Competitive Risks of Patent Pools vs Licensing Negotiation Groups

I recently wrote about the 2026 Office of the United States Trade Representative Special 301 Report (“Report”) (see, 2026 USTR 301 Report).  The Report claimed that Licensing Negotiation Groups (LNGs) are a “concerning development” that could harm competition.  Not once, however, did the Report identify the much more concerning development of large patent pools that seek injunctions against implementers.  So, let’s take another dive into competition law and the competition law concerns that arise from modern day patent pools as compared to LNGs.

Competition Law and Standard Development

It bears repeating that standard development involves:

a group of competitors, often both horizontal and vertical, that get together to collectively develop technology.  For each of the world’s most important standards, the group of competitors invariably involves many of the largest companies in the applicable field. The group of competitors invariably (even without contemplating any market power provided by patents) collectively dominate the market for the applicable technology (and some members of the group often also have individual market dominance).  When this group of competitors with collective market dominance jointly gets together to develop new technology, it creates obvious competition law concerns.  

See Back to Basics Part 2 – Injunctions and Licensing.  

It also bears repeating that the obligation to license patents on fair, reasonable and non-discriminatory terms was not created by the standards organizations out of the goodness of their hearts.  Instead, the FRAND obligation was created by the courts and the competition law authorities (and then codified by various SSOs) to reduce the potential competitive harms from this type of collective technology development by competitors.  See, Back to Basics – An Overview of Competition Law, Standard Development and Standard Setting.

Thus, the FRAND commitment is both a contractual obligation and a competition law mechanism to reduce the  significant anticompetitive concerns arising from these potential technology “cartels” (to use the European competition law word for groups of competitors that enter into any agreement, concerted practice or undertakings “which have as their object or effect the prevention, restriction or distortion of competition”).[1] 

Competition Law Concerns Related to Patent Pools

With all that in mind, let’s take a look a closer look at modern day patent pools.  Patent pools are a group of competitors, again usually both horizontal and vertical competitors, who get together to collectively license their patents to implementers.  These competitors are the same competitors that got together collectively to develop the standard in the first place.[2]  So, at heart, a patent pool is a group of competitors that first got together collectively to create a new technology and then got together collectively to license that technology to other companies that want to use the technology.  

Tellingly, many of the “patent pirates” and FRAND holdouts form a core part of some of these pools.[3]

The patent pool, i.e. the group of competitors that forms the pool, usually offers licenses across multiple generations of the same standard.[4] 

Large modern day patent pools usually also offer licenses for multiple different standards.[5]  In some cases, these different standards are in competition with each other, at least in certain market segments (see e.g., Convergence and Competition – A Tale of Two Standards Part 3 (The IoT Market)).  To say it a different way, some of the patent pools license two or more different standards that are alternatives or substitutes for each other for certain applications.  Thus, some of these patent pools have market power through the collective action of multiple competitors not only for multiple generations of a particular technology, but also for (often multiple generations of) the most widely used alternative or substitute for that particular technology.

In recent years, these groups of competitors also have been collectively (through the actions of the patent pools) seeking to prevent other companies from using the standard at all.[6] In other words, the competitors have taken collective action to stop other companies from adopting the very technology that they acted in concert to develop.

Finally, at least one of these groups of competitors has taken the position that, as a group, it is not required to license on FRAND terms.[7]  

To reprise, large, modern day patent pools:

1. Involve groups of horizontal and vertical competitors with collective (and sometimes individual) market power in a technology area who undertook collectively to develop technology in that technology area;

2. In some cases, these group of competitors includes as core members companies that engaged in what I'll term "questionble" behavior while developing the standard;

3. These same competitors then undertook collectively to license their patents to users and implementers of the technology;

4. These same competitors acted in concert to license the technology over multiple generations of the same technology; 

5. These patent pools not only seek to license that technology, but sometimes also to the most widely used substitute for that technology;

6. This same group of competitors actively and in concert seek to prevent other companies from using the technology via injunctions, and the patent pool sometimes seeks to prevent companies from using both that technology and the most widely used substitute for that  technology; and

7. Some of these groups of competitors claim that, when they act as a group, they are not subject to any obligation to license on fair, reasonable and non-discriminatory terms.

