
Article 1 

1. For the purposes of this Regulation, the following definitions shall apply:
(a) ‘agreement’ means an agreement, a decision of an association of undertakings or a concerted practice;
(b) ‘technology rights’ means know-how and the following rights, or a combination thereof, including applications for or applications for registration of those rights:
((i)) patents,
((ii)) utility models,
((iii)) design rights,
((iv)) topographies of semiconductor products,
((v)) supplementary protection certificates for medicinal products or other products for which such supplementary protection certificates may be obtained,
((vi)) plant breeder’s certificates and
((vii)) software copyrights;
(c) ‘technology transfer agreement’ means:
((i)) a technology rights licensing agreement entered into between two undertakings for the purpose of the production of contract products by the licensee and/or its sub-contractor(s),
((ii)) an assignment of technology rights between two undertakings for the purpose of the production of contract products where part of the risk associated with the exploitation of the technology remains with the assignor;
(ca) “the Chapter 1 prohibition” means the prohibition imposed by section 2(1) of the Competition Act 1998;
(d) ‘reciprocal agreement’ means a technology transfer agreement where two undertakings grant each other, in the same or separate contracts, a technology rights licence, and where those licences concern competing technologies or can be used for the production of competing products;
(e) ‘non-reciprocal agreement’ means a technology transfer agreement where one undertaking grants another undertaking a technology rights licence, or where two undertakings grant each other such a licence but where those licences do not concern competing technologies and cannot be used for the production of competing products;
(f) ‘product’ means goods or a service, including both intermediary goods and services and final goods and services;
(g) ‘contract product’ means a product produced, directly or indirectly, on the basis of the licensed technology rights;
(h) ‘intellectual property rights’ includes industrial property rights, in particular patents and trademarks, copyright and neighbouring rights;
(i) ‘know-how’ means a package of practical information, resulting from experience and testing, which is:
((i)) secret, that is to say, not generally known or easily accessible,
((ii)) substantial, that is to say, significant and useful for the production of the contract products, and
((iii)) identified, that is to say, described in a sufficiently comprehensive manner so as to make it possible to verify that it fulfils the criteria of secrecy and substantiality;
(j) ‘relevant product market’ means the market for the contract products and their substitutes, that is to say all those products which are regarded as interchangeable or substitutable by the buyer, by reason of the products’ characteristics, their prices and their intended use;
(k) ‘relevant technology market’ means the market for the licensed technology rights and their substitutes, that is to say all those technology rights which are regarded as interchangeable or substitutable by the licensee, by reason of the technology rights’ characteristics, the royalties payable in respect of those rights and their intended use;
(l) ‘relevant geographic market’ means the area in which the undertakings concerned are involved in the supply of and demand for products or the licensing of technology rights, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas;
(m) ‘relevant market’ means the combination of the relevant product or technology market with the relevant geographic market;
(n) ‘competing undertakings’ means undertakings which compete on the relevant market, that is to say:
((i)) competing undertakings on the relevant market where the technology rights are licensed, that is to say, undertakings which license out competing technology rights (actual competitors on the relevant market),
((ii)) competing undertakings on the relevant market where the contract products are sold, that is to say, undertakings which, in the absence of the technology transfer agreement, would both be active on the relevant market(s) on which the contract products are sold (actual competitors on the relevant market) or which, in the absence of the technology transfer agreement, would, on realistic grounds and not just as a mere theroretical possibility, in response to a small and permanent increase in relative prices, be likely to undertake, within a short period of time, the necessary additional investments or other necessary switching costs to enter the relevant market(s) (potential competitors on the relevant market);
(o) ‘selective distribution system’ means a distribution system where the licensor undertakes to license the production of the contract products, either directly or indirectly, only to licensees selected on the basis of specified criteria and where those licensees undertake not to sell the contract products to unauthorised distributors within the territory reserved by the licensor to operate that system;
(p) ‘exclusive licence’ means a licence under which the licensor itself is not permitted to produce on the basis of the licensed technology rights and is not permitted to license the licensed technology rights to third parties, in general or for a particular use or in a particular territory;
(q) ‘exclusive territory’ means a given territory within which only one undertaking is allowed to produce the contract products, but where it is nevertheless possible to allow another licensee to produce the contract products within that territory only for a particular customer where the second licence was granted in order to create an alternative source of supply for that customer;
(r) ‘exclusive customer group’ means a group of customers to which only one party to the technology transfer agreement is allowed to actively sell the contract products produced with the licensed technology.
2. For the purposes of this Regulation, the terms ‘undertaking’, ‘licensor’ and ‘licensee’ shall include their respective connected undertakings.‘Connected undertakings’ means:
(a) undertakings in which a party to the technology transfer agreement, directly or indirectly:
((i)) has the power to exercise more than half the voting rights, or
((ii)) has the power to appoint more than half the members of the supervisory board, board of management or bodies legally representing the undertaking, or
((iii)) has the right to manage the undertaking’s affairs;
(b) undertakings which directly or indirectly have, over a party to the technology transfer agreement, the rights or powers listed in point (a);
(c) undertakings in which an undertaking referred to in point (b) has, directly or indirectly, the rights or powers listed in point (a);
(d) undertakings in which a party to the technology transfer agreement together with one or more of the undertakings referred to in points (a), (b) or (c), or in which two or more of the latter undertakings, jointly have the rights or powers listed in point (a);
(e) undertakings in which the rights or the powers listed in point (a) are jointly held by:
((i)) parties to the technology transfer agreement or their respective connected undertakings referred to in points (a) to (d), or
((ii)) one or more of the parties to the technology transfer agreement or one or more of their connected undertakings referred to in points (a) to (d) and one or more third parties.
Article 2 

