This study adopts a comparative analytical legal methodology. It examines restrictive clauses in industrial licensing and technology transfer agreements in order to determine when such clauses remain within the legitimate scope of intellectual property exploitation and when they become anti-competitive restrictions. The study compares the approaches adopted in European Union law, United States antitrust law, Egyptian competition law, and UAE competition law.

The study relies on primary and secondary legal sources selected according to their relevance to industrial licensing, technology transfer, and competition-law control of restrictive clauses. The primary sources include Article 101 of the Treaty on the Functioning of the European Union, the Technology Transfer Block Exemption Regulation, European Commission guidelines, the Sherman Act, Egyptian Competition Law No. 3 of 2005, UAE Federal Decree-Law No. 36 of 2023 on the Regulation of Competition, selected judicial and administrative decisions, and the TRIPS Agreement.

The secondary sources include academic books, journal articles, official reports, and legal commentaries dealing with intellectual property licensing, technology transfer, restrictive agreements, tying and bundling, and the relationship between intellectual property rights and market competition.

The collected materials were analysed through doctrinal and comparative legal analysis. First, the study identified the legal rules governing restrictive agreements in each legal system. Second, it compared the treatment of selected restrictive clauses, including price fixing, market allocation, tying and bundling, territorial restrictions, and restrictions on technology development. Third, the study assessed these clauses according to three criteria: the necessity of the restriction, its proportionality to the legitimate purpose of the licence, and its actual or potential effect on market competition.

First, the study found that the competitive risk in industrial licensing agreements does not arise from the mere inclusion of contractual restrictions. Rather, it arises when such restrictions perform a market-controlling function that goes beyond the legitimate organisation of the licence. A clause defining the territorial, temporal, technical, or commercial scope of exploitation may be lawful where it serves the purpose of the licence. However, it may become anti-competitive where it is used to weaken the licensee’s independence, exclude alternative technologies, allocate markets, or limit competitive pressure.

Second, the study found that intellectual property exclusivity and competition-law scrutiny are not mutually exclusive. The existence of a patent, trademark, know-how, or other protected right does not, by itself, justify all contractual restraints imposed by the right holder. At the same time, competition law does not prohibit licensing merely because it involves exclusivity or limits on use. The decisive issue is whether the exclusive right is exercised in a manner consistent with innovation and technology transfer, or whether it is used to distort market freedom.

Third, the study found that the legality of licensing restrictions depends on their economic function rather than their formal contractual description. Restrictions that appear similar in wording may produce different legal consequences depending on the structure of the market, the position of the parties, the nature of the licensed technology, and the purpose of the restraint. A territorial restriction, exclusivity clause, quality-control obligation, or technical-use limitation may be justified where it protects the licensed technology or supports investment recovery, but it may become unlawful where it produces exclusionary or collusive effects.

Fourth, the study found that horizontal restrictions between actual or potential competitors represent the most serious threat to competition in the licensing context. Price fixing, market allocation, output limitation, and agreements not to enter each other’s markets directly undermine independent competitive conduct. These restrictions are particularly dangerous because they transform licensing from a mechanism for disseminating technology into a means of coordinating market behaviour between undertakings that should compete with one another.

Fifth, the study found that vertical restrictions in industrial licensing agreements require a more contextual assessment. Such restrictions are not inherently anti-competitive, as they may be necessary to organise production, ensure quality standards, protect know-how, or provide technical support. However, they become problematic when they are used to impose unjustified control over the licensee, tie the licence to additional products or services, foreclose access to competing technologies, or create technical and economic dependency that exceeds the legitimate purpose of the agreement.

Sixth, the study found that the European Union’s Technology Transfer Block Exemption Regulation offers a structured model for assessing licensing restrictions. Its importance lies not merely in granting exemption, but in establishing a method of legal classification based on the nature of the parties, market-share thresholds, and the exclusion of hardcore restrictions from safe harbour protection. This model shows that licensing agreements should not be judged by the presence of restrictions alone, but by whether those restrictions remain compatible with technology transfer, investment incentives, and effective competition.

Seventh, the study found that Egyptian and Emirati competition laws provide a general foundation for controlling restrictive agreements and abuse of dominance, but they lack detailed guidance specifically tailored to industrial licensing and technology transfer agreements. This creates uncertainty in distinguishing between restrictions that are necessary for the exploitation of intellectual property and restrictions that foreclose the market or reinforce technological dependency. The study therefore identifies a regulatory gap in the need for specialised competition-law guidance addressing licensing clauses such as tying, bundling, territorial limits, exclusivity, improvements, post-expiry obligations, and restrictions on dealing with competing technologies.

Overall, the results indicate that the appropriate test for assessing restrictive clauses in industrial licensing agreements should be based on three cumulative elements: the necessity of the restriction for the performance of the licence or the protection of the licensed right, its proportionality to the legitimate economic purpose pursued, and its actual or potential effect on competition. This test allows competition law to intervene where licensing becomes a tool of exclusion or market control, while preserving the legitimate role of licensing in promoting innovation, investment, and technology transfer.

Meaning of an industrial licensing agreement

An industrial licensing agreement is one of the most prominent legal mechanisms relating to intangible rights, as it allows these rights to be exploited economically without resulting in the transfer of their ownership. Through this agreement, the owner of the intellectual property right may allow another party to use or benefit from the right within a specific scope, while retaining its original ownership. This includes various forms of intellectual property rights, such as patents, trademarks, industrial drawings and designs, and other rights of an intangible nature, in return for financial consideration that may take the form of periodic royalties, a lump sum, or any other consideration agreed upon by the parties. (TRIPS Agreement, 1994, art. 28(2); Anderman & Schmidt, 2011; Korah, 2006; WIPO, n.d.).

In this context, an industrial licensing agreement may be viewed as an agreement under which the holder of the intellectual property right, as licensor, grants another person, as licensee, the authority to use or exploit the right in accordance with the terms and limits specified by the agreement, without resulting in the transfer of ownership of the licensed right. Licensing does not mean the assignment or sale of the right; rather, its effect is limited to enabling the licensee to benefit from it for a specific period, and within agreed territorial, technical, or commercial limits, while the legal ownership of the right remains with the licensor (Whish & Bailey, 2024, p. 770).

