Court of Justice of the European Union Rules Beneficiary of Patent License Must Pay Royalty Even if it Does Not Infringe the Patented Technology (July 7, 2016) [1]
On July 7, 2016, the Court of Justice of the European Union ruled [3] in Genentech Inc. v. Hoechst GmbH that the beneficiary of a patent license must pay the agreed royalty even if it does not infringe the patented technology. According to the press release [4], Behringwerke, a German company, granted Genentech a “worldwide non-exclusive licence to use a patented human cytomegalovirus enhancer.” Genentech subsequently used the enhancer in a manner that did not infringe the licensed patents and refused to pay royalties on that basis. The Court ruled “that EU competition law does not prohibit the obligation to pay a royalty for the use of technology, even where such use does not give rise to an infringement, or the technology is deemed never to have been protected in the event of retroactive revocation of the patent.” It found “that the royalty is the price to be paid for commercial exploitation of the patented technology with the guarantee that the licensor will not bring legal proceedings for infringement against the licensee,” and highlighted that “[t]he fact that the agreement may be freely terminated by the licensee makes it possible to reject the contention that payment of the royalty undermines competition by restricting the licensee’s freedom of action or by giving rise to market foreclosure effects.”