1988); [1988] 4 C.M.L.R. 653, 660.
204 Id. at 660.
205 Id.
206 Reg. Monograph, supra note 2, at 154. Korah “would have preferred horizontal agreements to have been more fully excluded from the regulation and the periods of territorial protection to have been unlimited [because] [t]he innovator has no incentive to share any market power it may have with his licensees and if it restrains them from competing with each other it must be because of the need to induce investments by them.” Id.
207 Commission Regulation 240/96, Recital 14, 1996 O.J. (L 31) 2.
208 See Reg. Monograph, supra note 2, at 153; Commission’s Press Release, supra note 180, IP(84) 270.
209 See Reg. Monograph, supra note 2, at 154; see also Bright, supra note 15, at 33–1.
210 See Bright, supra note 15, at 33–1.
211 Id. at 153. See Additional Opinion on the Draft Commission Regulation on the Application of Article 85(3) of the Treaty to Certain Categories of Know-how Licensing Agreements. Economic and Social Committee, adopted at the 25th plenary session on 23rd March 1988, 1988 O.J. (C 134) 10.
212 Commission Regulation (EEC) No. 2349/84, on the Application of Article 85(3) of the Treaty to Certain Categories of Patent Licensing Agreements, 1984 O.J. (L 219) 15.
213 Additional Opinion on the Draft Commission Regulation on the Application of Article 85(3) of the Treaty to Certain Categories of Know-how Licensing Agreements, supra note 211.
214 Commission Regulation 240/96, Recital 12, 1996 O.J. (L 31) 2.
215 Green Paper on Vertical Restraints in EC Competition Policy, COM(96)721 final, Brussels, 22.01.1997, [1997] 4 C.M.L.R. 519, 520, ¶ 1.
216 Jean-François Pons, Innovation and Competition: A View from the European Commission, at http://europa.eu.int/comm/dg04/speech/seven/en/sp97067.htm (Dec. 1, 1997).
217 The black list of the Technology Transfer Regulation (Article 3) is shorter than those of its predecessors. The following obligations on the licensee which were formerly contained in the black list of the Patent Regulation and the Know-how regulations were excluded from the current black list: (i) an obligation not to contest the secrecy of the licensed know-how or to challenge the validity of licensed patents within the common market (a “no-challenge” clause); (ii) a tying clause which is not necessary for a technically proper exploitation of the licensed technology or to ensure that the product meets accepted minimum specifications; (iii) an obligation not to continue to use the licensed know-how after the termination of the agreement where the know-how has meanwhile become publicly known other than by action of the licensee; (iv) an obligation to pay royalties on goods or services which are not entirely or partially produced by means of the licensed technology or for the use of know-how which has become publicly known by the action of the licensor; (v) an obligation to accept automatic prolongation of the initial duration of the licensing agreement by the inclusion in it of any new improvements communicated by the licensor; (vi) an obligation to grant the licensor the exclusive right for improvements to or new applications of the licensed technology which would prevent the licensee during the currency of the licensing agreement and/or thereafter from using his own improvements in so far as these are severable from the licensor’s own know-how or from licensing them to third parties, where such licensing would not disclose the licensor’s know-how that is still secret (an “exclusive grant-back clause”); and (vii) customer allocation restrictions where the parties were not competitors before the license was granted.
218 Mastromanolis, supra note 21, at 614. This author makes the same criticism with regard to territorial restrictions in exclusive distribution agreements. The argument is not new, though. In 1966, Advocate General Roemer, in his Opinion in Cases 56 & 58/64, Etablissements Consten SA and Grundig-Verkaufs-GmbH v. EEC Commission, 1966 E.C.R. 352, 359, argued that prohibiting an exclusive distribution agreement which grants absolute territorial protection, making possible imports of the product in question in the territory of the appointed distributor, may lead to the abolition of the sole distributorship and that suppression of the distributor may stand in the way of the integration of the various national markets. The E.C.J., however, did not follow the Opinion of the Advocate General.
219 V. Korah, Exclusive Distribution and the EEC Competition Rules 23 (2d ed. 1992).
220 Green Paper on Vertical Restraints in EC Competition Policy, COM(96)721 final, Brussels, 22.01.1997, [1997] 4 C.M.L.R. 519, 533.