By referring to what has been written on industrial licensing agreements, it can be observed that most legal and doctrinal writings revolve around one central idea: that licensing is essentially based on permission to use or exploit, not on the transfer of ownership. It creates a contractual relationship between the two parties, under which the licensor undertakes to enable the licensee to benefit from the right subject to the agreement, while the licensee undertakes to use it within the prescribed limits, pay the agreed financial consideration, and comply with the restrictions and conditions contained in the agreement (TRIPS Agreement, 1994, art. 28(2); Whish & Bailey, 2024).

Several doctrinal and institutional definitions have tended to confirm this meaning. Licensing is viewed as an agreement under which the owner of an intellectual property right allows another party to use or exploit that right under certain conditions, while legal protection of the right continues in favor of the original owner. It has also been defined as a contract that authorizes the licensee to exploit the know-how or intellectual right subject to the agreement for a specified period, and under certain terms and restrictions, in return for a financial amount, while the licensor retains ownership of the patent, trademark, or other intellectual property rights throughout the duration of the contractual relationship (Anderman & Schmidt, 2011; Korah, 2006; WIPO, n.d.).

It has also been defined as a legal act under which the holder of an intangible right grants a natural or legal person the right to benefit from that right or from some of its elements, as in the case of patents, trademarks, or know-how, in return for periodic consideration or a lump-sum payment, and for a period agreed upon by the parties. In this sense, licensing does not create for the licensee an ownership right over the intellectual right but rather grants it a specific authority to use or exploit it within an organized contractual framework (Bently et al., 2022; Anderman & Schmidt, 2011).

For this reason, some legal scholarship has drawn an analogy between the licensing agreement and the lease agreement, since the licensee is able to benefit from the licensed right and exploit it commercially or industrially without ownership being transferred to it, just as a lessee benefit from the leased object without becoming its owner. However, this analogy remains relative, because the subject matter of licensing is an intangible right or know-how, not a tangible object, and because the technical and competitive restrictions associated with it may be more complex than those found in traditional lease agreements (Korah, 2006; Whish & Bailey, 2024)

Licensing agreement as a contract of duration

A licensing agreement, like most commercial contracts, is a contract that is not concluded in perpetuity, but is usually limited to a specific period agreed upon by the parties. Time represents an essential element in this contract, because its effect is not limited to an immediate exchange of obligations, but extends to enabling the licensee to use or exploit the intellectual property right throughout the term of the license, and within the limits determined by the contract (Al-Qalyoubi, 2016; European Union, n.d.).

The licensor does not relinquish ownership of the intellectual property right subject to the contract, nor does it transfer it permanently to the licensee. Rather, the licensor grants the licensee temporary authority to benefit from that right, whether it relates to a patent, trademark, know-how, industrial design, or any other intellectual property right. Accordingly, the right remains owned by the licensor throughout the term of the contract, while the licensee’s position is limited to using or exploiting it during the agreed period and in accordance with the contractually specified terms and restrictions (TRIPS Agreement, 1994, art. 28(2); Bently et al., 2022; Whish & Bailey, 2024).

The importance of duration in a licensing agreement appears from the fact that the exploitation of intellectual property rights is not usually achieved at a single moment but rather takes place continuously or successively over a specific period. The licensee needs sufficient time to use the technology, know-how, trademark, or patent in its productive or commercial activity, and the financial consideration itself may be linked to the element of time, such as when it is paid in the form of periodic royalties connected to the volume of production or sales, or to the period of benefit from the licensed right (Al-Qalyoubi, 2016; European Union, n.d.; Bently et al., 2022).

It follows that the obligations of the parties to a licensing agreement continue over a period. The licensor undertakes to enable the licensee to benefit from the licensed right throughout the term of the contract, and may also undertake to provide technical support, training, updates, or guarantee of non-interference. In return, the licensee undertakes to use the right within the agreed limits, pay the financial consideration, maintain the confidentiality of the know-how, and not exceed the scope of the license in terms of duration, territory, or type of exploitation (UNCTAD, 2001; Anderman & Schmidt, 2011).

A licensing agreement does not constitute an assignment of intellectual property rights

A licensing agreement differs from the assignment of an intellectual property right. Assignment results in the transfer of ownership of the right, in whole or in part, to the assignee, either permanently or stably, depending on the nature and terms of the transaction. Licensing, however, does not result in the transfer of ownership; rather, the right remains owned by the licensor, while the licensee’s right is limited to the temporary benefit from, or exploitation of, the right during a specified period, upon the expiry of which its authority to use the right ceases, unless the contract is renewed or the continuation of the license is agreed upon (Whish & Bailey, 2024).

Accordingly, the temporal nature of a licensing agreement is one of its most prominent characteristics, as it confirms that the relationship between the licensor and the licensee is temporary and contractually organized, and is not a transaction transferring ownership of the intellectual rights. Therefore, the expiry of the term of the license leads, in principle, to the cessation of the licensee’s right of exploitation and the obligation to stop using the licensed right, with the licensor regaining full exclusivity in exploiting its right, unless there is a contrary agreement or a new license (Graham, 2008; Al-Qalyoubi, 2016; European Union, n.d.).

Some obligations may also continue after the expiry of the contract if their nature so requires, such as the obligation of confidentiality or non-disclosure of the know-how to which the licensee had access during the performance of the contract, given that know-how and trade secrets lose their economic value once disclosed or used outside the agreed limits. Legal writings concerning the termination of intellectual property licenses reveal that the expiry of the license does not necessarily mean the disappearance of all its contractual effects, as some obligations or effects may remain in force according to their nature and purpose (Kim, 2023; Loren, 2012).

The forms of industrial licensing agreements derive their significance not merely from the difference in the subject matter of the licensed right or the scope of exploitation granted to the licensee, but from the effect that these forms may have on the structure of the market and on the parties’ freedom to compete. The traditional classification of licensing agreements into patent licenses, trademark licenses, know-how licenses, or exclusive, non-exclusive, and sole licenses should not be viewed as a neutral theoretical classification, but rather as an entry point for understanding how licensing may be transformed from a legitimate means of technology transfer and exploitation of intellectual property rights into an instrument of market control or restriction of the licensee’s freedom (Anderman & Schmidt, 2011; Korah, 2006; Whish & Bailey, 2024).

