From Regulation to Order: the UK's Technology Transfer Block Exemption

In brief:

The assimilated EU Technology Transfer Block Exemption Regulation (TTBER), which offers a competition law "safe harbour" for certain intellectual property (IP) licensing agreements, is expiring in April 2026.
Following public consultation earlier this year, the UK Competition and Markets Authority (CMA) made its recommendation to the Secretary of State that the TTBER should be replaced with a UK-specific equivalent Technology Transfer Block Exemption Order (TTBEO) to take effect on 30 April 2026.
The TTBEO largely mirrors the key provisions of the TTBER but with some key amendments that will be important for UK and cross-border businesses to understand, including removing "utility models" from the scope of protection, and introducing definitions of "active sales" and "passive sales" in line with the UK Vertical Agreements Block Exemption Order (VABEO).
While the replacement of TTBER with the broadly aligned TTBEO should provide businesses with a welcome degree of consistency and continuity, the CMA's recommendation is a timely reminder that it is important to ensure that existing or impending agreements remain compliant with the block exemption. If you have any questions about whether or how these proposed changes may impact your agreements, please get in touch with our team.

Block exemptions and the role of the TTBER as a "safe harbour"

The TTBER is an EU regulation which was retained as assimilated law post-Brexit and therefore continues to apply to UK businesses, though it is due to expire in April 2026. While section 9 of the Competition Act 1998 (CA) offers an individual exemption for agreements that improve production/distribution or promote technical or economic progress, block exemptions, such as the TTBER and the UK block exemption for vertical agreements known as VABEO, provide safe harbours for qualifying agreements from prohibitions under competition law. The goal is to provide legal certainty for businesses by avoiding the need to scrutinise individual agreements under the individual exemption which are unlikely to be harmful to competition.

In the UK, the TTBER provides an automatic exemption for certain agreements known as "technology transfer agreements" (TTAs) from Chapter I of the CA, which prohibits agreements between undertakings that, by their object or effect, restrict or distort competition within the UK and which may affect trade in the UK.

A TTA is a form of licence agreement whereby the owner of certain IP rights (such as patents and copyright) grants a third party a licence to use those rights in the production of goods or provision of services. Such rights can be considered at odds with competition law, in light of the effective monopoly that is granted to the holder, but this kind of agreement can generate economic efficiencies, foster innovation and facilitate the entry of technology into new markets. For example, a business which is granted a licence may use the IP rights to improve their product and also improve the IP right itself.

The TTBER is intended to acknowledge these potential benefits and pro-competitive effects by exempting TTAs from the Chapter I prohibition, if they meet certain requirements. These requirements ensure that TTAs containing clauses which could facilitate anti-competitive conduct, such as collusion or restricting entry or expansion on the relevant markets, are subject to further scrutiny under competition law.

TTBEO maintains continuity with targeted amendments

Following a month-long consultation process earlier this year, the CMA has recommended that, upon its expiry in April 2026, the TTBER be replaced with a new UK-specific regime, which will broadly exempt the same categories of TTAs, with key variations which are set out in further detail below. If adopted, the proposed TTBEO will take effect on 30 April 2026 for a duration of 12 years, with a one-year transitional period for businesses to ensure their agreements remain compliant. Significantly, there are no changes proposed to the scope of hardcore or excluded restrictions.

[table]

