FTC FINALIZES TECHNOLOGY LICENSING GUIDELINES

03/01/2001

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Our November 2000 issue reported on the FTC's draft Guidelines for Handling Technology Li-censing-Related Cases. On 19 December 2000, the FTC held a public hearing to solicit opinions on the draft, and later passed the finalized ver-sion of the guidelines on 18 January, and prom-ulgated the same on 20 January 2001.

The content of the guidelines is in line with that of the draft as previously reported. Apart from various working amendments, the main changes are as follows:

Section 2 (2)-Definition of Terms

Patent as referred to means any invention patent or new utility model patent acquired under the Patent Law. Where a licensing agreement in-volving a non-ROC patent restricts competition or creates unfair competition in the relevant ROC market, the guidelines will apply mutatis mu-tandis.

Sections 4(1), 4(2) 2, 4(2) 3 and 4(3) 6-Steps of Review and Analysis

4(1) When reviewing a case involving a tech-nology licensing agreement, the FTC will first examine it with reference to Article 45 of the FTL. But acts which in form are legitimate acts undertaken in enforcing rights under the Patent Law and other IPR laws, but in substance go beyond the scope of the legitimate enforcement of rights and go against the legislative intent of the Patent Law and other laws in protecting in-ventions and creations, should be handled ac-cording to the FTL and the guidelines.

4(2) When reviewing a case involving a techni-cal licensing agreement, the FTC is not bound by the form or wording of the agreement, but will focus primarily on the effects or potential effects of the agreement in restricting competition or creating unfair competition in the following relevant markets:

1. (Omitted)

2. technology markets defined by the substitut-ability of the specific technology; and

3. innovation markets defined by possible re-search and development of goods or services.

4(3) When reviewing a case involving a tech-nology licensing agreement, in addition to con-sidering the reasonableness of the terms of the agreement, the FTC will consider:

1–5 (Omitted)
6. international or industry practices in the rele-vant markets for the licensed technology.

Section 5Examples of Terms Not Violating the FTL

Terms of a technology licensing agreement governing any of the following matters will not be considered as violating the FTL provisions regarding restriction of competition or unfair competition, except insofar as it is considered, with reference to Sections 3 and 4, that there is impropriety:

(1)–(7) (Omitted)
(8) terms requiring the licensee to guarantee a minimum production quantity (in the case of a product patent), a minimum number of uses (in the case of a method patent), or a minimum sale quantity, in order to assure the licensor a minimum royalty income;

(9) (omitted)

(10) terms barring the licensee from assigning or sublicensing the licensed technology, except insofar as otherwise agreed between the li-censor and licensee;

(11) terms barring the licensee from continuing to practice the licensed technology after the agreement has expired, insofar as the li-censed patent remains valid or the licensed know-how remains a trade secret.

Technology transfer and licensing agreements have become increasingly common in recent years, and the guidelines becomes important criterion for negotiating such agreements. We will closely follow their implementation by the FTC, and report to readers as appropriate.