A license to exploit a patent is, in principle, a legitimate legal means of enabling others to benefit from the invention without transferring its ownership. Article 28(2) of the TRIPS Agreement reflects the recognition by the international intellectual property system of this concept, as it establishes the right of the patent owner to assign, transfer, or conclude licensing contracts concerning the patent. However, the significance of this provision is not limited to recognizing the patent owner’s authority to grant licenses; it also confirms that licensing is one of the legitimate means of exploiting the exclusive right, provided that it remains connected to the function of the patent in encouraging innovation and technology transfer (TRIPS Agreement, 1994, art. 28(2); Anderman & Schmidt, 2011).

However, this legitimacy does not mean that the patent owner has unrestricted authority to impose whatever restrictions it wishes on the licensee. The competitive risk arises when licensing does not stop at regulating the use of the patent but extends to imposing restrictions that exceed what is necessary to protect the licensed right. Requiring a geographical, temporal, or technical scope may be justified if it defines the subject matter of the contract and ensures the viability of the investment, but it may turn into an anti-competitive restriction if it is used to isolate markets, prevent the licensee from developing the technology, or restrict its ability to deal with alternative technologies. Accordingly, the criterion of legality does not lie in the existence of the restriction itself, but in the extent of its necessity and proportionality to the legitimate purpose of the license (TRIPS Agreement, 1994, art. 40; European Commission, 2014; DOJ & FTC, 2017; Whish & Bailey, 2024).

The matter becomes more precise in technology transfer agreements when the technology subject to the contract is capable of patent protection, but no patent has been issued for it at the time of contracting. In this case, the licensor may exploit its bargaining position to link the continuation of exploitation or the financial consideration to the future issuance of the patent, thereby imposing additional burdens on the licensee that did not exist at the time the contract was concluded. Therefore, expressly stipulating the effect of the subsequent issuance of the patent is not merely a contractual detail, but a safeguard against disrupting the contractual balance and protecting the licensee from the transformation of subsequent patent protection into a means of compulsory renegotiation or the imposition of new economic dependency (Doran et al., 2025; Martinez & Zuniga, 2017; WIPO, 2005).

A licence to exploit a trademark, particularly in the form of franchising, reveals more clearly the tension between the legitimate protection of commercial interests and the possibility of restricting competition. The licensor has a legitimate interest in protecting the reputation of the mark and ensuring the uniformity of the technical and commercial standards associated with it. Therefore, some restrictions relating to quality, the method of operation, training, and technical supervision appear acceptable in principle. However, these restrictions lose their legitimacy if they exceed the limits of protecting the mark and become a means of controlling the licensee’s independent economic activity, imposing certain prices, preventing it from dealing with competing suppliers, or dividing the market among licensees. In this context, the risk does not lie in the use of the trademark itself, but in employing it as a tool to subject a network of independent undertakings to a unified commercial policy that restricts competition within the market. (Pronuptia de Paris GmbH v. Pronuptia de Paris Irmgard Schillgallis, 1986; Hurley, 1987; Whish & Bailey, 2024).

The Court of Justice of the European Union confirmed this composite nature of the franchise agreement in Pronuptia de Paris GmbH v. Pronuptia de Paris Irmgard Schillgallis, as it is not confined to mere sale or distribution, but is based on the transfer of a trade name, expertise, and methods of operation to a legally independent undertaking. This composite nature reveals that some restrictions may be necessary to protect the identity of the network and the quality of the products or services, but they do not grant the licensor absolute authority to manage the market or impose conditions unrelated to the protection of the mark. Accordingly, the competitive assessment of a franchise agreement must distinguish between functional restrictions necessary for the continuation of the commercial system and exclusionary restrictions that limit the licensee’s freedom or deprive the market of competitive alternatives (Pronuptia de Paris GmbH v. Pronuptia de Paris Irmgard Schillgallis, 1986; Hurley, 1987).

From the perspective of the extent to which the licensee has exclusive exploitation, the distinction between exclusive, non-exclusive, and sole licenses has a direct effect on the assessment of competition. An exclusive license may be justified if the licensee bears substantial investments in introducing the technology, building the market, or developing the product, as it may need a degree of temporary protection to recover its costs. However, exclusivity becomes suspicious if it extends temporally or geographically in a manner that leads to closing the market to other licensees, preventing the dissemination of technology, or consolidating the licensee’s control within a specific scope. Exclusivity is not unlawful, but it becomes so when it is transformed from an incentive for investment into an instrument of exclusion ( European Commission, 2014; European Commission, 2022).

As for a non-exclusive license, although it appears more compatible with competition because it allows multiple licensees and the dissemination of technology, it is not free from competitive risks. The licensor may use the multiplicity of licenses in appearance while imposing uniform conditions on all licensees, which may in practice lead to controlling their commercial conduct, unifying their prices, or restricting their freedom to develop. Accordingly, the multiplicity of licenses alone is not sufficient to establish the soundness of the competitive effect, unless each licensee retains its genuine economic and commercial independence ( European Commission, 2014; DOJ & FTC, 2017).

A sole license stands in a more sensitive area, because it combines preventing the licensor from granting licenses to third parties with the licensor’s retention of the right of exploitation. This situation may achieve a reasonable balance between the licensee’s interest in not being competed with by other licensees and the licensor’s interest in continuing to exploit its rights. However, this balance may be disrupted if the sole licence is used to restrict the entry of other parties into the market without justification, or if the licensor retains for itself the right of exploitation in a manner that allows it to compete with the licensee in a way that empties the licence of its economic content ( European Commission, 2014; Korah, 2006).

