Originally from European International Arbitration Review

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I.    Introduction

In its judgment of 7 July 2016, Genentech (C 567/14, EU:C:2016:526), the Court of Justice of the European Union (“the Court of Justice”) dealt with the question of compatibility of an ICC arbitral award with Article 101 TFEU regarding restrictions to competition. 

The case is of significant importance for two reasons. First, from a competition law point of view, it deals with the question of whether it is contrary to Article 101 TFUE to give effect to a licence agreement which requires the licensee to pay royalties for the sole use of the rights attached to the licensed patent, where the use of patents in question would not amount to an infringement of the patents had the parties not entered into the licence agreement. Second, from an international arbitration law point of view, it discusses the relationship between EU law and arbitration as well as, notably the extent to which the courts of the seat of the arbitration should review an award on public policy grounds when seized of an action for annulment. The present case note focuses on the second question.

II.    Factual Background and Arguments of the Parties

The Genentech case concerned an action for annulment of an ICC award relating to the performance of a licence agreement concerning rights derived from patents concluded between Behringwerke AG (later succeeded by Hoechst GmbH and Sanofi-Aventis Deutschland GmbH) as licensor and Genentech Inc as licensee. The licence agreement granted a worldwide non-exclusive licence to Genentech for the use of a human cytomegalovirus enhancer which was the subject of European Patent No EP 0173 177 53, issued in 1992 and revoked in 1999, as well as two other US patents (US 522 and US 140) that were issued in 1998 and 2001 respectively.

Under the licence agreement, governed by German law, Genentech undertook to pay, as consideration for the right to use the enhancer, a one-off fee of 20,000 German marks, a fixed annual research fee of 20,000 German marks and a running royalty equivalent to 0.5% of the net sales of the finished products that Genentech and its affiliates would put on the market. Genentech never paid the running royalty.