Exclusive license agreement / French substantive law applicable / Alleged breach of Community law / Taking into account of EEC Commission Regulation relative to application of Article 853 of EEC Treaty.

This arbitration was held in France. According to the arbitration agreement in the initial agreement, French law was applicable to the substance of the dispute. The initial agreement was signed in 1978 and an addendum in October 1984.

'The Defendant [French] criticises the Claimants [German] for violation of the exclusivity specified in the contract. The Arbitral Tribunal does not allow the Claimants' criticism that the exclusivity was in breach of the provisions of Community law. Although EEC Commission Regulation No. 2349/84 dated 23 July 1984 "relating to the application of Article 85(3) of the EEC Treaty to categories of patent license agreements" is not automatically applicable because of Article 6 para. 2 relating to the application of such provisions in time, the Arbitral Tribunal considers it useful in its interpretation of the contract to take account of the teachings of the said Regulation, which often serve to codify previous solutions. Accordingly, it appears that the exclusive patent license-as practised in the 1978-1984 agreement-is compatible with the provisions relating to competition and free movement of goods laid down by the Treaty even when it imposes on the grantor of the license the obligation . . . "not to authorise other enterprises to exploit the licensed invention in the territory, covering the whole or part of the Common Market, granted to the licensee, so long as one of the licensed patents remains in force" as well as "the obligation for the licensor itself not to exploit the licensed invention in the territory granted so long as one of the licensed patents remains in force . . .' . . . "the obligation prohibiting the licensee from exploiting the licensed invention in the territories reserved to the licensor within the Common Market, so long as the product under license is protected by parallel patents in the said territories," (para. 3) . . ., "the obligation prohibiting the licensee from manufacturing or using the product under license and from using the patented process and know-how communicated within the territories granted to other licensees within the Common Market, so long as, the product under license is protected by parallel patents in the said territories," (para. 4) . . . "the obligation prohibiting the licensee from exercising an active policy of marketing the product under license in the territories granted to other licensees within the Common Market, and in particular the requirement not to publish any advertising expressly aimed at the said territories, not to establish any branch and not to maintain any warehouse for the distribution of the said product, so long as the product under license is protected by parallel patents in the said territories . . ." (para. 5).

The Arbitral Tribunal came to the conclusion that the breaches of the exclusivity by the Claimants as regards the applications of the patent should be held to constitute violations of contractual obligations and that as a consequence thereof they had to repair the prejudice caused to the Defendant.'