Accordingly, the forms of industrial licensing agreements cannot be assessed through their abstract legal description, but rather through their economic function and their actual effect on the market. The same restriction may be lawful if it is necessary to protect the intellectual right, ensure the quality of the technology, or enable the parties to recover their investments, and it may become unlawful if it leads to price fixing, market allocation, prevention of development, obstruction of technology transfer, or the imposition of technical and economic dependency on the licensee. Therefore, competition-law oversight of licensing agreements does not aim to obstruct intellectual property, but rather to prevent its use outside its natural function as an incentive for innovation when it is transformed into a means of control, exclusion, or restriction of market freedom (TRIPS Agreement, 1994, art. 40; European Commission, 2014; DOJ & FTC, 2017; Anderman & Schmidt, 2011).

Intellectual property rights are based, in essence, on granting the right holder an exclusive authority that enables it to exploit the subject matter of protection exclusively and to prevent others from using it without its permission, as in the case of patents, trademarks, copyright, industrial designs, and know-how. However, this legal exclusivity does not necessarily mean the existence of an economic monopoly in a strict sense; the protected product or technology may remain subject to competition from alternative products or technologies within the market. Accordingly, the mere existence of intellectual property rights is not sufficient to establish the existence of a monopolistic position or a practice restrictive of competition (DOJ & FTC, 2017; Anderman & Schmidt, 2011; Whish & Bailey, 2024).

It was once common to view the relationship between intellectual property and competition law as one of tension, because intellectual property grants its holder an exclusive right, while competition law seeks to keep markets open and prevent exclusion, market allocation, and restrictions on market entry. However, this perception no longer reflects the modern trend in legal and economic policy, as the relationship between the two systems has come to be understood as one of complementarity rather than conflict. Intellectual property aims to encourage innovation and investment in knowledge, while competition law intervenes to ensure that this exclusive right does not become a means of market foreclosure, preventing technology transfer, or harming consumers ( European Commission, 2014; Anderman & Schmidt, 2011; Korah, 2006).

The European Commission expressed this approach in its guidelines on the application of Article 101 TFEU to technology transfer agreements, where it stated that intellectual property law and competition law share one fundamental objective, namely promoting consumer welfare and achieving efficiency in the allocation of resources, and that innovation is an essential element in a competitive market economy. This confirms that the protection of intellectual rights is not a purpose isolated from the market, but rather a means of stimulating innovation, provided that its use remains within limits that do not harm the structure of competition ( European Commission, 2014).

This balance appears clearly in the system of block exemption for technology transfer agreements. Regulation No. 772/2004 represented an important stage in the regulation of these agreements and was then replaced by Regulation No. 316/2014 on the application of Article 101(3) TFEU to categories of technology transfer agreements, which established that such agreements may in many cases achieve economic efficiency and support competition, provided that they comply with the prescribed conditions and do not contain serious restrictions. Regulation 2014 expired on 30 April 2026 and was replaced by the new European regulation, Commission Regulation (EU) 2026/877, which entered into force on 1 May 2026 (Commission Regulation (EU) 2026/877, 2026; European Commission, 2026).

This approach is not limited to European law but also finds its echo in some Arab legislation. In Egyptian law, Law No. 3 of 2005 on the Protection of Competition and the Prohibition of Monopolistic Practices adopts the same logic, as it is based on protecting economic activity founded on freedom of competition and prohibits agreements and practices that may restrict or harm competition. Accordingly, the use of intellectual property rights in licensing agreements remains lawful as long as it is connected to its natural function of protecting innovation and technology transfer, but it may be subject to competition-law scrutiny if it is transformed into a means of price fixing, market allocation, preventing dealing with competing technology, or excluding competitors from the market (Egyptian Competition Law No. 3 of 2005; TRIPS Agreement, 1994, art. 40; European Commission, 2026).

In the same direction, UAE Federal Decree-Law No. 36 of 2023 on the Regulation of Competition adopted the idea of prohibiting restrictive agreements and preventing the abuse of a dominant position. This reinforces the view that the legal protection of an exclusive right, whether arising from intellectual property or from a strong economic position, does not grant its holder absolute freedom in the market, but remains restricted by the requirement not to use it in a manner that prevents or limits competition or harms the structure of the market. The UAE Ministry of Economy has included this decree among competition-regulation legislation, alongside its implementing regulation issued by Cabinet Resolution No. 59 of 2026 (Federal Decree-Law No. 36 of 2023; Cabinet Resolution No. 59 of 2026).

The philosophy of these rules, whether in the European Union or in Arab legislation, is based on the premise that licensing and technology transfer agreements should not always be treated as restrictions on competition, because they may contribute to the dissemination of technology, enable the licensee to produce new or improved goods, reduce production costs, and stimulate investment in research and development. Therefore, Article 101(1) TFEU is not applied rigidly to every agreement containing a contractual restriction; rather, the nature of the restriction, its economic function, and its actual or potential effects on the market must be considered ( European Commission, 2014; European Commission, 2026; DOJ & FTC, 2017).

By contrast, the protection of intellectual property does not mean that the right holder has absolute freedom to use its right in a manner that harms competition. If intellectual rights are used as a means of market allocation, price fixing, preventing the licensee from dealing with competing technologies, or foreclosing the market to competitors, competition-law intervention becomes justified. Here, the importance of Article 101 TFEU in European law, and the provisions prohibiting restrictive agreements and the abuse of a dominant or controlling position in Egyptian and Emirati law, becomes apparent (TFEU, art. 101; Egyptian Competition Law No. 3 of 2005; Federal Decree-Law No. 36 of 2023; TRIPS Agreement, 1994, art. 40).

Accordingly, the decisive criterion in determining the relationship between intellectual property and competition law does not lie in the mere existence of an exclusive right, but in the manner in which that right is used and its effect on the market. If the use of the right leads to encouraging innovation, disseminating technology, and achieving economic efficiency, it is consistent with the objectives of competition law. However, if it is transformed into an instrument for excluding competitors, fragmenting markets, or weakening technology transfer, competition rules intervene to correct this deviation (Anderman & Schmidt, 2011; Korah, 2006; Whish & Bailey, 2024).

