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The European Commission today adopted new rules for the licensing of patents, know-how and software copyright. Brussels said the new rules - part of a "fundamental reform" of European antitrust regulations due to come into force on 1 May - will reduce bureaucracy.

More licensing agreements will henceforth benefit from a regulatory safe harbour, saving many agreements from individual scrutiny. These safe harbour rules apply only below certain market share thresholds (20 per cent for licensing agreements between competitors and 30 per cent for agreements between non-competitors).

The new block exemption regulation will have a black list of hardcore antitrust violations, in contrast with previous rules where white and grey lists operated.

The new rules replace a 1996 block exemption regulation, which was narrower in scope and criticised as creating a legal "strait-jacket" that sometimes ran contrary to commercial imperatives.

The 2004 regulations will also cover design right and software copyright licensing (the controversial bit) and not just patent and know-how licensing as before.

Mario Monti, the Commissioner in charge of competition policy, said: "The reform of our rules on technology transfer agreements will facilitate wide dissemination of innovation and give companies greater scope and design freedom. By strengthening the incentives for innovation while focusing on those restrictions which can seriously damage competition, competition policy can play an important role in injecting new dynamism into the EU economies."

Licensing is important for economic development as it helps disseminate innovation and allows companies to integrate and use complementary technologies and capabilities.

However, the EU recognises that licensing agreements can also be used for anti-competitive purposes (which are prohibited by Article 81 of the Treaty of Rome).

There's therefore a need to strike a balance between promoting competition and protecting intellectual property rights.

The updated regulation and guidelines will be available from the EU's website here. ®

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