Tesla v Avanci/InterDigital: UK Supreme Court rules that it has jurisdiction to determine FRAND rates of patent pools

In just the second judgment concerning FRAND matters from the UK’s top court (the other being the seminal Unwired Planet decision), the UK Supreme Court has ruled that it has jurisdiction to determine FRAND terms where the licence pertains to a patent pool.

This is the case even in circumstances where the claim is brought pro-actively by an implementer, and where the pool administrator owns none of the relevant patents and has not itself given a FRAND undertaking.

The parties

This claim was brought by two Tesla entities (“Tesla”) in the High Court in December 2023 against Avanci Vehicle, LLC (formerly Avanci, LLC) (“Avanci”), and also against InterDigital group entities (“InterDigital”), in respect of the planned UK rollout of 5G in Tesla’s vehicles.

Tesla had a prior licence to Avanci’s 4G Vehicle pool (which offered 2G, 3G, and 4G cellular SEPs to automotive manufacturers from its participating licensors), but objected to the flat-rate $32 per vehicle rate offered collectively for the 5G SEPs in Avanci’s 5G Vehicle pool.

Avanci acts as licensing agent for SEP owners who grant it a non-exclusive right to license their patents through its pools under a pre-determined standard licensing framework.  It does not itself own any of the SEPs within the Avanci 5G Vehicle pool, and therefore is not a party to the underlying ETSI FRAND declarations.  However, Avanci has publicly presented its offer as being FRAND, for example in correspondence with  the US Department of Justice.  The Supreme Court therefore considered whether Avanci’s licence rate should still be ‘shielded’ from judicial scrutiny.

Tesla also challenged the validity and essentiality of three UK InterDigital patents which were included in the Avanci pool.  InterDigital argued it had been unfairly targeted, given there were a number of other licensors and SEPs in play. The Supreme Court disagreed, noting InterDigital’s substantial portfolio of ETSI-declared 2G-5G SEPs, its communication to Tesla that a bilateral or Avanci 5G pool licence was required, its long-standing Avanci membership, and its demonstrated willingness to litigate its SEPs in England.

The Claim(s)

There were two heads of claim, split between the patent validity/essentiality challenges and challenges to whether the licence offered by Avanci satisfied the SEP owners’ FRAND obligations.  Declaratory relief was sought in both.  A separate claim against InterDigital as representative for other pool licensors failed at both first instance and in the Court of Appeal, and was not pursued further.

In July 2024, Fancourt J partially set aside service of Tesla’s overall claim, and struck out the licence claims.  In March 2025, the Court of Appeal upheld that outcome by a majority, with Arnold LJ dissenting.  The Supreme Court has now allowed Tesla’s appeal, largely endorsing Arnold LJ’s dissent.

In doing so, the Supreme Court confirmed the English courts’ broad power to grant declarations even where the underlying rights are not directly vested in a party to the proceedings, provided the parties have a legitimate interest, the declaration serves a useful purpose, and it furthers the interests of justice.

The issues

Three principal questions arose:

• whether the English courts had jurisdiction over a dispute concerning predominantly foreign patents licensed through a US-based pool;
• whether the contractual FRAND obligation, arising under ETSI’s IPR Policy, extends to licences offered via a pool rather than bilaterally by the patent owner; and
• whether a pool licence might, in certain circumstances, be the only FRAND licence available, such that a court could properly declare its terms.

Jurisdiction

A central difficulty was that only around 7% of the patents within the Avanci 5G Vehicle pool are UK patents, and Avanci, InterDigital and Tesla’s parent companies are all US-headquartered. Fancourt J had characterised the claim as, in substance, a global licensing dispute pointing towards the Delaware Court of Chancery.  The Supreme Court disagreed, holding that the claim was properly framed as one concerning the terms of a FRAND licence to InterDigital’s UK SEPs, even though any resulting licence would necessarily be global in scope.  On the evidence, US courts would be unlikely to set FRAND rates for foreign patents, and no US court had ever done so without the parties’ consent; the Delaware Court of Chancery was therefore not an available alternative forum.  Accordingly, service on InterDigital at its UK address for service was valid under CPR 63.14(2), since a claim to a licence that would preclude infringement of a UK SEP “relates to” that registered right.  The Court recognised that its approach permits an element of forum shopping, but regarded this as an inherent consequence of the fact that national courts may set global FRAND terms.

Does the FRAND obligation apply to pool licensing?

The Supreme Court found that Tesla had raised a serious issue to be tried as to whether the FRAND obligation applies where SEP owners choose to license jointly through a patent pool.  It held there was nothing in the wording of the FRAND undertaking, or in ETSI’s IPR Policy more broadly, to suggest the obligation lapses merely because two or more owners appoint a common licensing agent.  On the contrary, the policy rationale against patent hold-up applies with equal or greater force to collective licensing, particularly where, as alleged by Tesla, SEP owners controlling the majority of the global 2G–5G cellular SEP stack have combined to offer market-wide terms.  The Court concluded that joining a pool does not release an SEP owner from a FRAND commitment it has already given.

Could a pool licence be the only FRAND option?

The Court went further, holding that Tesla had a real prospect of establishing at trial that, for the relevant InterDigital UK SEPs, the only available FRAND licence was the global Avanci 5G Vehicle pool licence itself, taken as a whole at a FRAND rate.  It reasoned that FRAND must be assessed by reference to “commercial reality“, and that the impracticality of negotiating dozens of bilateral licences was a powerful factor supporting the conclusion that, in some circumstances, only a pool licence can be FRAND.  This conclusion applied notwithstanding that licensors remain free to leave the pool on notice.

Significance

The decision does not determine whether the Avanci 5G Vehicle pool rate is in fact FRAND, nor does it establish that a pool licence will always be the only FRAND option for a given sector; those questions remain for trial.  Its significance lies in confirming that such questions are justiciable in England.

Several industry bodies (the Computer & Communications Industry Association, the App Association, the Motion Picture Association and the Fair Standards Alliance) intervened in support of Tesla’s position that pool rates should not escape judicial oversight, while the International Center for Law & Economics argued the contrary.

By extending the logic of Unwired Planet’s jurisdictional analysis to collective licensing structures, the Supreme Court has reinforced England’s role as a forum for global FRAND disputes.  This development is likely to be welcomed by implementers, while inviting further debate over the extra-territorial reach of English courts’ jurisdiction in SEP litigation.

NOTE: Doug Jayatilaka acted for the Claimants in the prior High Court and Court of Appeal proceedings.