Relation of agreements restrictive of competition and industrial licensing agreements

Agreements restrictive of competition refer to agreements, conditions, or arrangements that are capable of, or result in, limiting freedom of competition within the market or affecting its natural mechanisms, whether by restricting one party’s freedom of production, pricing, distribution, or choice of suppliers or customers, or by excluding competitors and preventing them from accessing the market. It is not always necessary that the declared purpose of the agreement be to restrict competition; it is sufficient that its potential or actual effects weaken or disrupt competition or harm freedom of dealing within the market (TFEU, art. 101; Sherman Act, 1890, § 1; Whish & Bailey, 2024).

Agreements restrictive of competition are among the most important forms of conduct that competition law intervenes to address, because they may disrupt market mechanisms and limit the freedom of market participants. Comparative legislation has tended to prohibit such agreements or arrangements. This is clearly reflected in Article 101 of the Treaty on the Functioning of the European Union, which prohibits agreements between undertakings, decisions by associations of undertakings, and concerted practices that may affect trade between Member States and that have as their object or effect the prevention, restriction, or distortion of competition within the internal market. The first section of the U.S. Sherman Act adopts a similar approach, as it prohibits every contract, combination, or conspiracy that restrains trade (TFEU, art. 101(1); Sherman Act, 1890, § 1; Hovenkamp, 2020).

The danger of these agreements appears particularly in industrial licensing and technology transfer agreements, because such agreements are not limited to merely enabling the licensee to use an intellectual property right, but may contain detailed conditions regulating the manner of exploiting the technology, the scope of production, distribution areas, sources of supply, pricing policy, rights of development and improvement, and the extent of the licensee’s freedom to deal with competing technologies. Accordingly, some of these conditions may be lawful and justified by the nature of the licence, while others may turn into anti-competitive contractual restrictions if they exceed the limits of technical or economic necessity ( European Commission, 2014; DOJ & FTC, 2017; Anderman & Schmidt, 2011).

In principle, an industrial licensing agreement is based on enabling the holder of an intellectual property right to exploit that right economically, while at the same time enabling the licensee to access the technology or know-how necessary to carry out its productive or commercial activity. Therefore, the existence of certain restrictions in a licensing agreement is not unlawful; defining the scope of the licence in terms of duration, territory, type of exploitation, or technical field may be necessary to determine the subject matter of the contract and regulate the relationship between the parties. The difficulty arises, however, when the restriction is not merely a legitimate regulation of the use of the right, but a means of controlling the market, depriving the licensee of freedom of competition, or preventing third parties from entering the market (Consten and Grundig v. Commission, 1966; European Commission, 2014; DOJ & FTC, 2017; Anderman & Schmidt, 2011).

Examples of agreements or clauses that may raise suspicion of restricting competition in an industrial licensing agreement include requiring the licensee to purchase raw materials, equipment, or spare parts exclusively from the licensor or from suppliers designated by it; preventing the licensee from dealing with competing technologies; imposing certain resale prices for products manufactured under the licence; limiting production quantities without a legitimate technical or economic justification; restricting distribution to certain territories in a manner that leads to market allocation; requiring the licensee to return all improvements and developments it achieves to the licensor without fair consideration; or preventing the licensee from challenging the validity of the patent or intellectual property right subject to the licence (TRIPS Agreement, 1994, art. 40; Commission Regulation (EU) 2026/877, 2026; European Commission, 2014; DOJ & FTC, 2017).

The difficulty in assessing these agreements lies in the fact that industrial licensing agreements combine two overlapping dimensions: first, a legitimate dimension represented by the protection of the intellectual property right and enabling its holder to regulate its exploitation; and second, a competitive dimension represented by the need to prevent the use of that right as a tool for market foreclosure, exclusion of competitors, or consolidation of the licensee’s dependency on the licensor. Accordingly, the criterion of legality does not depend merely on the existence of the restrictive clause, but requires consideration of its nature, purpose, necessity for the performance of the licence, and actual or potential effects on the market ( European Commission, 2014; DOJ & FTC, 2017; Whish & Bailey, 2024).

Anti-competitive agreements in technology transfer contracts:

The forms of these agreements or practices vary according to the nature of the relationship between the parties and their position within the market. These agreements may be horizontal if concluded between undertakings operating at the same economic level and competing with one another, or vertical if concluded between parties operating at different levels of the production or distribution chain, such as the relationship between the licensor and the licensee or between the technology supplier and the technology importer. Some restrictions may also appear in the form of mixed practices or contractual clauses specific to licensing agreements, combining the protection of the intellectual right on the one hand and the impact on competition or technology transfer on the other ( European Commission, 2014; Whish & Bailey, 2024; Hovenkamp, 2020).

Horizontal Anti-competitive agreements

Horizontal agreements refer to agreements concluded between undertakings operating at the same level of the market, that is, between actual or potential competitors. These agreements are among the most serious forms of restrictions on competition, because they do not arise from a relationship of subordination or economic integration between a producer and a distributor, or between a licensor and a licensee, but rather from the coordination of will between competitors who were supposed to compete with one another independently (Whish & Bailey, 2024; Hovenkamp, 2020; Sakkers & Ysewyn, 2008).

The danger of horizontal agreements appears in that they often lead to the replacement of competition with collusion, and to limiting the freedom of the market in determining prices, quantities, areas of dealing, and customers. Therefore, comparative competition laws treat these agreements with considerable strictness, especially if they relate to price fixing, market allocation, restriction of production, or bid rigging (TFEU, art. 101(1); Sherman Act, 1890, § 1; Whish & Bailey, 2024; Hovenkamp, 2020).

The Egyptian legislator expressly prohibited these agreements in Article 6 of Law No. 3 of 2005 on the Protection of Competition and the Prohibition of Monopolistic Practices. This provision prohibits agreements or contracts concluded between competing persons in any relevant market if they are likely to produce any of the following effects: raising, reducing, or fixing the sale or purchase prices of the products subject to dealing; dividing or allocating product markets on the basis of geographical areas, distribution centres, types of customers, goods, seasons, or time periods; coordinating with regard to submitting or refraining from entering tenders, auctions, practices, and other supply offers; or restricting production, distribution, or marketing operations, or limiting the distribution of services in terms of type or volume, or imposing restrictions or conditions on their availability. Accordingly, the Egyptian legislator has treated horizontal agreements between competitors as among the most serious forms of harm to competition, given that they disrupt market mechanisms and replace independent competitive conduct with coordinated collusive conduct (Egyptian Competition Law No. 3 of 2005, art. 6; Whish & Bailey, 2024; Hovenkamp, 2020).