	TTBER – existing regime	TTBEO – recommended changes
Scope of qualifying "technology rights"	The qualifying rights include software copyright, design rights, utility models, patents and know-how.	Exclusion of "utility models" from the scope of protection of the exemption on the basis that they are not protected under UK intellectual property law. A utility model is an exclusive intellectual property right that protects an invention, similar to a patent but with less stringent requirements and a shorter duration. Often called a "petty patent" or "innovation patent," it is intended for incremental, minor inventions, particularly for mechanical and electrical devices. Introduction of "copyright in a database" and "database right" within the scope of "technology rights" with consequential amendments to the definition of "intellectual property rights" given the importance of data to the modern economy. If adopted, this means that database licences will be covered.
Market share thresholds	If the parties to the TTA are competitors, then their combined market share must not exceed 20%. If the parties are not competitors, then neither must have a market share exceeding 30%.	Maintain existing market share thresholds but introduction of an alternative "three or more competing technologies" test to assess whether there are an appropriate number of substitutable (i.e., competing) technologies in the market, in addition to those owned by the parties. If adopted, this means that if the parties' market shares are below the thresholds, or there are three or more competing technologies in the market, the TTA will be exempt (provided all other conditions are met).
Calculation of market shares	Market shares calculated using data from the preceding calendar year.	Maintain the existing basis of calculation of market shares and add provision to the effect that, if the preceding calendar year is not representative of the parties' position in the relevant market(s), market share is to be calculated as an average of the parties' market shares for the three preceding calendar years.
"Footprint" approach to market shares	Market shares of the licensor to be calculated on the basis of the presence of the licensed technology rights on the relevant product and geographic markets where the products are sold to combine sales data of the licensor and its licensees.	Extend the "footprint" approach to apply to both parties, not just the licensor.
Grace period for exceeding market share thresholds	There is currently a two-year grace period if the parties' market shares subsequently exceed the relevant thresholds before the TTA loses the benefit of the exemption.	Extend the grace period to three-years in line with proposals for the new TTBER in the EU, to ensure alignment between the regimes and provide greater legal certainty for businesses.
Definitions of "active" and "passive" sales	Not included.	Introduce definitions of "active sales" and "passive sales" consistent with those used in VABEO to provide clarity and consistency across the regimes. These are as follows: "active sales" means - actively targeting customers by for instance calls, e-mails, letters, visits or other direct means of communication, targeted advertising and promotion, by means of print or digital media, offline or online, including online media, digital comparison tools or advertising on search engines targeting customers in specific geographical areas or customer groups, advertisement or promotion that is only attractive for the buyer if it (in addition to reaching other customers) reaches a specific group of customers or customers in a specific geographical area (and is considered active selling to that customer group or customers in that geographical area), offering on a website language options different to the ones commonly used in the geographical area in which the distributor is established, or using a domain name corresponding to a geographical area other than the one in which the distributor is established. "passive sales" means - sales in response to unsolicited requests from individual customers, including delivery of goods or services to such customers without the sale having been initiated through advertising actively targeting the particular customer group or geographical area, general advertising or promotion that reaches customers in other distributors' geographical areas or customer groups (whether exclusive or not) but which is a reasonable way to reach customers not in those other distributors' geographical areas or customer groups (whether exclusive or not), for instance to reach customers in a supplier's own geographical area, or participating in a public procurement exercise undertaken in accordance with UK public procurement rules.

Please refer to the CMA's proposal for further detail on the rules regarding thresholds and the restrictions.

CMA to gain additional administrative powers

In addition to the above-mentioned changes to the scope of the exemption, under the proposed TTBEO, the CMA will have the power to cancel the block exemption in relation to any agreement it considers is not exempt, provided that it gives notice in writing of its proposal and setting out its reasons.

Further, the CMA has recommended that the TTBEO permits the CMA to request that parties provide it with information in relation to their TTAs within 10 working days. Failure to do so without a reasonable excuse potentially resulting in a withdrawal of the protection afforded to the relevant agreement.

Largely business as usual

The proposed TTBEO remains fundamentally the same as the TTBER and benefits from broad alignment with the draft revised TTBER, which will be welcome news for businesses operating in both jurisdictions.

The express inclusion of "copyright in a database" and "database rights" within the scope of technology rights afforded protection under the exemption, which diverges from the EU approach, recognises the increased significance of these rights in the UK. Similarly, the proposed alternative "three or more competing technologies" test may help to address some of the practical challenges in calculating market shares in dynamic technology markets.

Businesses that currently rely on the TTBER will need to ensure their agreements remain compliant or are amended as necessary. We encourage you to get in touch with us should you need any assistance with this process. Similarly, our team can assist with drafting and minimising compliance risks with new agreements.