Research Case Study

Impact: Designing a new technology transfer regulatory framework for the European Union

  • Tagged under

    Economy, business, politics and society

Professor Katharine Rockett

The University of Essex has contributed to research on competition policy and intellectual property rights, re-shaping the framework for licensing and standard setting for the transfer of knowledge and technologies in the European Union.

The revisions to the framework, following on from our research contribution and stakeholder consultations, were adopted by the European Commission in 2014 and will remain in force until 2026. The revisions have aimed to balance consumer and commercial interests to ensure that producers of high-tech products such as smartphones and pharmaceuticals take decisions on technology transfer that benefit consumers overall in terms of pricing, quality and availability. This high-tech market represents 26% of the European employment market and almost 39% of economic activity.

The challenge

High-tech products are highly complex. This complexity often relies upon technology transfer, including the movement of data, designs, inventions, materials, software, technical knowledge or trade secrets from one organisation to another. The rules governing this process involve the interplay between intellectual property rights and competition rules to achieve a balance between the needs of end users and all the companies and other interests in the chain of production. The regulation must be broad enough to protect consumers, as well as the production chain across countries within and beyond the European Union. It must be clear, and it must be fair.

The European Commission’s Competition Directorate identified Essex experts to develop a primarily theoretical analysis, as sufficient publicly available examples of practice, both good and bad, restricted empirical work. The academics were commissioned to develop an independent application of their research to develop a welfare analysis of the framework for technology transfer. Policy issues in licensing and standard setting were addressed as part of this work.

What we did

Professor Katharine Rockett, from the Department of Economics at the University of Essex, has been researching the theories of licensing, standard setting, and intellectual property rights design since the 1980s. She was commissioned by The European Commission with Dr Pierre Régibeau, formerly of the University of Essex, and an expert on technology standards, to assess anti-competitive conduct in the field of intellectual property rights and undertake a welfare analysis of the existing EU policy framework.

The research they undertook built on their previous work on intellectual property protection’s interaction with competition policy. It drew attention to industry coordination, concentration and competition policy as areas where policy toward technology intensive industries faces unique and pressing challenges. These concerns motivated arguments around licensing policy, patent pools and mergers.

Professor Rockett and Dr Régibeau undertook new research on the practices of grantbacks (clauses in licensing agreements that allow the licensor access to technology developed by a licensee) and also studied patent pools (sets of patents managed and traded as a “bundle”). Their work developed a theoretical model capturing the effects of different designs of grantback regulation. The study also explored the negative influence of patent thickets (dense networks of interlinked patents) on innovation and the potential for patent pools to resolve this problem. The authors went on to develop specific recommendations on how patent pool policy can be used to address thickets and devised a policy algorithm as a way of testing whether a merger would harm innovation.

What we changed

This research showed how economics can be used to evaluate a legal framework, a style of work that has been commonplace for many years in North America but is a more recent development in Europe. It contributed to significant changes to legal frameworks and regulations affecting consumers across the EU as well as organisations doing business in the EU. This was achieved through the adoption of recommendations on revisions of the European Commission’s Technology Transfer Guidelines and Technology Transfer Block Exemption Regulation.

These revisions aimed to improve consumer welfare by achieving a balance between providing effective incentives for competitors and non-competitors to enter into innovation and technology transfer agreements while ensuring that such agreements do not distort competition and therefore undermine economic welfare. This means that consumers have access to a range of quality, affordable products where those products rely on technology access agreements, and that firms wishing to compete do not face exclusionary or anticompetitive behaviour.

The starkest impact to policy deriving from the work was the tightening of the regulation on grantbacks, removing all exclusive grantbacks from the regulation’s exemptions, instead requiring individual assessment by companies. This has led to a stricter approach, counterbalancing the arguments of stakeholders, with greater considerations for consumer welfare.