This approach is close to that adopted by Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), which prohibits agreements between undertakings, decisions by associations of undertakings, and concerted practices that may affect trade between Member States and that have as their object or effect the prevention, restriction, or distortion of competition within the internal market. The same provision provides examples of such agreements, including those that directly or indirectly fix purchase or selling prices or other trading conditions, limit production, markets, technical development, or investment, or lead to the sharing of markets or sources of supply (TFEU, art. 101(1); Whish & Bailey, 2024; Jones et al., 2024).

It is clear that both Egyptian law and European law adopt the same approach to horizontal agreements, an approach based on treating coordination between competitors in prices, markets, production, or tenders as a direct interference with the essence of free competition. However, the Egyptian provision is more specific in enumerating the forms of prohibited agreements between competitors, particularly with regard to collusion in tenders and auctions, whereas Article 101(1) TFEU formulates the prohibition in general terms, covering agreements and concerted practices that have as their object or effect the restriction of competition, while providing non-exhaustive examples in this regard (Egyptian Competition Law No. 3 of 2005, art. 6; TFEU, art. 101(1); Whish & Bailey, 2024).

Price-fixing agreements

Price-fixing agreements are among the most serious forms of agreements restrictive of competition. They refer to situations in which the licensor imposes on the licensee a specific pricing policy when selling products manufactured or traded under the license, whether by fixing a specific price, setting a minimum resale price, or requiring the licensee not to sell below a certain price. The danger of this type of restriction lies in the fact that it affects the essence of price competition, as it deprives the licensee of the freedom to determine prices according to market conditions and, at the same time, weakens consumers’ ability to benefit from competition between producers or distributors (TFEU, art. 101(1); Sherman Act, 1890, § 1; Whish & Bailey, 2024; Hovenkamp, 2020).

Within the framework of European law, competition rules regard price restrictions, particularly those occurring between competing parties, as highly serious restrictions. Accordingly, the Technology Transfer Block Exemption Regulation (TTBER) treats certain restrictions, foremost among them price fixing and market allocation between competitors, as hardcore restrictions that remove the agreement from the scope of the exemption available for licensing agreements. This shows that the European Union does not object to industrial licensing in itself, but rather to its use as a means of undermining the licensee’s independence in determining its pricing policy or coordinating prices between undertakings that are supposed to compete with one another (Commission Regulation (EU) 2026/877, 2026; European Commission, 2026; European Commission, 2014).

In the United States, the Supreme Court established an important principle in this context in United States v. Socony-Vacuum Oil Co. (1940), namely that agreements aimed at raising, lowering, fixing, or stabilising prices are considered per se illegal practices, without the need to prove their actual economic effects in each case. The significance of this case lies in the fact that the defendant companies did not merely agree on a direct selling price but entered into arrangements to purchase quantities of surplus gasoline from the market in order to reduce supply and maintain a certain price level. Nevertheless, the Court considered that collective interference with the price mechanism itself constitutes a direct assault on freedom of competition (United States v. Socony-Vacuum Oil Co., 1940; Sherman Act, 1890, § 1; Hovenkamp, 2020).

The effect of this principle extends to industrial licensing and technology transfer agreements. Not every condition related to price is necessarily unlawful, as there may sometimes be financial or regulatory arrangements necessary to determine consideration or royalties, or to ensure the recovery of investment costs. However, a price restriction becomes anti-competitive when it exceeds this framework and turns into a tool for imposing resale prices, preventing the licensee from reducing the price, or coordinating pricing policy between competing parties. Accordingly, the criterion of assessment does not depend on the existence of licensing or intellectual property, but on whether the price condition is necessary to regulate the exploitation of technology or is used as a cover to disrupt price competition within the market (DOJ & FTC, 2017; Hovenkamp, 2020; Areeda & Hovenkamp, 2024).

Market allocation agreements

Market allocation agreements are among the agreements restrictive of competition that may arise in an industrial licensing agreement. They are also known as geographical restrictions. Competition between independent undertakings may be excluded by means other than direct or indirect price fixing. One such means is for companies to agree among themselves to divide certain markets. In practice, three companies in a particular country or region may agree that each of them will enjoy an exclusive right in a specific geographical area, and that each will refrain from encroaching on the areas of the other companies or attracting their customers. A similar method consists of dividing the market according to categories of customers, such as one company supplying products only to commercial customers, another supplying retailers, and a third supplying public institutions (TFEU, art. 101(1); Whish & Bailey, 2024; Hovenkamp, 2020).

From the cartel’s perspective, geographical market-sharing agreements are more effective than price fixing, because they spare the parties to the agreement the costs and difficulties of agreeing on uniform prices. An agreement to divide the market effectively leads to the absence of price competition in the first place. Such agreements are also among the most serious restrictions for consumers, even more than price fixing, because in this case consumers are left with only limited choices. Therefore, in the European Union, these agreements are regarded with considerable importance and seriousness due to their clear restrictive effects on competition ( European Commission, 2023; TFEU, art. 101(1); Whish & Bailey, 2024).

The Peroxygen Products case reveals the seriousness with which the European Commission views market-sharing agreements. The Commission imposed fines on five producers after establishing their participation in a long-term agreement to allocate “home markets” among them across extensive parts of the European Union. This agreement weakened competition between producers and led to price differences between different geographical areas, reflecting the direct effect of these practices in fragmenting the market and harming consumers (Commission Decision 85/74/EEC, Peroxygen Products, 1984; Whish & Bailey, 2024).

Vertical Anti-competitive agreements

Vertical agreements restrictive of competition in industrial licensing agreements are those concluded between parties operating at different levels of the production or distribution chain, such as the relationship between a producer and a distributor, a supplier and a customer, a licensor and a licensee, or a technology supplier and a technology importer. These agreements differ in nature from horizontal agreements, because they are not, in principle, concluded between direct competitors, but between parties that may have an economically complementary relationship ( European Commission, 2022; Whish & Bailey, 2024).