1. Subject to the provisions of this Regulation, technology transfer agreements are exempt from the Chapter 1 prohibition.
2. The exemption provided for in paragraph 1 shall apply to the extent that technology transfer agreements contain restrictions of competition falling within the scope of  the Chapter 1 prohibition. The exemption shall apply for as long as the licensed technology rights have not expired, lapsed or been declared invalid or, in the case of know-how, for as long as the know-how remains secret. However, where know-how becomes publicly known as a result of action by the licensee, the exemption shall apply for the duration of the agreement.
3. The exemption provided for in paragraph 1 shall also apply to provisions, in technology transfer agreements, which relate to the purchase of products by the licensee or which relate to the licensing or assignment of other intellectual property rights or know-how to the licensee, if, and to the extent that, those provisions are directly related to the production or sale of the contract products.
Article 3 

1. Where the undertakings party to the agreement are competing undertakings, the exemption provided for in Article 2 shall apply on condition that the combined market share of the parties does not exceed 20 % on the relevant market(s).
2. Where the undertakings party to the agreement are not competing undertakings, the exemption provided for in Article 2 shall apply on condition that the market share of each of the parties does not exceed 30 % on the relevant market(s).
Article 4 

1. Where the undertakings party to the agreement are competing undertakings, the exemption provided for in Article 2 shall not apply to agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object any of the following:
(a) the restriction of a party’s ability to determine its prices when selling products to third parties;
(b) the limitation of output, except limitations on the output of contract products imposed on the licensee in a non-reciprocal agreement or imposed on only one of the licensees in a reciprocal agreement;
(c) the allocation of markets or customers except:
((i)) the obligation on the licensor and/or the licensee, in a non-reciprocal agreement, not to produce with the licensed technology rights within the exclusive territory reserved for the other party and/or not to sell actively and/or passively into the exclusive territory or to the exclusive customer group reserved for the other party,
((ii)) the restriction, in a non-reciprocal agreement, of active sales by the licensee into the exclusive territory or to the exclusive customer group allocated by the licensor to another licensee provided the latter was not a competing undertaking of the licensor at the time of the conclusion of its own licence,
((iii)) the obligation on the licensee to produce the contract products only for its own use provided that the licensee is not restricted in selling the contract products actively and passively as spare parts for its own products,
((iv)) the obligation on the licensee, in a non-reciprocal agreement, to produce the contract products only for a particular customer, where the licence was granted in order to create an alternative source of supply for that customer;
(d) the restriction of the licensee’s ability to exploit its own technology rights or the restriction of the ability of any of the parties to the agreement to carry out research and development, unless such latter restriction is indispensable to prevent the disclosure of the licensed know-how to third parties.
2. Where the undertakings party to the agreement are not competing undertakings, the exemption provided for in Article 2 shall not apply to agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object any of the following:
(a) the restriction of a party’s ability to determine its prices when selling products to third parties, without prejudice to the possibility of imposing a maximum sale price or recommending a sale price, provided that it does not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, any of the parties;
(b) the restriction of the territory into which, or of the customers to whom, the licensee may passively sell the contract products, except:
((i)) the restriction of passive sales into an exclusive territory or to an exclusive customer group reserved for the licensor,
((ii)) the obligation to produce the contract products only for its own use provided that the licensee is not restricted in selling the contract products actively and passively as spare parts for its own products,
((iii)) the obligation to produce the contract products only for a particular customer, where the licence was granted in order to create an alternative source of supply for that customer,
((iv)) the restriction of sales to end-users by a licensee operating at the wholesale level of trade,
((v)) the restriction of sales to unauthorised distributors by the members of a selective distribution system;
(c) the restriction of active or passive sales to end-users by a licensee which is a member of a selective distribution system and which operates at the retail level, without prejudice to the possibility of prohibiting a member of the system from operating out of an unauthorised place of establishment.
3. Where the undertakings party to the agreement are not competing undertakings at the time of the conclusion of the agreement but become competing undertakings afterwards, paragraph 2 and not paragraph 1 shall apply for the full life of the agreement unless the agreement is subsequently amended in any material respect. Such an amendment includes the conclusion of a new technology transfer agreement between the parties concerning competing technology rights.
Article 5 

