GAZETTE
territorial protection if the Italian patent had run out.
This means that
to be safe an inventor should obtain
patent protection in all the EEC Member States.
There are still differences of opinion over whether
e g. a British company which has been given a licence
of a UK patent may sell directly into the territory of
the Irish patentee. It is clear that a company which
buys from the licensee may export the goods to Ireland,
so that the patentee has no absolute territorial protec-
tion, but only a margin of protection equal to the
minimum profit margin which the potential exporter
would accept, plus royalty and transport costs. In the
case of a direct export by the licensee the patentee
has agreed to the sale and obtains his royalty, but he
did not agree to the licensee selling in Ireland. Terri-
torial protection against one's own licensee is not, how-
ever, part of the "specific subject matter'' of the patent,
as described by the Court: the right to confine a licensee
to a part of the Common Market is not comparable
to the right to prevent infringements by unauthorised
imitators. The more conservative view is that the prin-
ciples stated by the Court apply to patented goods
only after they have been sold initially: this is based
on the view that Community law merely extends the
principle of exhaustion of patent rights to sales of goods
in other member states.
The view which in the long run seems likely to be
adopted is that
the patentee cannot use his rights under
national law to prevent direct sales by his licensee out-
side the territory licensed. If
the patentee needs terri-
torial protection against his licensee, the appropriate
contractual export prohibition would have to be ap-
proved by the Commission under Art. 85 (3). This view
seems more consistent with the Court's decisions.
It is accepted that licensees cannot use national
patent rights to prevent direct sales in their territories
by the patentee (or by other licensees). This is because
the protection of the territorial rights of a licensee
against intra-brand competition can hardly be regarded
as part of the essence of a patent. It would therefore
be unfair if licensees had not corresponding rights to
sell in the territory of the patentee, and it would be
unfair if companies in Member States which are not
importers of technology were not free to export to the
more highly industrialised Member States if companies
in the latter could export into the technology-importing
States.
To allow licensors automatic territorial protection
would involve several inconsistencies. First, this would
treat differently patents and unpatented knowhow (for
which territorial protection can only be by contract,
which would not normally be permissable). This would
not always correspond to a difference of substance.
Secondly, since a patent licence fixing the price at
which the licensee could sell in the licensor's territory
would be illegal ,it would be illogical automatically to
permit the licensee to be prohibited from selling there.
Thirdly, automatic territorial protection could only
apply to simple patent licences and not to cross licences.
But this distinction would be hard to maintain or
apply, especially when grant-back occurs.
If there was automatic territorial protection for
licensors, the Commission could not prevent the Com-
mon Market being divided, because the Commission
cannot determine and has no power to challenge the
validity of national patents. Companies therefore could
use invalid patents to divide up the market.
Even if territorial protection for patent licensors is
not automatic under EEC law, territorial protection
could be obtained by contract where it is genuinely in-
dispensable, for the benefit of licensor or licensee. This
January-February 1976
would require the approval of the Commission under
Art. 85 (3). This should be clearly understood, so that
potential parties to licence agreements are not wrongly
deterred from signing by the fear of competition from
the other parties.
To sum up, I personally consider that all patented
or trade marked goods, or goods made with secret know-
how, sold or to be sold in any part of the EEC with the
consent express or implied of the present or former
owner of the patent or trade mark, may be sold directly
anywhere in the Common Market without territorial
restrictions unless these are embodied in a contract
approved by the Commission. Consent is express when
embodied in a licence. It is implied inter alia where the
user is a company associated with the owner of the
patent, trade mark or knowhow. But it is possible that
the law may not go as far as this.
Clauses in patent and knowhow licences
Fhe use of patent or trade mark rights to exclude
goods produced and sold elsewhere in the EEC may
now be unsuccessful, but it involves no risk of fines.
Illegal clauses in a patent licence, however, such as most
export prohibitions within the EEC, may involve the
parties in fines under Art. 85 EEC Treaty.
Broadly, partial or incomplete licences of a patent,
and licensee restrictions which are within the scope of
the patent, are permissable. However, this is merely a
rule of thumb: a patentee is normally free not to use
his patent, but if he agrees with a competitor never to
use it, that agreement is an illegal restriction on com-
petition even though the restriction is within the scope
of the patent. But in every case all the surrounding
circumstances must be considered.
Most licences (except those given by one competitor
to another) tend to encourage competition. Licences
ALL IRELAND
ALL PURPOSE PROFESSIONAL
PROPERTY VALUATION SERVICE
Osborne King & Megran
Dublin 760251 Cork 21371
Galway 65261
11