A UK Technology Transfer Block Exemption Order? What the biopharmaceutical industry may have to say in relation to the CMA’s forthcoming consultation


Amid the planned UK bonfire of EU legislation, the EU Technology Transfer Block Exemption Regulation (TTBER) – which provides a framework for licensing compliant with competition law – is a pretty small twig.

However, for companies in the biopharmaceutical and other technology-rich sectors, the pending CMA consultation on a future UK version of the TTBER and the related Guidelines is of some importance. Navigating the competition rules in this area is not always straightforward, and having clear and detailed guidance assists with ensuring legal certainty when entering into licensing agreements, which are frequently of high value and long-term in duration. (A reminder of how to apply the existing TTBER and Guidelines is here.)

What, then, can we expect from the CMA’s review?

One key question: to retain or not? Our expectation is that the CMA’s focus will be on whether to enact a UK Technology Transfer Block Exemption Order (TTBEO), or whether to let the EU instrument lapse without a UK-flavoured replacement. While there is always room for improvement, and while it remains difficult to be sure that the market share thresholds apply, the current TTBER and in particular the Guidelines do provide a useful framework for assessing most technology licensing agreements. Without any UK guidance, industry would have no certainty as to how the CMA might approach such issues. We anticipate that the CMA will decide to implement a UK TTBEO along with accompanying Guidelines, as it has done with previous reviews of the Verticals, R&D and Specialisation block exemptions.

Will the UK TTBEO diverge from the EU TTBER? While the EU has also announced a consultation on the existing TTBER (here), that review is likely to take place over a longer timeframe, given that the TTBER doesn’t expire until April 2026. This is both a challenge for the CMA – it will not have the benefit of reviewing responses to the EU consultations as it has done with the previous reviews – and an opportunity: the CMA will have a first-mover advantage in dealing with any new issues. Companies which wish to ensure that particular issues are addressed in any new EU TTBER would do well to raise such issues first with the CMA. Our expectation is that it is more likely that the CMA will initially enact a TTBEO which closely resembles the EU TTBER, subject to necessary changes to make it UK-specific. That is likely to be in industry’s interests: many licences will cover the whole of Europe, including the UK, so having a significantly different regime in the UK would add complexity and increase the compliance burden. However, the CMA may give itself the opportunity for a further review after the new EU TTBER is in force (rather similarly, the new UK Verticals Block Exemption Order has a relatively short period of validity, having been introduced last year and expiring in 2028).

What can we learn from the 2013-14 review of the EU TTBER? Key changes in 2014 related to the treatment of no-challenge clauses and grant-back obligations. The first of these was a particular flashpoint for the biotech sector. The EU had intended to remove all protection for no-challenge clauses, including the previously permissible ‘terminate-on-challenge’ provisions (i.e. a contractual clause that allows a licensor to terminate the licence if the licensee challenges the validity of the licensed IP). However, many representations were made on the importance of such provisions to biotech collaborations, where licensors rely on their IP assets and had a concern that well-funded licensees could seek to challenge IP rights before commercialisation, depriving IP owners of vital income streams. The EU therefore backtracked somewhat, and allowed such provisions to continue to benefit from the block exemption where included in exclusive licences. However, the guidance made clear that the protection was dependent on market share thresholds being met. This issue may therefore come up again, with the biopharma industry seeking increased protection for their key assets. Experience also suggests that companies do still routinely include terminate-on-challenge clauses in their licences, and that these are generally respected by licensees.

What can we learn from the recent CMA review of the R&D Block Exemption Regulation? The UK R&D Block Exemption Order was introduced in December 2022, in advance of the EU equivalent which has been delayed, following feedback raising concerns about the treatment of innovation markets (see our article reporting on this here). In that review, the CMA sought to bring additional clarity to the definitions used in the block exemption, but has otherwise largely maintained the status quo. As noted above, that is our provisional expectation of the outcome from TTBER review also.

Are there any new issues that the CMA will need to consider in the biopharma sector? The CMA is likely to be most open to providing new guidance where there are new ways of doing business which are not adequately reflected in the current block exemption and guidance. Examples in the biopharma sector may include:

  • Increased amounts of data generated from licensing collaborations: industry participants may wish to consider whether it would be beneficial to ensure that such data is subject to equivalent rules on grant-backs as IP rights (where obligations to grant exclusive licenses or assignments back of IP developed by the licensee to the licensor are not covered by the block exemption and require ‘individual’ exemption to be enforceable). More generally, industry is likely to benefit from further guidance on when grant-backs which do not comply with the block exemption may nevertheless benefit from an individual exemption.
  • Increasing use of platform technologies: relevant markets (and thus market shares) are often particularly difficult to assess in this context, given that licensees may retain considerable flexibility to make exploratory use of the licensed technologies, with no certainty as to the nature of final products. Based on its learnings from the tech sector, the CMA may have a concern about market tipping in a platform context, so it is likely to believe that the use of market share thresholds remains important when considering how the competition rules apply to restrictions on licensees.
  • Pharma/biotech patent pools: This is another area which has traditionally been more commonly the preserve of tech companies. The growth in pharma/biotech pooling potentially raises different issues compared with those that typically arise in the tech sector, which should be reflected in the relevant section of the Guidelines.
  • Long-term licensing obligations: Not strictly a new issue, but nevertheless one that the author has seen come up with increasing frequency in recent years. Licence agreements in the pharma sector often involve royalties being payable long after patent expiry.  In some cases that can be legitimate, due to delays to commercialisation compared to the period of patent protection (even taking into account SPCs and other patent term extensions). However, some licences go further, and do not include any termination provision at all or (more commonly) no effective ability for licensees to terminate (for example, where a combined patent and know-how licence is granted and the licensee needs continued access to the know-how). The current EU Guidelines take a permissive approach to post-expiry royalties, which is arguably not fully in line with recent case law of the Court of Justice (notably Genentech v Hoechst). Additional guidance on assessing the appropriateness of such post-expiry royalties and related restrictions would be welcome.

The timing of the CMA’s review is not yet certain: the CMA is currently in a phase of informal consultation, but a formal written consultation is expected later in 2023.  Watch this space!