L50 Tying and Trade Secrets

Tying Clauses
To reinforce a best endeavours clause or to try and reduce the extent to which the licensee competes with the licensor in other respects licensors may be tempted to include tying clauses which oblige the licensee to use some product or process other than those subject to the IP being licensed (a tie-in) or prohibit the licensee from using others' products or processes (tie-out).

Such tie-in and tie-out clauses may contravene not only national law (for example in the UK and Ireland) but also EC Article 81(1).

The guidelines to Article 3 of the EC regulation 773/2004 (the TTBER or Technology Transfer Block Exemption Regulation), note that it limits the application of the block exemption by market share thresholds, and ensures that tying and bundling are not block exempted above the market share thresholds of 20 % in the case of agreements between competitors and 30 % in the case of agreements between non-competitors. The market share thresholds apply to any relevant technology or product market affected by the licence agreement, including the market for the tied product. Above the market share thresholds it is necessary to balance the anti-competitive and pro-competitive effects of tying.

Trade Secrets and Confidentiality clauses
Know-How related agreements and other IP licensing agreements will need to provide for both parties to keep confidential information obtained from the other secret. Such obligations must not however stop either party from disclosing information which is public or becomes public other than through the party constrained to keep it confidential.

There may also be restrictions placed on the use to which confidential information may be put. Where such restrictions on use are to continue beyond the end of the agreement they may be unenforceable even if royalty payments for continued use of the know-how might be enforceable. The guidelines to EC regulation 773/2004 states (para 155(a) that it does not deal with confidentiality obligations as being amongst those obligations that are generally not restrictive of competition within the meaning of Article 81(1).

Both parties should in any event ensure that leakage of confidential information both during negotiations and during any agreement are kept to a minimum. Non-disclosure agreements can be used to remind employees to keep information confidential and secure and any confidential information should be marked confidential and only disclosed to those who need to know.