Tesla v InterDigital and Avanci: UK Supreme Court extends FRAND scrutiny to SEP licensing platforms
Introduction
The Supreme Court of the United Kingdom has handed down its highly anticipated judgment in Tesla v InterDigital and Avanci, unanimously allowing Tesla's appeal and confirming that its claims concerning the fair, reasonable, and non-discriminatory (FRAND) licensing terms on Avanci’s 5G licensing platform should proceed in the English courts. The decision is one of the most significant developments in U.K. FRAND jurisprudence since Unwired Planet and provides important guidance on the interaction between FRAND obligations and patent licensing platforms. It will be of particular interest to standard-essential patent (SEP) owners, implementers, and businesses operating in standards-driven sectors, including automotive, telecommunications, and connected technologies.
Background
SEPs and FRAND
SEPs are patents that are essential to implementing technical standards such as 5G. SEP holders participating in (in the case of 5G) the European Telecommunications Standards Institute (ETSI) standard-setting process undertake to license those patents on FRAND terms. These undertakings are designed to ensure that implementers can access standardized technology while SEP owners receive appropriate remuneration for the use of their inventions.
Avanci and the dispute
Avanci operates a licensing platform through which participating SEP owners collectively license portfolios of 2G, 3G, 4G, and 5G patents for connected vehicles. Rather than negotiating licenses separately with numerous SEP owners, implementers can obtain a single global license covering all participating portfolios. Avanci itself does not own any patents and has not provided FRAND undertakings.
Tesla sought to launch 5G-enabled vehicles in the United Kingdom and challenged the royalty charged under the Avanci 5G Platform, arguing that it exceeded a FRAND rate. Tesla sought declarations that the platform license was not FRAND and that the English courts should determine what FRAND terms should apply. Both the High Court and the majority of the Court of Appeal held that Tesla's claims disclosed no serious issue to be tried (i.e., raise a trialable claim).
The issue before the Supreme Court
The central question for the Supreme Court was whether an implementer can ask the English courts to determine whether a license offered through a patent platform complies with FRAND obligations where the platform includes U.K. SEPs that are subject to a FRAND undertaking. The appeal also raised broader jurisdictional questions concerning the ability of English courts to hear disputes relating to global platform licenses offered by overseas entities.
Why the decision matters
The Supreme Court previously confirmed in Unwired Planet that the English courts can determine the terms of a global FRAND license. Tesla v Avanci considered whether those principles extend to patent pools and licensing platforms in a rate determination action filed by an implementer.
The decision therefore has implications beyond the automotive sector. As collective licensing models become increasingly common across telecommunications, Internet of Things, consumer electronics, and other standards-driven industries, the case raised important questions about the extent to which platform licensing terms can be challenged before the Court on a proactive basis by those seeking to use the standards.
The outcome
The Supreme Court unanimously allowed Tesla's appeal and held that its licensing claims raised a serious issue to be tried (a trialable issue). The Court concluded that Tesla had a realistic prospect of establishing that SEP owners remain subject to ETSI FRAND obligations when licensing through a platform such as Avanci and that the FRAND status of the Avanci 5G Platform may properly be assessed by the courts.
The Court also confirmed that the English courts have jurisdiction to hear the dispute and rejected the challenges based on improper service and improper forum. The case will now proceed to a substantive determination of whether the Avanci platform license complies with FRAND requirements and, if not, what FRAND terms should apply. The Court did not determine that the Avanci license is not FRAND, nor did it determine what a FRAND royalty should be. Those issues remain for trial.
The Supreme Court's reasoning
The Court held that Tesla's claims have a real prospect of success and therefore satisfy the threshold requirement of a serious issue to be tried. In reaching that conclusion, it emphasized that FRAND obligations must be interpreted in light of commercial realities, including the increasing use of licensing platforms and the practical difficulties associated with negotiating bilateral licenses with large numbers of SEP owners.
FRAND obligations may continue to apply to platform licensing
The Court rejected the proposition that an SEP owner's FRAND obligations automatically cease when licensing takes place through a platform. It held that there is a serious issue to be tried as to whether SEP owners remain bound by their ETSI undertakings when they make patents available through Avanci. Nothing in the ETSI framework suggested that FRAND obligations fall away merely because licensing occurs collectively rather than bilaterally.
A platform license may itself be the relevant FRAND license
The Court also accepted that Tesla has a realistic prospect of establishing that, in the commercial reality of the automotive sector, the relevant FRAND license may be a license to the Avanci platform itself. It relied on the increasing prevalence of platform licensing, evidence that some SEP owners rely on platform licenses to satisfy their FRAND obligations, and the practical impossibility of negotiating licenses individually with a very large number of SEP holders.
Implications for implementers
Implementers may now have a clearer route to challenge collective licensing arrangements that are alleged to exceed FRAND rates. This can be done on a proactive basis. Although the Court did not determine the merits of Tesla's challenge, it confirmed that such claims are arguable in principle and capable of being heard by the English courts.
As platform-based licensing becomes increasingly important across standards-driven industries, the judgment is likely to have significant implications for future SEP licensing strategy and FRAND litigation.
Next steps
The Supreme Court has not made any findings regarding the Avanci license—only that there are serious issues to be tried on these points. The case will now return to the High Court for substantive determination.
This Legal Development was drafted with the help of Senior Legal Business Analyst Sneha Shaji.
