Exclusive patent licensing agreement / Consistency of contractual stipulations with EC law provisions on competition and free movement of goods, yes

'Defendant claims that Claimant 1 and Claimant 2 have breached the rights of exclusivity foreseen in the Contract. Claimants' assertions against the legality of such exclusive rights, in light of the provisions of Community law, are not upheld by the Arbitral Tribunal. Though Regulation 2349/84 of the EC Commission, dated 23 July 1984, "concerning the application of article 85 § 3 of the EEC Treaty to types of patent licensing agreements", is not automatically applicable, due to article 6 § 2, given the timing of the entry into force of such provisions, the Arbitral Tribunal finds it useful to consider the implications of this Regulation in its assessment of the Contract, since the Regulation has often been seen as codifying prior solutions. It thus appears that the exclusive licensing of a patent-as provided for in the license agreement of 1978-1984-is consistent with the provisions on competition and the free movement of goods set out in the treaty, even to the extent they impose on the licensor the obligation "not to allow other enterprises to exploit the licensed invention within the territory granted to the licensee, covering the whole or part of the Common Market, insofar and as long as one of the licensed patents remains in effect", as well as "the licensor's obligation not to itself exploit the licensed invention within the licensed territory insofar and as long as one of the licensed patents remains in effect […]" […] "on the licensee the obligation not to exploit the licensed invention in the territories reserved by the licensor within the Common Market, insofar and as long as the licensed product enjoys the protection of parallel patents in such territories" (sub-para 3) […], "the obligation that the licensee not manufacture or use the licensed product nor use the patented process and know-how in territories in the Common Market allocated to other licensees, insofar and as long as the licensed product is protected through parallel patents in those territories" (sub-para 4) […], "the licensee's obligation not to actively market the licensed product in territories in the Common Market allocated to other licensees, and in particular not to undertake any advertising expressly aimed at such territories, and not to set up any branch or maintain any stores there for the distribution of said product, insofar and as long as the licensed product is protected through parallel patents in those territories […]" (sub-para 5).

After considering the provisions of the above-mentioned Regulation, including those of its article 3, the Arbitral Tribunal therefore decides that if the provisions of the said Regulation had been applicable and relied upon, they would not have ruled out the exemption. Thus it appears that the obligations arising from the exclusive nature of the license do not transgress Community rules. Consequently, their validity should be upheld and their alleged breach by Defendant investigated, bearing in mind that the so-called XYZ applications were taken out of the agreement as from 1 January 1986.

The hearings and documentary evidence introduced clearly established that Claimants have introduced or permitted to be introduced products XYZ on the French market, in breach of the exclusive patent license agreement for the supply of goods, which they were contractually bound to with Defendant.

Violations of exclusive rights for patent applications […] should be considered as contractual breaches, for which the breaching party is liable vis-à-vis their victims.

On the basis of the information submitted by the parties and the Expert's Report, the Arbitral Tribunal is of the opinion that the resulting damage amounts to one million francs at the time of this Award.'