Context: Last week, the European Commission (EC) launched a public consultation on its current antitrust rules for vertical agreements in the automotive sector (February 28, 2025 EC press release). The consultation suggests that it may introduce a framework for Licensing Negotiation Groups and poses a series of questions around whether they have positive or negative effects on competition, as well as whether the existing framework is fit for purpose. The EC’s move comes after the Bundeskartellamt (Germany’s Federal Cartel Office (FCO)) announced last June that it would “tolerate” the formation of an Automotive LNG for standard-essential patents (SEPs) (June 10, 2024 ip fray article) – while the formation of the proposed LNG wouldn’t be considered per se illegal, if SEP holders decline to negotiate with an automotive LNG, no information exchange will ever take place, the automotive LNG will remain an empty shell, and SEP enforcement will not be impaired.
What’s new: At a conference on SEPs in the Polish capital of Warsaw today, panellists clashed over the existence and practicality of LNGs – particularly for patent pools and licensors. While Peter Chrocziel at Chrocziel Legal and Felix Engelsing, Chairman of the 4th Decision Division at the FCO, emphasized that there is a place for LNGs in reaching FRAND SEP licensing agreements, Uta Schneider, Vice President of Global Government Affairs at Avanci and Patrick Hofkens, Head of IPR Policy at Ericsson agreed that there is no certainty that they are “exactly needed”. Mrs. Schneider, in particular, said there would be no situation in which an LNG would need to be involved in a pool licensing negotiation – whether that is at the start of a new programme or to expand an existing one: “joint licensing gives you a simpler solution that already constitutes a discount – what are you going to use the LNG for?”
Direct impact and wider ramifications: The FCO’s decision last June does not mean LNGs couldn’t run into regulatory issues elsewhere – as nowhere else has such organisations been given the green light. But the EC’s public consultation, which runs until April 25, 2025, indicates that the topic of LNGs is now on the EU’s table – despite licensors and patent pools being clearly disgruntled.
Speaking on a panel this afternoon, Ericsson’s Patrick Hofkens said he was “quite surprised” when the EC first suggested introducing the LNG framework. The discussion around LNGs had started from the perspective of SMEs as it would help smaller companies work together so they could engage in licensing negotiations. But, he said, “what we are seeing happening now is not at all SMEs – it’s the opposite of SMEs.”
While noting that we are currently in “a bit of a vacuum” and having LNG guidance may be helpful, Mr. Hofkens pointed to scenarios in which such groups have taken positions and that these positions are not really facilitating licensing:
“They actively ask for boycott, not using interesting solutions. So there is a risk of organised delay, of holdout, and organised level setting of prices that is too low. Another risk is if you really aggregate a market into these kinds of solutions, you will have fewer and fewer reference points.”
Mr. Hofkens listed several more questions regarding competition, including: if there is no binding nature, how does this help the market?
He noted that at the end of the whole discussion, there should be a license:
“It’s interesting to talk – but talking too much is not very helpful. We’ve learned that in Europe the hard way.”
So, if the discussions only lead to information sharing then these questions come to the surface:
- Is it efficient?
- Is it effective?
- How do you share information?
Mr. Hofkens was not entirely critical, noting that he is “happy to hear the precaution taken” in LNG approaches. But, he said, in the end, you still need to make something that is attractive for a licensor to engage with. “And I am not sure that what I am hearing is all that attractive.”
Avanci’s Uta Schneider concurred with her fellow panellist. “I always look at things from a practical point of view – with regards to LNGs, I am not entirely certain they are exactly needed,” she said.
Mrs. Schneider emphasized that a patent pool is only ever a “compromise” and that it should come as “no surprise” that individual companies may not be entirely satisfied with that compromise. But, she noted, at the end of the day “actions speak louder than words” and companies have decided to join Avanci, whether that is as a licensor or a licensee.
She explored two instances in which Avanci would consider interacting with an LNG:
- In the process of setting up a new program: for Avanci, it’s extremely important they are able to solicit views from individual companies, as all their needs differ and they discuss commercially sensitive information. Interacting with LNGs in this context could undermine Avanci’s ability to find a solution.
- An already active program: here there are certain terms and conditions already set out. But you don’t really need an LNG to negotiate those sorts of things.
So, she noted, from a practical point of view “I fail to understand why LNGs are needed [as] no implementer and no patentee would take a license if they didn’t think it was more efficient to do so from a pool.”
Mrs. Schneider and Mr. Hofkens were met with resistance from their fellow panellists Mr. Engelsing and Mr. Chrocziel. The latter, in particular, emphasized that LNGs ensure that companies are free to come and go from negotiations and that licensors can push back against rates they are unsatisfied with. “When setting up a new program, it’s easier to speak to an LNG than speak one-on-one with 20 companies,” he said.
Plus, he added, LNGs would not engage in fields where the SEPs have existed for years already – they are more forward-looking than that.
That panel, entitled “Growing role of LNGs in licensing of SEPs – legal framework”, was moderated by Peter Camesasca, founder of Peter Camesasca Advocaat. The “Regulatory and Enforcement Developments for SEPs” event, hosted by the Patent Office of the Republic of Poland and the Polish Presidency of the Council of the EU, concludes tomorrow, March 7, 2025.