221 See Paddock v. Chicago Tribune, 103 F.3d 42 (7th Cir. 1996) (upholding a series of contracts under which various sellers of news and other services supplied one newspaper exclusively in a given area).
222 Schwinn, 388 U.S. at 373. See Dunlop Co. Ltd. v. Kelsey-Hayes Co., 484 F.2d 407, 417 (6th Cir. 1973). In Dunlop, the court of appeals held that the territorial division of world markets through patent licenses did not violate U.S. antitrust law. Id.
223 Pfizer, Inc. v Heckler, 735 F.2d 1502, 1512 (D.C. Cir 1984); Dunlop Co. Ltd., 484 F.2d at 417; U.S. v. Crown Zellerbach Corp., 141 F. Supp. 118, 127 (N.D. Ill. 1956); Brownell v. Ketcham Wire & Mfg. Co., 211 F.2d 121, 128–29 (9th Cir. 1954); United States v. Parker-Rust-Proof Co., 61 F. Supp. 805, 812 (E.D. Mich. 1945).
224 “The applicant patentee, or his assigns or legal representatives may in like manner grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States.” 35 U.S.C. § 261 (1982).
225 Crown Zellerbach Corp., 141 F. Supp. at 127.
226 Some scholars argued that, lacking an expressed exemption, all licensing schemes should be subject to a Rule of Reason scrutiny under the antitrust laws. See Turner, The Patent System and Competitive Policy, 44 N.Y.U. L. Rev. 450, 469–70 (1969).
227 Miller Insituform, Inc., v. Instituform of North America Inc., 605 F. Supp. 1125, 1130–31 (M.D. Tenn. 1985), aff’d 830 F.2d 606 (6th Cir. 1987) (the licensees’ division of its territory among its various sublicensees constituted lawful application of rights derived from the patent grant). See also Selchow & Righter Co. v. Goldex Corp., 612 F. Supp. 19, 28–29 (S.D. Fla. 1985) (grant of an exclusive license under design patent of “Trivial Pursuit” game-board to the whole of the U.S. held not to be an illegal territorial restriction).
228 Dunlop, 484 F.2d at 417; Miller Insituform, 605 F. Supp. at 1131.
229 PMI-DSV [1996] 5 C.M.L.R. 320, ¶¶ 11–12.
230 The Commission reached the same conclusion in a previous decision of the “Ladbroke saga” rejecting a complaint by Tiercé Ladbroke (a Belgian betting agency) against the principal French horse racing associations (Pari Mutuel Urbain and Pari Mutuel International). Ladbroke, 1997 ECR II-927, ¶ 146.
231 See Commission Regulation 240/96, Recital 18, 1996 O.J. (L 31) 2.
232 Korah, supra note 184, at 175.
233 Centrafarm, 1974 E.C.R. 1147, Grounds ¶ 5.
234 Commission’s Press Release, supra note 180, [1985] 2 C.M.L.R. 1.
235 See Sylvania, 433 U.S. at 49. Notice though that minimum resale maintenance still is per se illegal. Khan, 522 U.S. at 3.
236 Fox, supra note 31, at 156.
237 The Commission, however, is likely to clear an exclusive license when (i) the licensor and the licensees are permitted to sell in the whole of the common market and they are likely to do so given that the licensed products can be transported relatively easily and inexpensively, and (ii) the combined market shares of the parties in the relevant market is not noticeable. See Commission Decision No. 72/25/EEC, [1972] 4 C.M.L.R. D67, ¶6 (Burroughs/Delplanque); Commission Decision No. 72/26/EEC, 4 C.M.L.R. D 72, ¶6 (Burroughs/Geha-Werke). The combined market share of the parties at the date of the decision of the relevant product was under 10%. Reg. Monograph, supra note 2, at 44 n.36.
238 After Nungesser, the E.C.J., despite not judging absolute territorial protection clauses under the Rule of Reason but under the ancillary restraints doctrine, has ruled that, in some situations, absolute territorial protection clauses are compatible with Article 81(1). Erauw-Jacquéry, 1988 E.C.R. 1919, Grounds ¶20; Coditel SA, 1982 E.C.R. 3381 Grounds ¶20.
