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France - Payment of Royalties on Patent and Know-How Licenses

In a 1990 decision in the case of Pestre v. Oril SA, which has only just been reported in English, the Paris Court of Appeal was confronted with the question of enforceability of a license agreement which required payment of royalties under a patent and licensed know-how necessary to work the patent for a period of 50 years. The license did not distinguish between royalties payable before and after the patent expired. The evidence showed that the know-how transferred was an important part of the package, this being confirmed by the fact that, even after the patent had expired, no competitors entered the market. The court concluded that under the circumstances the 50-year royalty payment was merely a payment facility for the benefit of the licensee which would otherwise have had to pay more at an earlier date; therefore the contract was valid and remained enforceable. The Court concluded that the agreement was not in conflict with free competition because the product itself (which was an antibiotic) was subject to competition with other similar products in the market.



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© Copyright 1994 Ladas & Parry - Originally published November1994
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