Context: About a year ago, the Bundeskartellamt (Federal Cartel Office (FCO) of Germany) granted what we called an unprecedented cartel clearance to an Automotive Licensing Negotiation Group (ALNG) for standard-essential patents (SEPs) consisting mainly of the three major German automotive groups (June 10, 2024 ip fray article). Pool administrators and SEP holders doubt that an ALNG is needed (March 6, 2025 ip fray article). The fact that the automotive industry is largely Avanci-licensed (April 9, 2025 ip fray article) is the reason why there is hardly any litigation against car makers over their implementation of cellular SEPs.
What’s new: The European Commission (EC) announced today (July 9, 2025 EC press release) that, subject to certain conditions, it does not deem the ALNG to violate the bloc’s competition rules. The standards in question must not be specific to the automotive sector; the ALNG must remain open to other interested automotive companies (car makers as well as suppliers); negotiations with the ALNG must be voluntary for SEP holders; and there are (largely unspecified) restrictions on what information may be shared between the ALNG’s members.
Direct impact: A joint purchasing group operating in a global market needs clearance in all relevant jurisdictions if it does not want to risk being declared illegal in a market that matters. The German comfort letter was not the definitive answer, given that even if all members of a group are from one country, it must still respect all other countries’ competition laws. Today’s DG COMP announcement has more weight, but a single major jurisdiction, such as the United States with its current patentee-friendly government, could still challenge the ALNG’s legality. It is not known whether the ALNG has meanwhile been incorporated. Thus far, whenever the question came up at IP conferences, the answer has been no. On the botton line, there is no immediate impact by today’s announcement on real-world licensing negotiations. Also, one would need to analyze the comfort letter itself (which is not available yet) to understand the the requirements and the scope of the restrictions.
Wider ramifications: A statement by EU competition chief (officially, Executive VIce-President for Clean, Just and Competitive Transition) Teresa Ribera makes it clear that the current (von der Leyen II) Commission views antitrust enforcement as an industrial policy tool, which is a fundamental departure from the past stance (or, at least, the way it was portrayed in official communications). Her quote ends with a non sequitur: it is illogical to argue that “the competitiveness of the EU’s automotive sector” would be increased by a licensing approach that at the same time must be open to all other market participants (and which others could replicate). There is nothing that uniquely affects EU companies with respect to automotive SEP licensing, and no matter where automakers are from, they will need to license SEPs if they want to sell in Europe. Even if European automakers ended up paying lower SEP royalties than others (which is not going to happen), the impact on competitiveness would be negligible given the low cost cellular SEP licensing.
Here is Mrs. Ribera’s statement in full:
“Companies that pursue the EU’s strategic goals should not be held back by uncertainty about the application of our competition rules. Innovation and competitiveness often depend on access to standardised technology, in particular to allow products to interoperate or speak to one another. By issuing this guidance letter, we are providing clarity on the application of competition law to arrangements under which manufacturers group together to jointly negotiate licences of standardised technology relevant to the Internet of Things or electronic communications, such as 4G. These arrangements can reduce transaction costs and help to increase the competitiveness of the EU’s automotive sector.”
The first and the last sentence make it clear that this is a politically-motivated decision. German automakers presumably told the EC about how they are losing market share, which is actually due to a variety of factors other than SEPs, primarily the incredibly high quality (particularly with respect to the digital experience) and relatively lower prices of Chinese electric vehicles. Also, there are markets that are not interested in EVs, such as in Latin America and Africa, where Chinese and other non-European companies have also recently gained ground, benefiting from European car makers’ prioritization of EV sales.
Those who take the Avanci 5G license at the early-bird rate of $29 per car have a licensing cost that is far too low to be one of the top ten challenges facing European car makers as they compete with rivals from China and other countries. It is a safe assumption that in the aggregate of licensing and transaction costs, car makers would end up paying substantially more if they had to license dozens of SEP portfolios individually, in each case with the risk of litigation resulting from disagreements during the negotation process.
It is a false equivalency — or more accurately, a false symmetry — to consider an ALNG the equivalent of, or an appropriate counterweight to, SEP pools. Every patent that is truly essential to a given standard must be licensed to implement the standard, but no two patents can cover the same invention or at least one of them would be invalid (for non-novelty, obviousness or double patenting). Therefore, SEP pools aggregate a combination of non-substitutive licenses, on an optional basis. That is different from how car makers compete with each other.
The EC’s Directorate-General for Competition (DG COMP) apparently adopted the same approach to market definition as the German FCO, looking at SEP licensing as a single market as opposed to recognizing the special characteristics of automotive SEP licensing. While smartphones are typically replaced every few years, cars are in use for approximately 15 years. Car makers charge for cellular connectivity and use it to reduce their own costs (on the service side). Royalty rates between the two industries wouldn’t differ if there was no reason for that. Put simply, there is ovewhelming evidence that automotive SEP licensing is a market of its own. But an overbroad market definition allows the ALNG and the EC to argue that even a group that would clearly aggregate more than 15% of the share of the relevant market is small enough to fall under a de minimis exception unless it engages in activities that might be per se illegal regardless of market share.
Of course, market characteristics don’t matter if the primary objective of competition enforcement, or non-enforcement in this case, is industrial policy, or something that is described as serving an industrial policy purpose regardless of whether it does.
With a view to our ongoing transition to a freemium (free + premium) business model (June 29, 2025 announcement), we would just like to clarify that ALNG topics will be covered outside our paywall. Our articles on certain topics will not be paywalled, at least not for the remainder of 2025. Patent pools are among those topics, and even though licensing negotiation groups are disparate from patent pools, they are portrayed by their proponents as a response to patent pools.