For agreements valid in the EU, this subject is specifically
regulated by Regulation No 240 of 31 January 1996.
The Regulation has an expiry date, which is 31 March 2006.
The word “patent” is given a broad interpretation inasmuch
as the following are considered equal to granted patents:
- patent applications;
- utility models;
- applications for registration of utility models;
- topographies of semiconductor products;
- “certificats d’utilité” and “certificats
d’addition” according to French law;
- supplementary protection certificates for medicinal or all
other products for which such certificates may be obtained;
- certificates concerning new plant varieties.
The territorial protection which is typical of exclusive licences
is admitted for the licensee. In fact, the licensee is required:
- not to authorise other companies to use the invention granted
in the territory guaranteed by the licence, in so far and as long
as at least one of the patents granted under licence remains in
- not to use himself the invention granted in the territory
covered by the licence in so far and as long as at least one of
the patents granted under licence remains in force.
These obligations are also included in the European Patent Convention
which allows the European patent to be granted under licence, either
exclusive or non-exclusive, throughout the territory of the Community
or only in one part thereof. Moreover, the rights deriving from
a European patent can be exercised against a licensee who exceeds
the limits imposed by the licence. One of these limits may be the
It is a consequence of the territorial restrictions that every
licensee must respect the territorial limits imposed by the agreement;
to be more precise:
- not to use the invention in the exclusive territory of the
licensor inside the EU;
- not to manufacture or use the product under licence and
not to use the patented method and the know-how imparted, in the
territories of other licensees inside the EU.
“Using” the invention means not only manufacturing and
using the product and the method, but also putting the products
onto the market for the first time.
Competition is generally divided into active and passive competition.
Active competition is always forbidden when it involves the licensee
in looking for clients outside his own territory. Passive competition
occurs when the licensee satisfies requests, which he had not sought,
coming from the territory of other licensees.
This type of competition is forbidden for a maximum period of five
To be more exact, the licensee can be required not to market the
product under licence in the territories of other licensees inside
the EU for a period of not more than five years starting from the
date on which the product was marketed for the first time by the
licensor or one of the other licensees.
Parallel imports, however, greatly reduce the value of territorial
exclusivity, since anyone is free to purchase the products from
the licensor or from one of the licensees and then resell them in
the territory of a licensee or of the licensor.
It is recognised that parallel imports have the important function
of promoting competition on the level of distribution.
It is admissible for a clause to be included in the agreement whereby
the licensee is obliged to buy supplies from the licensor, or from
an undertaking designated by him, or to use particular services,
but only if this obligation serves to guarantee that the invention
covered by the licence is exploited in a technically correct manner.
In the absence of this condition, the clause cannot be applied.
Another obligation which can be applied to the licensee is to respect
minimum quality specifications of the product under licence. Minimum
quality means the quality required for there to be a technically
correct exploitation of the invention (Burroughs/Geha Werke, GADI,
1972, No 231; Raymond/ Nagoya, GADI, 1972, No 236).
However, the quality specifications must answer objective, pre-determined
and verifiable criteria, so as to prevent the licensee’s activity
from suffering from arbitrary interference. The obligation must
not extend beyond what is indispensable and, above all, it must
not give the licensor the opportunity to interfere in those commercial
decisions which are reserved for the licensees.
Another obligation which is allowed is that the parties must reciprocally
communicate to each other the experience they have acquired
in using the invention under licence, and that they grant each other
a licence for all inventions of improvement or application, on condition
that the communication or licence is not exclusive.
However, this obligation is not allowed to be unilateral on the
licensee’s side, nor that he should be “required to
grant the licensor, either in whole or in part, his own patent rights
concerning inventions of application or improvement on the patents
under licence, or the rights to such patents” (Davison Rubber,
GADI, 1972, No 235).
A licensee can be obliged to limit his exploitation of the invention
licensed to him to one or more of the technical applications included
in the patent.
On the contrary, there are no limits allowed with regard to clients,
and in particular with regard to supplying particular classes of
clients, employing certain forms of distribution, or, with the aim
of sharing customers, adopting particular forms of packaging for
Other constraints which are held to be inadmissible are:
- to limit the quantity of products under licence to manufacture
or sell (Maize seed, GADI, 1978, No 1127);
- to set the prices, the components of the price or the discounts
for the products under licence;
- to forbid the supply to particular classes of users, or
to ban using particular means of distribution or particular forms
of packaging for the products;
- to oblige the licensee to carry out the production process
in a single location (Windsurfing International Inc./EC Commission,
GADI, 1987, No 2224).
It is also forbidden for the licensee to have to pay royalties
for the manufacture of unpatented products, or products which are
the subject of expired patents, or to use know-how which has become
public knowledge, on condition that it cannot be imputed to the
licensee himself or to a Company connected therewith that the know-how
has entered the public domain.
Another forbidden clause is that which prevents the licensee from
contesting the validity of the patent granted under licence or any
other rights of industrial and commercial property belonging to
the licensor or to undertakings connected therewith (AOIP/Beyrard,
GADI, 1975, No 777; Bayer, IIC, 1990, No 212).
A further inadmissible constraint is the automatic extension of
the agreement beyond the duration of the patents granted under licence
and extant at the date when the agreement was made, except when
the agreement states that all the contracting parties have the right
to withdraw from the agreement at least every year starting from
the date of expiry of the patents under licence.