Research and development agreements

1) OBJECTIVE

To encourage cooperation between firms in the area of research and development whilst maintaining effective competition within the common market.

2) ACT

Commission Regulation (EC) No 2659/2000 of 29 November 2000 on the application of Article 81(3) of the Treaty to categories of research and development agreements [Official Journal L 304, 05.12.2000].

3) SUMMARY

Research and development (R&D) agreements

R&D agreements may concern the acquisition of know-how, theoretical analyses, studies or experiments relating to products or processes, including experimental production, the establishment of the necessary facilities and the obtaining of the relevant intellectual property rights.

Context

This Regulation should be read in the light of Regulation No 2821/71 empowering the Commission to exempt certain types of agreements in accordance with Article 81(3) of the EC Treaty. It is intended to replace Regulation No 418/85 of 16 December 1984, which expired on 31 December 2000.

This new block exemption Regulation diverges from the traditional approach taken by exemption regulations, which list specifically exempted clauses, and introduces an approach based on a general exemption of all the conditions in which firms conclude R&D agreements. This approach is part of the process of simplifying and clarifying rules and regulations on which the Commission embarked in 1997.

Scope

Since cooperation on R&D generally helps to promote the exchange of know-how and technologies, to facilitate technical and economic progress, and to rationalise the manufacture and use of products that benefit consumers among others, this Regulation exempts not only agreements the primary object of which is R&D but also all agreements directly related to and necessary for the implementation of cooperation in R&D, provided that the combined market share of the parties does not exceed 25% of the relevant market.

On the other hand, the Regulation does not apply to agreements that are not indispensable to attaining the positive effects mentioned above. Certain serious restraints on competition (such as price fixing and limiting production) will continue to be prohibited in general.

The Commission reserves the right, if necessary, to withdraw the exemption granted by this Regulation.

Agreements covered by the exemption

Agreements are exempted that are concluded between two or more undertakings with a combined market share of less than 25% and are aimed at pursuing:

• research and development of products and processes and joint exploitation of the results;
• exploitation of the results of research previously carried out by the parties;
• research and development of products and processes excluding joint exploitation of the results.

Exemption of agreements is subject to the following conditions:

• all the parties must have access to the results of the research;
• all the parties must be free to exploit the results. In the event of an agreement that is limited to R&D, the parties must be free independently to exploit any such results;
• any joint exploitation of results must be protected by intellectual property rights or constitute know-how that is decisive for the manufacture or application of the end products;
• firms entrusted with manufacture must be required to fulfil orders for supplies from all the parties to an agreement.

Exemption applies for the duration of the R&D unless the agreement provides only for the joint exploitation of the results. In that case, the exemption applies for seven years from the time the contract products are first put on the market.

Market share is calculated either on the basis of the market sales value or on the basis of an estimation of that value in relation to the preceding calendar year. If, after a certain time, the market share exceeds the threshold of 25% but remains below 30%, the exemption continues to apply for two years. However, when the 30% threshold is exceeded, the exemption applies for only one year.

Agreements not covered by the exemption

The exemption does not apply to R&D agreements aimed directly or indirectly at:

• restricting the freedom of the participating undertakings to carry out R&D, either in a field unconnected with the field concerned or, after completion of the work provided for in the agreement, in the field to which it relates or in a connected field;
• prohibiting challenges to the validity of intellectual property rights held by the parties, whether exploited for the purposes of the R&D or arising from the R&D results;
• limiting output or sales;
• fixing prices;
• restricting supplies of the product to customers at the end of a seven-year period from the time the products are first put on the market;
• prohibiting passive sales in territories reserved for other parties;
• banning marketing of the products in the territories of other parties after a seven-year period from the time the products are first put on the market;
• preventing licences from being granted to third parties to manufacture the contract goods where exploitation of the R&D results is not provided for or does not take place;
• requiring that demand from customers outside the common market not be met;
• requiring distribution to be restricted through, for example, the improper use of intellectual property rights.

Withdrawal of exemption

In accordance with Regulation No 2821/71, the Commission may withdraw the benefit of exemption where:

• the agreement substantially restricts the scope for third parties to carry out the same activity or to gain access to the market;
• the results of the R&D agreement are not exploited by the parties;
• the products resulting from the R&D are not subject to competition in the whole or a substantial part of the market;
• the agreement eliminates effective competition in R&D on a particular market.

In the period from 1 January 2001 to 30 June 2002, the Regulation will not apply to agreements already in force on 31 December 2000 that satisfy the conditions provided for in Regulation No 418/85.

Last updated: 07.03.2007