Bayer AG and Maschinenfabrik Hennecke GmbH v Heinz Süllhöfer (65/86)

Contents

Judgment of the Court27 September 1988^noteIn Case 65/86REFERENCE to the Court under Article 177 of the EEC Treaty by the Bundesgerichtshof (Federal Court of Justice) for a preliminary ruling in the proceedings pending before that court betweenBayer AG, Leverkusen,Maschinenfabrik Hennecke GmbH, St. Augustin-Birlinghofen,andHeinz Süllhöfer, 58 Niederrheinstraße, Düsseldorf, a trader,THE COURTcomposed of: Lord Mackenzie Stuart, President, G. Bosco, J. C. Moitinho de Almeida and G. C. Rodriguez Iglesias, Presidents of Chambers, T. Koopmans, U. Everling, C. N. Kakouris, R. Joliét and F. A. Schockweiler, Judges,Advocate General: M. DarmonRegistrar: D. Louterman, Administratorafter considering the observations submitted on behalf of— Bayer AG, Leverkusen, and Maschinenfabrik Hennecke GmbH, St. Augustin-Birlinghoven, appellants in the main proceeding, by Dietrich Hoffmann, Rechtsanwalt, Düsseldorf,— Heinz Süllhöfer, Düsseldorf, respondent in the main proceedings, by Oliver Brändel, Rechtsanwalt, Karlsruhe,— the Commission of the European Communities, by Norbert Koch, acting as Agent,having regard to the Report for the Hearing and further to the hearing on 7 May 1987,after hearing the Opinion of the Advocate General delivered at the sitting on 7 July 1987,gives the following

Judgment

1By an order of 4 February 1986, which was received at the Court on 6 March 1986, the Bundesgerichtshof referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of Article 30 et seq. and Article 85 of the EEC Treaty with a view to determining the compatibility with those provisions of a contractual stipulation in a licensing agreement by which the licensee undertakes not to challenge the validity of certain technical industrial property rights granted to the licensor in several Member States of the European Community which have the same content as those in respect of which he has been granted licences.

2The question was raised in proceedings between Mr Süllhöfer (hereinafter referred to as ‘Süllhöfer’), a trader in Düsseldorf, and Bayer AG and Maschinenfabrik Hennecke GmbH, the latter company being a wholly owned subsidiary of the former (hereinafter referred to as ‘Bayer’ and ‘Hennecke’), whose registered offices are in the Federal Republic of Germany. The proceedings concern the validity of the abovementioned agreement and the question whether those companies must give a statement of account and pay damages to Süllhöfer.

3On 20 December 1950, Bayer obtained a patent (the ‘Moroni’ patent) relating to processes and devices for the continuous manufacture of panels, lengths or sheeting from foamable substances, especially polyurethane-based substances. On 22 July 1965, Süllhöfer applied for a utility model and a patent for a dual conveyor-belt system for the manufacture of rigid polyurethane-foam-based panels. The utility model was registered on 21 July 1966. The patent application was published on 17 August 1967, from which date the period within which an opposition might be lodged started to run.

4Legal proceedings between Süllhöfer and Hennecke ensued from 1967 to early 1968. Süllhöfer, relying on the abovementioned utility model, had issued warnings to both Hennecke and its customers. Hennecke, for its part, sought a declaration that the utility model was invalid and an order that Süllhöfer should pay compensation for unlawfully and wrongfully issuing warnings.

5Meanwhile, Bayer and Hennecke, at that time two independent undertakings, had lodged oppositions to the abovementioned patent application made by Süllhöfer.

6The agreement in question was concluded on 9 April 1968 to bring the above proceedings to an end. By that agreement, Süllhöfer granted Hennecke and Bayer a nonexclusive free licence to use the aforementioned utility model and patent, together with the right for both companies to grant sub-licences. Süllhöfer also undertook to grant Hennecke and Bayer a licence subject to payment of royalties to use the corresponding industrial property rights he held in other Member States, together with the right for both companies to grant sub-licences.

7Bayer, for its part, granted Süllhöfer a nonexclusive and nontransferable licence subject to payment of royalties for the manufacture of foam panels under a German patent it held, waived any claims against Süllhöfer in respect of infringements of that patent and undertook, together with Hennecke, not to challenge the validity of the patent Süllhöfer had applied for relating to the dual conveyor-belt system referred to above. The parties to the agreement also undertook to withdraw the abovementioned legal proceedings.

8Some years later, further disputes arose between the parties, leading Süllhöfer to terminate the agreement of 9 April 1968. On his application, the Landgericht (Regional Court) Düsseldorf declared the agreement invalid on the ground that it was based on a wilful deception. On appeal, the Oberlandesgericht (Higher Regional Court) Düsseldorf considered that the no-challenge clause was incompatible with Article 85 (1) of the EEC Treaty, with the result that the whole agreement was invalid under Paragraph 139 of the German Civil Code, which provides that ‘if part of a legal transaction is void, the whole legal transaction is void unless it may be assumed that it would have been entered into even without the void part'.