1. The exemption provided for in Article 2 shall not apply to any of the following obligations contained in technology transfer agreements:
(a) any direct or indirect obligation on the licensee to grant an exclusive licence or to assign rights, in whole or in part, to the licensor or to a third party designated by the licensor in respect of its own improvements to, or its own new applications of, the licensed technology;
(b) any direct or indirect obligation on a party not to challenge the validity of intellectual property rights  held by the other party which have effect in the United Kingdom, without prejudice to the possibility, in the case of an exclusive licence, of providing for termination of the technology transfer agreement in the event that the licensee challenges the validity of any of the licensed technology rights.
2. Where the undertakings party to the agreement are not competing undertakings, the exemption provided for in Article 2 shall not apply to any direct or indirect obligation limiting the licensee’s ability to exploit its own technology rights or limiting the ability of any of the parties to the agreement to carry out research and development, unless such latter restriction is indispensable to prevent the disclosure of the licensed know-how to third parties.
Article 6 
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Article 7 
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Article 8 
For the purposes of applying the market-share thresholds laid down in Article 3 the following rules shall apply:

((a)) the market share shall be calculated on the basis of market sales value data; if market sales value data are not available, estimates based on other reliable market information, including market sales volumes, may be used to establish the market share of the undertaking concerned;
((b)) the market share shall be calculated on the basis of data relating to the preceding calendar year;
((c)) the market share held by the undertakings referred to in point (e) of the second subparagraph of Article 1(2) shall be apportioned equally to each undertaking having the rights or the powers listed in point (a) of the second subparagraph of Article 1(2);
((d)) the market share of a licensor on a relevant market for the licensed technology rights shall be calculated on the basis of the presence of the licensed technology rights on the relevant market(s) (that is the product market(s) and the geographic market(s)) where the contract products are sold, that is on the basis of the sales data relating to the contract products produced by the licensor and its licensees combined;
((e)) if the market share referred to in Article 3(1) or (2) is initially not more than 20 % or 30 % respectively, but subsequently rises above those levels, the exemption provided for in Article 2 shall continue to apply for a period of two consecutive calendar years following the year in which the 20 % threshold or 30 % threshold was first exceeded.
Article 9 
This Regulation shall not apply to licensing arrangements in research and development agreements which fall within the scope of  the Competition Act 1998 (Research and Development Agreements Block Exemption) Order 2022  or in specialisation agreements which fall within the scope of  the Competition Act 1998 (Specialisation Agreements Block Exemption) Order 2022.
Article 10 
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Article 11 
This Regulation shall enter into force on 1 May 2014.
It shall expire on 30 April 2026.
...Done at Brussels, 21 March 2014.
For the Commission, On behalf of the President,
Joaquín ALMUNIA
Vice-President