Is the No-Challenge Clause in Your License Agreement Enforceable in the European Union

The no-challenge clause in a license agreement is a common provision that prohibits the licensee from challenging the validity of the licensed patent or intellectual property. While this clause may seem like a beneficial safeguard for the licensor, its enforceability in the European Union (EU) has been called into question.

The legality of the no-challenge clause in the EU is primarily determined by EU competition law and national patent laws. In particular, the EU has strict laws regarding the abuse of a dominant market position, which can include attempts to prevent licensees from challenging the validity of a licensed patent.

In 2015, the European Commission ruled that a no-challenge clause in a license agreement between Motorola and Apple violated EU competition law. The Commission determined that Motorola, who held a dominant market position in the mobile phone industry, was using the clause to unfairly limit the ability of licensees to challenge the validity of its patents.

This ruling set a precedent for the enforceability of no-challenge clauses in the EU and highlighted the importance of fair competition in the licensing process. However, it is important to note that not all no-challenge clauses will be considered illegal under EU competition law. The clause must be evaluated on a case-by-case basis to determine if it unfairly restricts competition.

In addition to competition law, national patent laws may also impact the enforceability of no-challenge clauses. For example, in Germany, a no-challenge clause is only enforceable if it is expressly agreed upon by both parties and is deemed reasonable in light of the specific circumstances of the license agreement.

Overall, the enforceability of a no-challenge clause in a license agreement in the EU is complex and heavily dependent on the specific circumstances of the agreement. It is important for both licensor and licensee to ensure that their agreement complies with EU competition law and national patent laws to avoid potential legal issues.