9The Bundesgerichtshof considered that the Court has not yet ruled on whether a no-challenge clause by which a licensee undertakes not to challenge the validity of certain technical industrial property rights held by the licensor in several Member States of the Community which have the same content as those in respect of which he has been granted licences is compatible with the EEC Treaty. It therefore stayed the proceedings and referred the following question to the Court for a preliminary ruling:’Is it compatible with the Treaty establishing the European Economic Community (Article 30 et seq. and Article 85 of the EEC Treaty) to include in a licensing agreement a contractual stipulation by which the licensee undertakes not to challenge the validity of technical industrial property rights granted to the licensor in several Member States of the European Economic Community which all have the same content and in respect of which licences have been granted?'

10Reference is made to the Report for the Hearing for a fuller account of the facts of the case and the observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

Compatibility of the no-challenge clause with Article 30 et seq. of the EEC Treaty

11With regard to the question whether a contractual undertaking not to challenge certain industrial property rights is compatible with Article 30 et seq. of the EEC Treaty, it must be borne in mind that those articles form part of the rules intended to ensure the free movement of goods and to eliminate for that purpose any measures of Member States likely to form, in any way, a barrier thereto. Agreements between undertakings, on the other hand, are governed by the rules on competition in Article 85 et seq. of the Treaty, whose aim is to maintain effective competition within the common market.

12The national court's question refers to the inclusion of a no-challenge clause in a patent licensing agreement. It does not, therefore, involve the application of national legislation relating to the exercise of an industrial property right likely to form a barrier to the free movement of goods between Member States, but the validity of an agreement between undertakings which might have as its object or effect the restriction or distortion of competition.

13The problem of interpretation of Community law raised by that question therefore involves Article 85, and not Article 30 et seq. of the EEC Treaty.

Compatibility of the no-challenge clause with Article 85 (1) of the EEC Treaty

14In the Commission's view, an undertaking not to challenge an industrial property right included in a licensing agreement should, in principle, be considered to be a restriction of competition. Such a clause is, however, compatible with Article 85 (1) of the EEC Treaty when it is included in an agreement whose purpose is to put an end to proceedings pending before a court, provided that the existence of the industrial property right which is the subject-matter of the dispute is genuinely in doubt, that the agreement includes no other clauses restricting competition, and that the no-challenge clause relates to the right in issue.

15The point of view put forward by the Commission cannot be accepted. In its prohibition of certain ‘agreements’ between undertakings, Article 85 (1) makes no distinction between agreements whose purpose is to put an end to litigation and those concluded with other aims in mind. It should also be noted that this assessment of such a settlement is without prejudice to the question whether, and to what extent, a judicial settlement reached before a national court which constitutes a judicial act may be invalid for breach of Community competition rules.

16A no-challenge clause included in a patent licensing agreement may, in the light of the legal and economic context, restrict competition within the meaning of Article 85 (1) of the EEC Treaty.

17In regard to that context, it should be pointed out that there is no restriction on competition when the licence granted is a free licence inasmuch as, in those circumstances, the licensee does not suffer from the competitive disadvantage involved in the payment of royalties.

18Nor does a no-challenge clause contained in a licence granted subject to payment of royalties restrict competition when the licence relates to a technically outdated process which the licensee undertaking did not use.

19It should, however, be pointed out that, if the national court were to consider that the no-challenge clause contained in the licence granted subject to payment of royalties does involve a limitation of the licensee's freedom of action, it would still have to verify whether, given the positions held by the undertakings concerned on the market for the products in question, the clause is of such a nature as to restrict competition to an appreciable extent.

20It should finally be pointed out that, if that criterion is met, a reciprocal licensing agreement relating to industrial property rights protected in several Member States of the Community is capable of affecting trade between Member States, even if the parties to the agreement are established in the same Member State.

21It follows from the foregoing considerations that the answer to the national court's question must be that a no-challenge clause in a patent licensing agreement may, depending on the legal and economic context, restrict competition within the meaning of Article 85 (1) of the EEC Treaty. Such a clause does not, however, restrict competition when the agreement in which it is contained granted a free licence and the licensee does not, therefore, suffer the competitive disadvantage involved in the payment of royalties or when the licence was granted subject to payment of royalties but relates to a technically outdated process which the undertaking accepting the no-challenge agreement did not use.

Costs

22The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,THE COURT,in answer to the question referred to it by the Bundesgerichtshof by order of 4 February 1986, hereby rules: A no-challenge clause in a patent licensing agreement may, depending on the legal and economic context, restrict competition within the meaning of Article 85 (1) of the EEC Treaty. Such a clause does not, however, restrict competition when the agreement in which it is contained granted a free licence and the licensee does not, therefore, suffer the competitive disadvantage involved in the payment of royalties or when the licence was granted subject to payment of royalties but relates to a technically outdated process which the undertaking accepting the no-challenge agreement did not use.

Delivered in open court in Luxembourg on 27 September 1988.