Genentech – Is the right to receive royalties for a revoked or non-infringed patent compatible with the EU law on restrictive agreements?

This article was published as a case study in the November 2016 issue of Competition Policy Research, a journal published by the Electronic Intellectual Property Center, Ministry of Industry and Information Technology in China.

Abstract: This case arose from a dispute between a licensor and licensee over patents used in the development of a cancer drug. Under the terms of the agreement, the licensee was required to pay, in addition to other royalties, a running royalty rate over the finished products. Although the EU patent was revoked in 1999, the patent licence agreement was not terminated by the licensee until a number of years later. The licensor and licensee then entered into arbitration over the payment of the royalties that were due. The arbitrator ruled in favour of the licensor and required the licensee to pay the outstanding royalties. The licensee then appealed to the Court of Appeal in France, raising the question on whether

a contractual requirement to pay royalties for an expired or revoked patent is compatible with the EU law on restrictive agreements. The Court of Appeal in France stayed their proceedings and referred the question on the interpretation of EU law to the Court of Justice of the European Union. The highest court in the European Union confirmed that EU law on

restrictive agreements does not prohibit licensors from requiring licensees to pay royalties for the entire duration of the agreement, regardless of the absence of an infringement or revocation of the licensed patent, provided that the licensee was able to terminate the patent licence agreement with reasonable notice.

Click here to download the full article (in Chinese).

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