Software licensing not always anti-competitive says Monti

On 1 May, businesses operating within the EU will be free to strike technology licensing agreements – on the proviso that they only act within certain market thresholds of 20 per cent. New rules have also been passed by the Commission on software.

On Wednesday, the Commission adopted the new rules, saying in a statement: "Licensing is important for economic development and consumer welfare... However, licensing agreements can also be used for anti-competitive purposes."

It goes on to give the example of a case where "two competitors use a licence agreement to divide markets between them, or when an important licensor excludes competing technologies from the market," and adds that it's necessary to find the "right balance between protecting competition and protecting intellectual property rights."

However, until recently, technology licensing in the EU was governed by article 81 of The Treaty, which meant licensing agreements that restricted competition were prohibited but did include a list of exemptions.

A text dating from 1996 was deemed by manufacturers quizzed by the EU in a public consultation to be "too prescriptive", "too formalistic" and when applied, "too narrow" – so the EU decided to clear matters up a bit.

From now on, Brussels has opted for a different principle of ban, accompanied by a range of exceptions. Businesses are now free to arrange licensing agreements as long as their market share isn't more than 20 per cent of the market as whole when it concerns firms in competition and 30 per cent when they aren't competing.

"The new rules leave companies more freedom to devise their licensing agreements according to their commercial needs," the Commission said.

In addition, the scope for the new rules to be applied has been widened: "The new rules also become broader in scope since they will now cover design right and software copyright licensing, as requested by many who commented on the texts, and not just patent and know-how licensing."

In Europe, when it comes to software, it's the author's rights that prevail – a direct opposite to the situation in the US, when the principle of patenting is the norm.

The new regulations will come into effect on 1 May – when the number of EU member states will increase from 15 to 25 countries.

Christophe Guillemin writes for ZDNet France.