C-320/87

2. The essential purpose of the questions is to determine whether the clauses of a licensing contract for the commercial exploitation of a patented product may be relied upon by one of the parties even after the patent itself has expired, where those 5. As may be inferred from the order for clauses lay down certain obligations for an reference, the prohibition in question is not indeterminate period or, at least, for a incompatible with the Danish legislation, period exceeding the validity of the patent. according to which, in the exercise of their contractual freedom, parties may undertake to provide certain things or behave in a particular way even after the expiry of a patent. Although the Sø- og Handelsret expressly makes that finding only with regard to the payment of the royalty, stating 3. In that regard, the national court seeks a that there are no 'mandatory rules of ruling on two distinct problems: whether, Danish law [whereby] the payment of once the patent has entered the public royalty [is to] cease upon the expiry of the domain, it is possible to continue to require patent', the very fact that it raised the the payment of a royalty on the basis of a question concerning the prohibition of licensing agreement remaining in force and manufacture and marketing leads me to

* Original language: Italian.

OPINION OF MR TESAURO —CASE 320/84

think that the Danish court reached simila to pay a royalty for the right to exploit the conclusions regarding that prohibition a, patented product commercially. well.

During the validity of a patent a fair reward for the inventor can be guaranteed, as the Court has emphasized in previous decisions 8. Even though, as we shall see shortly, the (see the judgment of 14 July 1981 in Case possibility cannot be ruled out that an obli­ 187/80 Merck & Co. Inc. v Stepbar and gation to pay a royalty may persist in Exler [1981] ECR 2063), only by ensuring certain circumstances even after the patent that no one can manufacture or market the has expired, it is nevertheless certain that product without the consent of the such an obligation can only arise in such a proprietor of the patent. Conversely, after case in implementation of a pre-existing the expiry of the patent there is no longer contractual requirement and therefore has any justification for such a prohibition and nothing to do with determination of the fair an inventor who forearms himself against reward due in respect of the patent, whereas that inevitable development by including a a prohibition of manufacture and marketing prohibitory clause in the licence contract is may be solely and specifically designed to in fact exploiting the protection available for secure for the inventor the possibility of an intellectual property right to secure a granting a licence for the exploitation of his further reward which is no longer due to patent in return for a fair reward. Breach of him, and is therefore creating an unjustified the obligation to pay undertaken by the restriction of competition. licensee can be penalized, both during the validity of the patent and after the patent has expired, only by means of the normal remedies available for that purpose. Therefore, any attempt to forearm oneself against the risk of default after the patent 7. Admittedly, the right to prohibit manu­ has expired by means of a prohibition of facture and marketing is essential in order manufacture and marketing must in my to guarantee the inventor a fair reward for opinion be regarded as an unjustified his endeavours, since in the absence of such restriction of competition and an a prohibition no one would feel constrained infringement of Article 85(1).

10. I shall therefore return to my review of However, whilst recognizing that there is in the questions submitted to the Court and this case an agreement between under­ address the first question (in the order takings, the Commission is not sure that the adopted by the national court), concerning clauses in issue are liable to affect trade the compatibility with Article 85(1) of the between Member States or to distort contractual clause requiring payment of a competition within the common market. It royalty even after the expiry of the patent wonders whether the agreement, entered for the licensed product. into between two undertakings in one Member State, one of which without doubt has a rather small turnover, may in fact be one of those agreements of minor 11. It seems to me that it can be said importance which, according to the without any particular difficulty that under Commission notice of 3 September 1986 such a clause the obligation to pay the (Official Journal C 231, 12.9.1986, p. 2), royalty is, as a rule, connected with the are not caught by the prohibition contained period of validity of the patent. On the in Article 85(1). It would be necessary to other hand, although the royalty must be establish, in that connection, whether the paid to ensure that the inventor receives his agreement relates to products which, reward, the detailed arrangements for together with similar products of the making the payment may nevertheless differ contracting companies, account within the considerably. common market or a substantial part thereof for more than 5 % of the total of such products in the area affected by the agreement and whether the aggregate As regards the period over which the annual turnover of those companies exceeds payments are to be made, it may easily be ECU 200 million. imagined that, for various reasons, the total sum payable to the inventor might be divided into a large number of periodic instalments, some of which might therefore The figures provided at the hearing by fall due after the expiry of the patent, or counsel for the defendants in the main that rather than receiving a high percentage proceedings, to the effect that 90 % of the of the sale price of the product an inventor

