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A deal is not always a deal

October 2010 - Corporate & Commercial. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

The Copenhagen Maritime and Commercial Court recently ruled that anti-competitive agreements are void and unenforceable, even if they form part of a licence deal.

Danish businesses are free to decide what to do with their intellectual property rights. Thus, it is perfectly okay to sign a licence deal with another business so long as the deal is not anti-competitive. A Danish jewellery company commissioned a Copenhagen designer to create a collection of glass beads. At the same time, they agreed that she would receive royalties on the company's net sales of all glass beads. That she would only be designing some of them was of no significance. But, later on, a disagreement arose between the parties as to how to calculate the designer's royalties. The company no longer believed that she was entitled to royalties on all glass beads sold. The designer disagreed, citing their licence deal, and demanded a one-off payment of almost EUR 52 million in the absence of full royalties.

Receiving royalties on own design was enough
The Court ruled in favour of the jewellery company. The royalty provision was void because it was intended to restrict competition, and it was not covered by any of the derogations permitted by competition law. Accordingly, the designer was only entitled to royalties on the beads she had designed. The Court also dismissed the designer's claim for compensation, holding that her financial interests had been adequately safeguarded since she was entitled to royalties on the beads she had designed.

Norrbom Vinding notes:

that the fact that the licence deal was between two competitors seems to have weighed heavily with the Court. Therefore, businesses should always carefully consider the competition law implications of collaborating with a rival before setting out on such a venture; and
that the Court applied the principles of the Technology Transfer Block Exemption Regulation in the determination of whether the anti-competitive provisions fell within one of the derogations from the competition law prohibition against anti-competitive agreements. The Block Exemption Regulation is not directly applicable to copyright deals and can therefore by no means always be used to determine if a copyright licence deal gives rise to competition law issues.

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A deal is not always a deal