The UK’s Competition and Markets Authority (CMA) has set in motion a significant reform of the country’s technology licensing rules, recommending that the government abandon the assimilated Technology Transfer Block Exemption Regulation (TTBER) and introduce a new block exemption regime tailored to the UK economy. The TTBER, a carry-over from European Union law, expires in April 2026. The CMA argues that a bespoke framework is needed to address modern licensing practices in software, databases, and other technology rights, while ensuring competition law remains aligned with the UK’s innovation-led economic strategy.
The proposal, presented to the Secretary of State for Business and Trade, calls for a fresh Technology Transfer Block Exemption Order (TTBEO) to last for 12 years, with a one-year transitional period. Businesses would be given clarity on which licensing agreements are automatically exempt from competition law scrutiny and which clauses would still fall foul of enforcement. In essence, the CMA is seeking to balance the need for legal certainty with the dynamic realities of technology development and the risks of anti-competitive behaviour.
Why is the CMA moving to replace the current TTBER instead of extending it further?
The assimilated TTBER has long provided a safe harbour for companies licensing technology in the UK. Originally designed by the European Commission, it was imported into UK law after Brexit under retained EU legislation. The CMA acknowledges that the TTBER has worked well in many respects by reducing legal uncertainty, encouraging licensing, and supporting collaboration between firms. However, the regulator warns that the framework is no longer adequate for today’s market conditions, particularly in sectors where data rights and software dominate.
The CMA’s review highlighted three main problems. First, certain rights covered by the TTBER, such as utility models, have little or no relevance in UK law, making their inclusion redundant. Second, the regulation does not explicitly address modern forms of intellectual property like database rights, which are critical in data-driven industries. Third, reliance on rigid market share thresholds in technology markets has created compliance challenges and, in some cases, discouraged pro-competitive licensing of new technologies.
By proposing a new block exemption, the CMA aims to build on what works, remove what is obsolete, and introduce rules that reflect the realities of contemporary licensing. The new framework would be closely aligned with the UK’s competition law priorities, rather than mirroring EU rules by default.
How would the proposed UK block exemption reshape the scope of technology licensing?
A central reform in the CMA’s proposal is the removal of utility models from the definition of protected rights, a move that reflects their limited relevance in UK law and the regulator’s focus on streamlining the regime for rights that are actively used in technology licensing. Utility models, often described as “petty patents,” are not generally recognised in the UK, and the CMA sees no rationale for their continued inclusion. In contrast, the regulator wants to expand the definition of technology rights by explicitly including copyright in a database and database rights. This reflects the growing importance of databases as commercial assets in industries ranging from healthcare and pharmaceuticals to artificial intelligence and financial services.
The CMA also recommends retaining core categories such as patents, software copyrights, design rights, and know-how, meaning that the bulk of technology licensing activity will continue to fall within the exemption. However, the recognition of database rights marks a significant modernisation, acknowledging the increasing commercialisation of data as a standalone input in competition analysis.
Why is the market share test being replaced and what does the new three-technologies test mean?
The TTBER currently allows agreements to qualify for exemption if the parties’ combined market share does not exceed certain thresholds in both product and technology markets. While workable in consumer goods sectors, this approach has been harder to apply in the context of fast-moving technologies. Calculating a market share in an emerging field where products are still nascent often proves impractical.
The CMA therefore proposes a dual route. Agreements would still qualify if product market shares remain under the set thresholds. However, in place of the technology market share test, the CMA would allow an alternative “three-technologies test.” This means that if at least three substitutable and independently controlled technologies exist on the market beyond those held by the parties, then the licensing agreement could still fall under the exemption.
The regulator argues that this reform provides a more practical safeguard against monopoly control of critical technologies while encouraging licensing in areas where market shares are not easy to measure. Legal experts note that while this test introduces welcome flexibility, it may also create grey areas. Determining whether three truly independent and substitutable technologies exist in fields like artificial intelligence, semiconductors, or biotechnology may prove highly contentious.
What does the CMA recommend on hardcore restrictions and sales clauses?