Competition Law and LNGs

LNGs also involve a group of competitors (although the LNGs thus far have involved only horizontal competitors, not also vertical).  But that is where the similarities between patent pools and LNGs end.  In contrast to the members of modern day patent pools, LNGs do not involve the largest companies in the technology area of the standard.  The LNG members do not have market power (either collectively or individually) in the standardized technology area.  Indeed, although the LNG members may be competitors in one market (e.g. automobiles), they are not competitors in the standardized technology market for which the group was formed.[8] 

The LNG was not formed to develop any new technology.  Indeed, in most cases, the LNG members do not even themselves develop, manufacture, or sell products that directly implement the standard.  Instead, the LNG members sell products (e.g. cars) that incorporate component parts (e.g. chips) that implement the standard.  These implementing component parts are developed, made and sold by other, unrelated companies. In other words, LNG members typically are companies that I previously termed “passive implementers” (see, The Cellular Multiverse). 

Nor, unlike certain modern day patent pools, is the LNG seeking to prevent other companies from using or licensing the standardized technology. 

Instead, LNGs are seeking to address very real concerns, including the lack of transparency in SEP licensing, which has been identified as a pressing problem over and over by the courts, commentators, in the SEP Report, and even by the USTR Report (see, Transparency, Transparency, Transparency;  "Inconsistency" - Europe Dithers Some More and 2026 USTR 301 Report).  Without an LNG, the LNG members would have little if any insight into what was actually being offered to their peers, and how what has been offered to them is fair, reasonable, and non-discriminatory compared to what has been offered to their peers (see, Licensing in the Real World - Secrecy vs Transparency). With an LNG, each member knows exactly what has been offered to the other members which should, in any event, be the same.  That is what non-discrimination is supposed to mean in the FRAND context and is the minimum that the non-discrimination prong of the FRAND commitment requires.  

Net net, for all of these reasons, LNGs pose less potential anti-competitive risks than do modern day patent pools.  Thus, the USTR Report's focus on LNGs, rather than on patent pools, is misplaced. 

Modern day patent pools, and the competitors that comprise them, on the other hand merit much closer scrutiny than they currently are getting from competition law authorities and the courts.   Based on their behavior, the question must be asked:  have some of these large patent pools become technology “cartels” (to use the European parlance) because the competitors that comprise them have entered into agreements, concerted practices and undertakings “which have as their object or effect the prevention, restriction or distortion of competition”?

[1[          CONSOLIDATED VERSION OF THE TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION

[2]          It is true that most patent pools do not represent the entirety of the companies involved in the development of a given standard.  However, the larger patent pools claim to represent a very large percentage of the SEPs for the standard.  See for example, Wi-Fi 7 leaders back Sisvel pool, research shows - Sisvel Wi-Fi Multimode. 

[3] See, Pirates on the Move; The Huawei IEEE Scandal: Is Huawei a Buccaneer or a Privateer?); and The ISO Holdouts: The "Nordic Companies" and Wi-Fi (Part 6 in Convergence and Competition – A Tale of Two Standards) for identification of some of these companies.  Huawei for example is a member of Sisvel’s Cellular IoT pool (Sisvel Cellular IoT Licenses: Connecting Innovation) and its Wi-Fi Multimode (Sisvel | Wi-Fi Multimode).  Ericsson is a member of Avanci’s 5G vehicle pool (Avanci 5G Vehicle - Avanci) and its Avanci Video pool (Avanci Video - Avanci).

[4]          See e.g., Avanci 5G Vehicle - Avanci (2G, 3G, 4G/LTE, 5G).  

[5]          See, e.g. Sisvel Licensing Programs: Adapting to Tech Evolution

[6]          For example, both Sisvel and Avanci (which are both large patent pools) have each sought injunctions in numerous cases.  

[7]          See para. 12 in Tesla v. Interdigital and Avanci et al.

[8]          This was recognized in the European Commission’s press release on the automotive LNG, albeit with somewhat different terminology.  See, IP_25_1768_EN.pdf.