In July 2016 the Court of Justice for the European Union (CJEU) issued its judgment in Genentech Inc. v. Hoechst GmbH, Case C-567/14 (available here), stating that "Article 101(1) TFEU must be interpreted as not precluding the imposition on the licensee, under a licence agreement such as that at issue in the main proceedings, of a requirement to pay a royalty for the use of a patented technology for the entire period in which that agreement was in effect, in the event of the revocation or non-infringement of a licenced patent, provided that the licensee was able freely to terminate that agreement by giving reasonable notice" (para. 43). (The matter was referred to the CJEU by the Paris Court of Appeal, to determine whether an arbitration decision in favor of Hoechst was enforceable. The holding may be contrasted with the U.S. Supreme Court's decision in Kimble v. Marvel, which I blogged about here.) I blogged about the Genentech case here and noted a couple of early commentaries on it here. Here are some more commentaries that have come out in the last few months:
1. Marco Botta published an article titled Comment on "Genentech": The Arbitrability Paradox in EU Competition Law, 48 IIC 235 (2017). Here is the abstract:
Article 101(1) TFEU must be interpreted as not precluding the imposition on the licensee, under a licence agreement such as that at issue in the main proceedings, of a requirement to pay a royalty for the use of a patented technology for the entire period in which that agreement was in effect, in the event of the revocation or non-infringement of a licenced patent, provided that the licensee was able freely to terminate that agreement by giving reasonable notice.
2. Helen Hopson has published a short article titled Genentech: No EU Competition Law Barrier to Patent Royalties Despite Invalidity or Noninfringement of the Licensed Patents, 7 J. Euro. Comp. L. & Prac. 679 (2016). Here is a link to the paper, and here is the abstract:
The Court of Justice has confirmed that EU competition law prohibition of anticompetitive arrangements does not preclude the entitlement to patent royalties in the event of the revocation or finding of non-infringement of the licensed patent(s), provided that the licensee was able freely to terminate the licence by giving reasonable notice.
3. The December 2016 and March 2017 issues of les Nouvelles published several articles on Genentech. Appearing in the December 2016 issue is an article by Patricia Cappuyns and Jozefine Vanherpe titled Patent Royalties and Competition Law: The Genentech Judgment of the Court of Justice of the European Union (pp.283-85). Here is a link, and here is the abstract:
On 7 July 2016, the Court of Justice of the European Union (“CJEU”), the highest court in Europe, held that a requirement to pay royalties for the licensed use of a patented technology for the entire duration of the license is not contrary to competition rules in the event of the revocation or non-infringement of the patent at issue (Case C-567/14, Genentech v. Hoechst and Sanofi-Aventis). This ruling shifts the balance back in favour of the licensors, while recent case law as well as the Commission had emphasised that licensees must always remain free to challenge licensed IP rights. But what is the point of successfully challenging the licensed IP right if the royalties simply keep running?
In the March 2017 issue, Mizuki Hashiguchi published Unraveling the Conundrums of Running Royalties in Cross-Border License Agreements (pp. 13-20). Here is a link, and here is the abstract:
Adjacent to the glorious and delicate stained glass of Sainte-Chapelle, stands the magnificent “Palace of Justice,” currently housing the Court of Appeal of Paris. In Genentech v. Hoechst, the court encountered an enigma involving patent royalties and European competition law. A license agreement licensed three patents. One patent was subsequently revoked. The other two patents were later found not to be infringed by the licensee. Yet, the license agreement imposed an obligation on the licensee to pay running royalties throughout the contractual term. Is the imposition of this obligation permitted under Article 101 of the Treaty on the Functioning of the European Union?
The Court of Appeal of Paris referred this question to the Court of Justice of the European Union. On July 7, 2016, the Court of Justice of the European Union issued a judgment answering the question in the affirmative.
Analyzing the judgment in comparison with legal precedent in the United States such as Kimble v. Marvel Entertainment evinces differing judicial approaches to interpreting license agreements and discerning the parties’ commercial intent when royalty payments and patent monopoly are at issue. Similar cases in the United States, France, and Japan provide practical guidance concerning the licensees’ obligation to pay royalties and whether licensees are entitled to a refund when the licensed patents are ultimately invalidated.
This article discusses, among other things, the law in the U.S., France, and Japan. In addition, Richard Binnes and Nicola Walles published Royalties for Unpatented Technology (pp. 27-30). Here is a link, and here is the abstract:
The Court of Justice of the EU has ruled that a licensee could be obliged to pay past royalties under a patent licence agreement even after a patent has expired or been deemed invalid, provided that the licensee has the ability to terminate the licence agreement for convenience. The Court of Justice’s response to the question posed by the Paris Court of Appeal in Genentech Inc v Hoechst and Sanofi-Aventis (Case C-567/14) suggests that, if a licensee does not have the option to terminate for convenience, requiring it to pay past royalties due under the licence could be anti-competitive, amounting to a violation of Article 101 of the Treaty on the Functioning of the European Union (TFEU).This ruling reflects the status quo in some jurisdictions, but highlights the importance of careful drafting in respect of royalty obligations.
This article briefly discusses the law in several EU countries prior to Genentech. Also, Patrick Gattari, Steven M. Ferguson, David Crichton, and Bryan Helwig published Beyond Hybrid Licenses – Strategies for Post Patent Expiration Payments in the United States(pp. 31-36) Here is a link, and here is the abstract:
The recent US Supreme Court decision in Kimble v Marvel confirmed that royalty payments based on post-patent expiration sales violate US patent laws and the Court’s often criticized 1964 Brulotte decision. Fortunately, several alternatives exist for structuring deals that can extend payments beyond the expiration of a patent for a license that existed during the patent term. This article explores those alternatives and proposes strategies that address the needs of business while complying with the patent laws.
4. Jacques Raynard published an article titled L'obligation contractuelle de payer des redevances au titre d'un exploitation qui n'est pas couverte par le brevet ("The contractual obligation to pay royalties for a noninfringing use of a patent") in the December 2016 issue of Propriété Industrielle. Here is the abstract (my somewhat free translation):
On July 7, 2016, the Court of Justice issued a judgment in the context of a referral presented by the Paris Court of Appeals arising from an appeal against an arbitration decision. The Court of Justice decides that article 101 of the TFEU should be interpreted as not prohibiting a licensee from being required to pay a royalty for the use of a patented technology during the effective period of the contract, in the event of an invalidation or even the noninfringement of the licensed patent, as long as the licensee can terminate the license with reasonable notice. Beyond what the judgment has to say about competition law, its context serves to delimit the extent to which E.U. law can render arbitral decisions accountable.