Licence fees even for unused and invalid patents

The Court of Justice of the European Union (EuGH) had to decide what the licensee of a patented technology actually pays for. For the use of the patent itself? The possibility of using the technology? Or the right not to be sued? And it came to the latter conclusion. A licensee must therefore also pay the agreed fee even if he does not infringe the patent or if it is subsequently declared invalid.

The pharmaceutical company Genentech was granted a non-exclusive, worldwide licence in the field of genetic research in 1992. However, the company ultimately only used the licence for the research and manufacture of a new medicinal product and thus in a manner not covered by the patent and, even if it had been protected, would not have given rise to claims for infringement due to the invalidity of the European patent.

Genentech therefore refused to pay the entire licence fees and terminated the licence agreement.

After Genentech was ordered in arbitration proceedings to pay the fees up to termination, the company turned to the Cour d'appel in Paris, which referred the matter to the EuGH.

The decision of the Court of Justice of the European Union (EuGH)

The EuGH ruled in favour of the licensor with Judgment of 07.07.2016 – Az. C-57/14.

The licence fee is compatible with EU competition law, so the licensor may also demand a fee if the use of the licensed technology does not result in patent infringement and the underlying patent is moreover declared invalid. This is the price that the licensee must pay in order to be able to use the technology commercially without risking an infringement action against itself.

Furthermore, the licensee can terminate the agreement at any time at its discretion, so that competition is not impaired and the licensee itself is not restricted in its freedom to act.

Conclusion

Whoever in future wants to pay licence fees only if he uses the licensed technology within the scope of the patent should agree this contractually. Anyone who fails to do so runs the risk of having to pay licence fees even when the scope of protection of the patent is not touched at all. In that case, only termination of the licence agreement will help.