The German company Behringwerke granted the company Genetech a worldwide non-exclusive licence to use a patented human cytomegalovirus enhancer. Nevertheless, the licensed patent was not infringed as a result of the way Genetech used the enhancer. For this reason Genetech refused to pay
the royalty, arguing that the terms of the licence agreement indicated that the payment of the royalty was based on the supposition, first, that the enhancer was present in the finished product and, second, that the manufacture or use of that enhancer had, in the absence of that agreement, breached the rights attached to the patent. Genetech also pointed out that paying the royalty in this scenario would mean an imposition of unjustified expenses, in breach of Competition Law.
In this context, the Court of Appeal in Paris, before which the dispute is pending, requested the Court of Justice of the EU for a preliminary ruling in order to clarify whether the royalty agreed in a patent licence must be paid even if the patented technology is not infringed or if, by contrast, Article 101 (1) TFEU prohibits such payment
The Court has considered that Competition Law does not prohibit the obligation to pay a royalty for the use of technology, even where this use does not constitute an infringement or the technology is deemed to have been never protected due to a later retroactive revocation of the patent. This situation would not infringe Article 101 (1) TFEU as far as the licensee can freely terminate the agreement by giving reasonable notice. A royalty shall reflect the price to be paid for commercial exploitation of the licensed technology with the guarantee that the licensor will not exercise its industrial-property rights. In this sense, if the licence may be freely terminated by the licensee, the payment of the royalty would not undermine competition by restricting the freedom of action of the lincesee of by causing market foreclosure effects.
In conclusion, if the payment is valid even after the expiration of the patent rights, the Court has considered that the payment would also be valid when those rights are still legally binding, as far as the licensee can freely terminate the agreement.