The CMA proposes maintaining the TTBER’s core list of prohibited restrictions. This means that price fixing, output limitations, and market allocation will continue to be treated as hardcore restrictions and excluded from safe harbour protection. The regulator also wants to import definitions of “active” and “passive” sales from the UK’s Vertical Agreements Block Exemption Order. This would harmonise the treatment of vertical distribution and technology licensing, making the law more consistent and easier for businesses to navigate.
Grant-back obligations, no-challenge clauses, and termination-on-challenge provisions will remain excluded or tightly controlled under the new framework. The CMA’s reasoning is that such clauses can have significant deterrent effects on innovation and competition if misused, particularly in markets where licensing is the primary channel for technology dissemination.
How will transitional arrangements and CMA oversight function under the new framework?
The CMA recommends that the new TTBEO last for 12 years from April 2026, expiring in April 2038. To smooth the shift, it proposes a one-year transitional period. Agreements that were compliant under the old TTBER would temporarily remain exempt, even if they fail to meet the new tests, giving businesses time to adapt contracts.
Importantly, the CMA would retain the power to withdraw block exemption protection in specific cases where an agreement is later found to restrict competition. This cancellation power, combined with information-gathering rights, underscores that the exemption is not a blanket shield but a structured safe harbour subject to oversight. Businesses will need to be prepared to justify their agreements if called upon.
How could the CMA’s new UK block exemption reshape compliance risks, licensing strategies, and investor confidence after the end of TTBER?
For businesses, the biggest challenge is the uncertainty created by the new three-technologies test. While it offers a more practical path than market share calculations, it raises interpretive questions about what constitutes a “substitutable” technology. Startups developing breakthrough technologies may worry that their agreements could fall into legal limbo if substitutes are hard to identify.
Investors, especially in high-tech sectors such as biotechnology, AI, and data analytics, will closely monitor whether the UK regime diverges significantly from the European Union’s revised TTBER. Divergence could complicate cross-border licensing and increase transaction costs for multinational businesses. At the same time, if the UK’s rules prove clearer and more adaptable, it could give the country an edge as a hub for tech investment.
Sentiment among legal practitioners has been cautiously positive. Many welcome the inclusion of database rights and the transitional period. However, some argue that the proposed flexibility could create more compliance uncertainty, leading to cautious behaviour by firms and possibly dampening licensing activity in the short term.
How will replacing TTBER with a new UK block exemption influence innovation strategy, data-driven industries, and the country’s wider competition policy?
The CMA’s recommendation fits into a broader narrative of post-Brexit regulatory independence. By tailoring competition rules to the UK’s economy, policymakers hope to build a reputation for pragmatic regulation that encourages innovation while deterring anti-competitive behaviour. Technology licensing is central to this agenda. It allows small and medium-sized firms to access key inputs without reinventing the wheel, accelerates the spread of new technologies, and supports investment in R&D.
The UK’s approach to block exemptions will also be closely watched internationally. If the new order proves successful, it could become a model for other jurisdictions grappling with similar questions of how to regulate data, IP rights, and collaborative licensing in the digital economy. Conversely, if the framework creates uncertainty or is seen as too restrictive, it could harm the UK’s competitiveness as an innovation hub.
What should UK businesses and investors expect from the CMA’s proposed block exemption replacing TTBER in 2026?
The CMA has tried to strike a careful balance between preserving the benefits of a block exemption regime and addressing the realities of modern licensing. The inclusion of database rights is a smart and necessary update. The three-technologies test is innovative but will need careful guidance from the CMA to avoid confusion. The one-year transition period is welcome, but businesses should not underestimate the work involved in reviewing existing contracts and ensuring compliance by 2027.
Institutional sentiment suggests that larger corporates with established compliance teams will adapt more smoothly, while smaller tech firms may face higher legal costs to navigate the changes. Investors are likely to view the reforms as broadly supportive of innovation, though much depends on how the government and Parliament translate the CMA’s recommendations into final law.
The broader message is clear: the UK is carving its own path in competition regulation. With the TTBER due to expire in 2026, the next 18 months will be critical for businesses, investors, and policymakers to shape a framework that keeps the UK competitive in a global innovation race.
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