For this reason, vertical agreements are not restrictive of competition in themselves; rather, they may be necessary to achieve economic efficiency, organize the distribution of products, ensure the quality of technology, or protect know-how. However, they may turn into anti-competitive restrictions if they are used to impose unjustified control over the licensee, foreclose the market to competitors, divide markets, or deprive market participants of other alternatives. Vertical agreements appear clearly in industrial licensing and technology transfer agreements, because these agreements establish an extended relationship between the licensor and the licensee, in which the licensor often possesses a degree of technical, economic, or informational superiority. The licensor may therefore exploit this superiority to impose conditions that exceed the requirements of protecting intellectual rights or ensuring the quality of the technology ( European Commission, 2014; DOJ & FTC, 2017; Korah, 2006).

Tying and bundling agreements

Tying and bundling agreements are among the most prominent vertical restrictions that may appear in industrial licensing agreements, where the licensor requires the licensee to obtain an additional product, service, or technology as a condition for granting the original licence. This may take the form of requiring the licensee to purchase raw materials, equipment, software, or spare parts, or to obtain maintenance, training, or technical support services from the licensor itself or from suppliers designated by it, despite the existence of other alternatives available in the market. The danger of these conditions does not lie merely in their connection with the licence, as they may sometimes be justified to ensure the quality of the technology or the safety of its operation, but rather in their use as a means of extending the licensor’s control to other markets or imposing economic and technical dependency on the licensee (Choi, 2004; DOJ & FTC, 2017; Whish & Bailey, 2024).

The forms that tying may take in licensing agreements vary. It may appear as an express contractual clause under which the licensee undertakes to obtain an additional product or service from the licensor, known as contractual tying. It may also occur indirectly through a dominant undertaking’s refusal to supply the original product unless the other party agrees to obtain a product or service linked to it, known as refusal to supply. Tying may also take a technical form when two products or services are integrated in a manner that makes separation between them practically impossible, or an economic form through the sale of a group of products or services in one package, whether in the form of pure bundling, which does not allow each product to be purchased separately, or mixed bundling, which allows the products to be purchased separately while offering a discount when they are purchased together, which known as Technical Tying. These forms acquire particular importance in technology transfer agreements, where the licensor may use the original licence to impose additional obligations relating to maintenance, training, spare parts, or technical or software updates, in a manner that may in some cases exceed what is necessary to protect the licensed technology (Choi, 2004; Nalebuff, 2003; Whish & Bailey, 2024).

The special nature of technology transfer agreements associated with the exploitation of intellectual property rights requires that not every contractual restriction be treated, in itself, as anti-competitive. These agreements do not usually arise in an economic vacuum, but rather in the context of substantial investments and high risks borne by both the licensor and the licensee. The licensor may have spent significant amounts on research and development, technical experiments, and legal protection of the licensed technology, and its need to recover these costs and achieve a fair economic return that preserves its incentive to innovate cannot be ignored. In return, the licensee may also bear substantial investments, such as preparing production lines, training workers, modifying the technical infrastructure of the project, and marketing products based on the licensed technology (DOJ & FTC, 2017; European Commission, 2014; Anderman & Schmidt, 2011).

Accordingly, the existence of some restrictions in a licensing agreement should not automatically lead to considering the agreement contrary to competition rules, where such restrictions are connected to the legitimate purpose of the licence, proportionate to the protection of investment, and enable the parties to recover the costs they have incurred. A temporal, territorial, or technical restriction may, in some cases, be a means of ensuring the viability of the investment, not a tool for market allocation or exclusion of competitors. Therefore, the legal assessment of these restrictions must be carried out through a flexible and realistic approach that takes into account the economic circumstances preceding the conclusion of the contract, the size of the risks borne by the parties, and the nature of the market subject to the agreement ( European Commission, 2014; DOJ & FTC, 2017; Whish & Bailey, 2024).

However, this flexibility does not mean granting the parties absolute freedom to impose any restrictions under the pretext of protecting investment or recovering costs. The dividing line remains between restrictions that are necessary or reasonable to achieve the legitimate economic purpose of the licence and restrictions that exceed that purpose and turn into a means of price fixing, market allocation, preventing the entry of competitors, or obstructing technology transfer. Thus, the required balance lies in not sacrificing incentives for innovation and investment on the one hand, and not allowing intellectual property rights to be exploited as a tool for restricting competition on the other (TRIPS Agreement, 1994, art. 40; European Commission, 2014; DOJ & FTC, 2017; Anderman & Schmidt, 2011).

The importance of this approach is particularly evident in technology transfer agreements, because excessive strictness in assessing contractual restrictions may lead to an opposite result, namely that technology holders refrain from licensing their technology, or that licensees hesitate to invest in exploiting it for fear of being unable to recover what they have spent. Conversely, absolute leniency may lead to the consolidation of technological dependency, market foreclosure, and the deprivation of competitors and consumers of the benefits of innovation. Therefore, the most appropriate criterion is that of proportionality and economic necessity, whereby the restriction is considered in light of its actual function and real effects on the market, not merely through its abstract description (Whish & Bailey, 2024; Korah, 2006; European Commission, 2014).

The Technology Transfer Block Exemption Regulation (TTBER) is a regulatory instrument that aims to determine the cases in which licensing agreements may be exempted from prohibition. Although Article 101(1) TFEU prohibits agreements that restrict competition, any agreement between undertakings that may restrict competition can, in principle, fall within the prohibition of Article 101(1). However, the European Union recognises the special nature of licensing and technology transfer agreements, because they may be necessary for disseminating technology, recovering research and development costs, and encouraging innovation. Therefore, the European Commission adopted this regulation to grant certain agreements a prior block exemption where specific conditions are met. The current regulation is Commission Regulation (EU) 2026/877, which became applicable on 1 May 2026, replacing Regulation No. 316/2014, which expired on 30 April 2026 (TFEU, arts. 101(1), 101(3); Commission Regulation (EU) 2026/877, 2026; European Commission, 2026).

