TIPS^®  Taiwan Intellectual Property Special

“Guideline of Reviewing Technology Licensing Agreement” Draft Published by Fair Trade Commission for Public Comments

As the increase of international technology transaction and technology licensing, the owners of intellectual property rights often attach restricted competition clauses in licensing agreement to boost their market power by taking advantage of their monopoly technology. Such kind of clauses will thus produce restricted competition or unfair competition. In order to monitor and review the disputes resulting from technology licensing, the Fair Trade Commission (“FTC”) passed the “Guideline of Reviewing Technology Licensing Agreement” draft (“Draft Guideline”) on August 31, in which the FTC categorizes the clauses of technology licensing in three types: non-violation, in violation of, and the likelihood of violation of Fair Trade Law (“FTL”).

Pursuant to the Draft Guideline, the following licensing clauses will not be deemed in violation of FTL: the restriction on the use and the scope of licensing, the limit of licensing term, the requirement of grant back licensing under non-exclusive basis, the requirement of duty of confidentiality, the minimum requirement of manufacturing quantity and sales, the requirement of the maintenance of the quality of the components to be used on the licensed products, the restriction of assignment or sub-licensing, and the restriction on the continuous use of licensed technology after the termination of the licensing agreement.

In contrast, the following licensing clauses will be deemed in violation of FTL: the agreement on the concerted action, the restriction on competition, the restriction on the licensee’s trading counterparts, the compulsory package licensing with respect to unnecessary patent or know how, the requirement of exclusive grant back license, the restriction on the use after expiration of the patent, the requirement of continuous payment of royalty after the expiration of patent, the restriction on the price, the restriction of objection or challenge to validity of the licensed patent, and the rejection of providing important transaction information with respect to the licensed technology.

The FTC also lists the circumstances which have the likelihood of violation of FTL as follows: the restriction on the licensee’s marketing channel, the restriction on the licensee’s trading counterparts with respect to the materials and components of the products, the restriction on the licensing territory, and the discrimination on the licensing clauses without reasonable cause.

After the promulgation of this Draft Guideline, it will become the FTC’s principle while reviewing technology licensing agreement. At present, the FTC has posted this Draft Guideline on its website (http://www.ftc.gov.tw) inviting the comments and opinions from the public. This Draft Guideline is predicted to have crucial influence on the practice of technology licensing, which should attract great attention from the high tech manufacturers and the owners of the intellectual property rights.