might prefer a lower percentage over a period of validity, and does not therefore longer period of years. It is also possible constitute infringement of Article 85(1). that an extension of the payment period might be intended to reward the inventor for exploitation of the product in the period between the filing of the patent application and the grant of the patent. 14. It is not, however, so simple to establish that such a situation actually exists, and it is wholly natural that the extension of payments beyond the expiry date of the patent may give rise to suspicion of an agreement contrary to the Community 12. Notwithstanding the fact that they competition rules. restrict competition, such stipulations do not therefore necessarily represent a misuse of the patent right and may therefore be removed from the scope of Article 85(1), as was expressly noted by the Commission in Regulation No 2349/84 of 23 July 1984 on the application of Article 85(3) of the It will therefore be for the national court, Treaty to certain categories of patent after carefully considering all the infor­ 1 mation before it, to determine whether the licensing agreements. According to the second part of Article3(4), the first part of payment of the royalty beyond the expiry of that paragraph, pursuant to which the the patent constitutes, in the case before it, charging of royalties on products which are a special arrangement for discharging the not patented is not to be exempt from the obligation to pay the reward due to the application of Article 85(1) is 'without inventor or a supplementary payment to prejudice to arrangements whereby, in order which the inventor is not entitled after the to facilitate payment by the licensee, the entry of the patent into the public domain. royalty payments for the use of a licensed It is clear, however, that when the extension invention are spread over a period of the obligation to pay the royalty is for an extending beyond the life of the licensed indeterminate period, as in this case, it will patents or the entry of the know-how into be difficult to rebut the strong presumption the public domain'. that the clause is unlawfully restrictive and that the exemption does not therefore apply. In that connection it is significant that Article 3(4) of Regulation No 2349/84 refers expressly to the extension of payments beyond the expiry of the patent as a case for which the exemption is not 13. In the cases just mentioned the payment available, except where the payments are of the royalty during the period beyond the spread 'over a period', that is to say over a validity of the patent thus does not fixed period. represent consideration for the manufacture or marketing of the product after the expiry of the patent but, rather, represents a part of the remuneration granted to the inventor for the exploitation of the patent during its 15. In the second question, to be answered 1 — OJ L 219, 16.8.1984, p. 15. if the answer to the first is in the

18. This clearly relates to the practice known in English as 'tying in', one form of which consists precisely in arbitrarily By contrast, in the event of an affirmative making the permission to exploit commer­ answer, the incompatibility of the payment cially a patented product conditional upon a of a royalty for a patented product would a commitment by the other party to enter into fortiori entail the incompatibility of a similar a licence agreement and to pay a royalty payment for an unpatented product except also for an unpatented product whose use is where, for the sake of argument, the unnecessary for the exploitation of the licensing agreement for an unpatented patented product. This constitutes an product was entered into wholly separately abusive exploitation of the inventor's intel­ from the licence in respect of the patented lectual property right and consequently an products. It seems to me, however, that the infringement of Article 85(1). case envisaged by the national court is precisely that of a close connection between patented and unpatented products covered by a single licence, for which reason we need not inquire further. And in view of the fact that the solution suggested for the first 19. It does not seem to me that the question is only partially in the affirmative, judgment of 25 February 1986 in Case it seems to me to be permissible to regard 193/83 Windsurfing, 2 to which the the second question as being designed to Commission refers in its observations, determine whether, in the event that payment of the royalty after the expiry of 2 — [1986] ECR 611

23. The situation is different where the parties initially fix an amount which they consider to be a fair reward for the inventor in respect of the patented product and 21. It is clearly apparent from that passage thereafter determine the method of that there are two distinct logical steps: first, payment, agreeing for example that part of determination of the reward due to the the sum may derive from a percentage of inventor for the patented product; secondly the sale price of an unpatented product. and necessarily at a later stage, at least from That seems to me to be the position in the the conceptual point of view, determination circumstances considered in the Windsurfing of the method of payment of that reward. judgment: if my interpretation is correct, the contracting parties first decided that a particular payment would be fair, calcu­ lating it for reasons of convenience as a relatively low percentage of the sale price of a complete sailboard; subsequently they Notwithstanding the difficulties experienced recognized that, as it was preferable to in identifying them clearly, those two steps abandon that system because it was then must be kept quite separate from each opposed by the Commission, a fair payment, other, since their characteristics are, in my to be calculated thereafter on the basis of opinion, of fundamental importance in the sale price of the sail rig alone, could determining whether or not in a specific only be obtained by increasing the case there is an infringement of Article percentage accruing to the proprietor of the 85(1). patent.

26. It will be for the national court to determine whether the licensing agreement was concluded also to facilitate commercial 29. The solutions I have proposed still exploitation of the ornamental design of the apply, in my opinion, if the licensing patented apparatus or of the know-how agreement was entered into in the interval relating to its manufacture and use, which between the filing of the application and the the defendants vigorously deny. grant of the patent. The inventor's position is the same in both situations, subject only to the fact that in the first case the patent may possibly not be granted to him. However, that does not prevent the inventor from taking advantage of the prospect that a patent will be granted and from 27. If it is accepted that in this case the concluding, subject to reservations, of inventor enjoys other intellectual property course, licensing agreements on the same rights or rights connected with the existence terms as those which he could conclude of know-how, there is no difficulty in once the patent was obtained.

OPINION OF MR TESAURO —CASE320/84

30. In conclusion, I propose therefore that the following answers should be given to the questions submitted to the Court by the Sø- og Handelsret, Copenhagen:

'(1) A clause in a licensing agreement whereby the licensee is not entitled to manufacture or sell the product in question after the termination of the agreement constitutes, where the licence relates to a patented product and the patent has expired, a restriction of competition prohibited by Article 85(1) of the Treaty.

OTTUNG v KLEE & WEILBACH

(5) For the purposes of answering the foregoing questions, the fact that the clause is contained in a licensing agreement entered into between the filing of the patent application and the grant of the patent is irrelevant.'