239 Fox, supra note 31, at 159.
240 Crown Zellerbach Corp., 141 F. Supp. 118.
241 Id. at 123.
242 Id.
243 Id. at 123–24.
244 Id. at 124.
245 Crown Zellerbach Corp., 141 F. Supp. at 124.
246 Id.
247 Id. at 127.
248 Id. at 128.
249 Addyston Pipe & Steel Co., 175 U.S. 211.
250 Crown Zellerbach Corp., 141 F. Supp. at 127–28.
251 Fox, supra note 31, at 158–59; see also Green Paper on Vertical Restraints in EC Competition Policy, European Commission, COM(96) 721 final, Brussels, 22.01.1997, [1997] 4 CMLR 519, 520.
252 See Burroughs/Delplanque, supra note 237; Burroughs/Geha-Werke, supra note 237.
253 IP Guidelines, supra note 1, § 4.1.2.
254 Id. § 5.5; see Article 5 of Commission Regulation 240/96.
255 IP Guidelines, supra note 1, § 5.6; see Articles 2(1)(4) and 3(6) of Commission Regulation 240/96.
256 IP Guidelines, supra note 1, § 5.7.
257 Id. § 4.3.
258 1997 O.J. (C 372) 13, ¶¶ 9–11; see Bright, supra note 15, at 33–11.
259 See id.; Reg. Monograph, supra note 2, at 30.
260 IP Guidelines, supra note 1, § 5.7.
261 James B. Kobak, Jr., Running the Gauntlet: Antitrust and Intellectual Property Pitfalls on the Two Sides of the Atlantic, 64 Antitrust L.J. 341, 341 (1996).
262 Burroughs/Delplanque, supra note 237; Burroughs/Geha-Werke, supra note 237.
263 This lack of concern was partially supported by the Commission Notice of 1962 (the “Christmas Message”) in which the Commission took the view that limited patent licenses did not infringe Article 81(1) because some of the restrictions upon the licensee, such as territorial restrictions, field-of-use restrictions, or limitations in time, were inherent to the patent rights of the licensor. Notice on Patent Licensing Agreements, 1962 O.J. 2922/62.
264 OECD Competition Policy and Intellectual Property Rights 7 (1989).
265 See Commissioner Roscoe B. Starek, III, International Cooperation in Antitrust Enforcement, Address at the Illinois State Bar Association International Trade Program, at http://www.ftc.gov/speeches/starek/illbar.htm (May 10, 1996). (“[a]ntitrust is becoming increasingly important to American firms because they are engaging in more and more international transactions. A firm must be carefully attuned not only to the antitrust laws of the United States but also to the competition policies and antitrust enforcement regimes of the other nations in which it operates.”). See also Kobak, supra note 261, at 341; Sara M. Biggers, Richard A. Mann, & Barry S. Roberts, Intellectual Property and Antitrust: A Comparison of Evolution in the European Union and United States, 22 Hastings Int’l & Comp. L. Rev. 209, 209 (1999).
266 Reg. Monograph, supra note 2, at 251.
267 IP Guidelines, supra note 1, § 4.1.2.
268 An example of the Commission’s zeal on monitoring exclusive license agreements can be found in the Commission decision in the Davidson Rubber case. [1972] C.M.L.R. D 52. In this case, a U.S. company, Davidson, granted exclusive patent and know-how licenses to several European licensees over a new technology to make elbow rests and seat cushions. Davidson agreed not to appoint other licensees in the granted territories. The Commission held that the exclusive licenses violated Article 81(1) on the grounds that they prevented Davidson from giving third parties, through the grant of further licenses, the possibility of also exploiting its patents. The Commission, however, granted an exemption under Article 81(3) because (i) the exclusive territories were “indispensable” if the technology was to be made available in Europe, (ii) there were other competing processes, and (iii) the licensees were not prevented from selling the licensed products outside its territories. ¶¶ 47–48. The question that arises from this case is whether the Commission should have cleared directly Davidson’s license agreements, given that ex ante no competition was restricted in the common market, instead of granting an exemption.
269 See Deacon, supra note 59, at 308.
270 See, inter alia, Nungesser, 1982 E.C.R. 2018, 2073; Case 234/89, Delimitis, 1991 E.C.R. 935; Langnese, 1995 E.C.R. II-1533; Case T- 9/93, Schöller Lebensmittel, 1995 E.C.R. II-1611.
271 Korah, supra note 31, at 399.
272 White Paper, supra note 22, at 17.