The core idea of this system is to achieve a balance between two opposing interests. On the one hand, intellectual property rights must not be transformed into a means of market allocation, price fixing, or preventing competitors from entering the market. On the other hand, excessive strictness in applying competition law must not deprive the technology holder of exploiting its innovation, recovering research and development costs, or discourage licensees from investing in the licensed technology. Therefore, the regulation grants a form of safe harbour. If the licensing agreement falls within the scope of the regulation, the parties’ market shares do not exceed the prescribed thresholds, and the agreement does not contain serious restrictions on competition, it is presumed to satisfy the conditions of Article 101(3) TFEU and is therefore exempted from the prohibition under Article 101(1) (TFEU, art. 101(3); Commission Regulation (EU) 2026/877, 2026; European Commission, 2026; Whish & Bailey, 2024).

For example, a licensing agreement concluded between a company that owns a patent in a particular industrial technology and another company wishing to use it may, in principle, be lawful if it disseminates the technology and enables the licensee to produce a new or improved product. However, this agreement may fall outside the scope of legality if it contains hardcore restrictions, such as requiring the licensee to apply a fixed selling price, completely preventing it from competing with the licensor, or agreeing not to enter certain markets (Commission Regulation (EU) 2026/877, 2026; European Commission, 2026; Whish & Bailey, 2024).

The matter differs, however, if the contract contains conditions such as requiring the licensee not to sell the products except in a specific country, not to compete with the licensor at all, to comply with a fixed selling price, or if the parties agree not to enter each other’s markets. In such cases, licensing may be transformed from a legitimate means of technology transfer into a tool for restricting competition. Accordingly, the problem does not lie in industrial licensing itself, but in its use as a contractual cover to disrupt price, geographical, or technical competition within the market (Anderman & Kallaugher, 2006; Anderman & Schmidt, 2011; Bellamy & Child, 2018).

For this reason, the Technology Transfer Block Exemption Regulation distinguishes between agreements concluded between competitors and agreements concluded between non-competitors.

Agreements between competitors

These are the more serious agreements, because the parties were, or could have been, competitors in the technology or product market. If, for example, they agree on a cross-licensing arrangement with each party undertaking not to enter the other party’s market, this may be viewed as a market allocation agreement. According to Article 3 of the Technology Transfer Block Exemption Regulation, where the parties to the agreement are competitors, the exemption applies only if their combined market share does not exceed 20% in the relevant market or markets. Where the agreement is concluded between non-competing parties, however, the market-share threshold rises to 30% (Commission Regulation (EU) 2026/877, 2026, art. 3; European Commission, 2026; Drexl et al., 2025).

The parties are considered actual competitors in the product market if, before the conclusion of the agreement, they were active in the same market, whether through products incorporating the licensed technology or through other products that are substitutable for them. The licensee may also be considered a potential competitor if it is likely that, in the absence of the licensing agreement, it would have made the necessary investments to enter the relevant market, particularly in the event of a small but permanent increase in product prices (Commission Regulation (EU) 2026/877, 2026; Anderman & Kallaugher, 2006; Galli et al., 2024).

Agreements between non-competitors

These agreements are often less serious, because the licensor may merely be the owner of the technology, while the licensee is the party that possesses the industrial or commercial capacity to exploit it. Nevertheless, certain restrictions may remain subject to scrutiny if they exceed what is necessary for the exploitation of the technology (Anderman & Schmidt, 2011; Bellamy & Child, 2018; Choi & Heinemann, 2016).

Accordingly, the regulation does not state that all licensing restrictions are lawful, nor does it state that every restriction is unlawful. Rather, it asks whether the restriction is necessary for technology transfer and investment recovery, or whether it aims to disrupt competition and divide the market. Thus, the block exemption regulation is not an open licence for all clauses in technology contracts, but a legal framework that determines when licensing is lawful and beneficial to competition, and when it becomes an instrument for restricting it. In conclusion, it is not sufficient to consider a restriction contained in a licensing agreement anti-competitive merely because it restricts the freedom of one party; rather, it must be examined whether that restriction is necessary and proportionate to the nature of the investment and the risks involved in technology transfer, or whether it exceeds this and becomes a means of disrupting competition, dividing the market, or impeding technology transfer (Commission Regulation (EU) 2026/877, 2026; Anderman & Kallaugher, 2006; Drexl et al., 2025; Whish & Bailey, 2024).

• 1- Legislation, particularly Egyptian legislation, should establish a precise framework that clearly distinguishes between restrictions necessary to protect the intellectual right and restrictions that foreclose the market and impede technology transfer.

• 2- The assessment of restrictions should be determined by a strict functional economic criterion: necessity, proportionality, and the actual effect on competition, rather than the legal form of the clause.

• 3- Arab legislation should benefit from the European experience in regulating technology transfer agreements, not by literally transplanting the block exemption system, but by adopting its underlying philosophy, which is based on distinguishing between acceptable restrictions that may achieve economic efficiency and disseminate technology, and hardcore restrictions that affect the essence of competition, such as price-fixing agreements and market allocation between competitors.

• 4- Competition authorities in the countries under study should issue independent regulatory guidelines for industrial licensing agreements, whether by competition authorities or by the bodies competent in intellectual property, including practical examples of lawful and unlawful restrictions.

• 5- Technology transfer agreements should include express provisions concerning the effect of the subsequent issuance of a patent, the expiry of the protection period, or the emergence of improvements and developments to the technology, so that these events do not become tools for compulsory renegotiation, the imposition of additional consideration, or the restriction of the licensee’s freedom of independent development.

• 6- Arab legislation, particularly in Egypt and the UAE, should strengthen institutional integration between competition authorities and bodies concerned with intellectual property and technology transfer, because complete separation between these bodies may lead either to formal protection of the intellectual right without awareness of its competitive effect, or to strict competition-law intervention without sufficient understanding of the nature of technological investment.

• 7- The objective of oversight of industrial licensing agreements should be to protect the balance between encouraging innovation and technology transfer on the one hand and ensuring freedom of competition and preventing technical and economic dependency on the other.