Tesla v Interdigital: Tesla hits a speed bump as Court of Appeal dismisses its claim for a FRAND ‘pool’ licence

On 6 March 2025, the UK Court of Appeal dismissed Tesla’s claim for the UK court to set the FRAND rate for a licence to the Avanci 5G patent pool. Tesla claimed for declaratory relief against Avanci, the administrator of the patent pool, and for FRAND determinations against InterDigital as both an individual member of, and representative for, the entire Avanci 5G Platform.

This claim was dismissed at first instance (see our report and podcast), which finding has now been upheld on appeal. The Court of Appeal gave a split decision with the majority finding that Tesla had failed to identify a contractual right which could form the basis for its claim for a FRAND ‘pool’ licence. Arnold LJ gave a dissenting judgment that he would have allowed Tesla’s claim against Avanci and against InterDigital as an individual member of the Avanci pool.

Majority judgment

The majority judgment found that there was no serious issue to be tried because there was no contractual obligation on either Avanci or the members of the Avanci 5G Platform to grant Tesla a pool licence on FRAND terms. Following the precedent in Vestel, Tesla’s claim was properly characterised as a free-standing FRAND determination for which the Court did not have jurisdiction.

In reaching this conclusion, the Court found that the undertakings given to ETSI by SEP owners, whilst giving Tesla a right to a bilateral FRAND licence from each SEP owner, did not entitle it to a right to a pool licence on FRAND terms (or indeed on any terms at all). The Court held that there was no sensible interpretation of the ETSI undertakings on which an obligation to grant a pool licence could be based. The fact that the SEP owners have voluntarily put their patents on the Avanci platform does not change this.

The Court’s view was supported by a review of the contractual relationship between the pool members and Avanci, which is governed by a Master Licence Management Agreement (MLMA). Importantly, the MLMA does not contain an obligation on Avanci to fulfil the FRAND obligations of its members, nor does it give the members the ability to determine the rate for the pool. The MLMA also explicitly permits the conclusion of bilateral licences and, in fact, Tesla had concluded such a licence with one of Avanci’s members.

Phillips LJ also noted that the FRAND rate sought by Tesla for the Avanci 5G Platform was plainly intended to be a single collective rate, “heavily discounted” for bulk and convenience. He considered that it would not be possible to determine such a ‘collective’ rate since the SEP owners are not required under the ETSI obligation to license their SEPs on discounted collective terms. It is therefore a commercial choice for Tesla whether to negotiate bilateral licences on FRAND terms with each individual SEP owner or take a licence to the Avanci 5G Platform at the offered rate.

Dissenting judgment

Arnold LJ, dissenting from the majority, considered that there was a serious issue to be tried. He took the view that, as a matter of commercial reality, Tesla has to take a licence to the Avanci 5G Platform because it would be impractical to negotiate bilateral licences with each of the 65 SEP owners who are members of the pool. Arnold LJ also considered that a declaration saying that the $32 rate offered for a pool licence by Avanci is not FRAND would serve a useful purpose. Using the declaration granted in Panasonic v Xiaomi relating to interim licences as an example, Arnold LJ considered that in this case, it is possible or likely that it would force Avanci to reconsider its position as it would be untenable for the Avanci 5G Platform to offer terms declared as non-FRAND. However, as recently demonstrated in Lenovo v Ericsson, such a declaration may not always have the effect Arnold LJ envisaged, as further explored in our article here.

The views of Arnold LJ did not convince the other Court of Appeal judges who considered that, although pool licences of FRAND-encumbered patents may be a commercial reality, the English Courts do not have jurisdiction to determine the FRAND terms for SEPs (including foreign SEPs) without an underlying contractual obligation arising from the ETSI obligation. Phillips LJ noted that just because a Court order may force a party to comply with it, does not in itself justify the Court to make the order. This is an interesting counterpoint to the recent judgment in Lenovo v Ericsson (admittedly a case in which the Court already had jurisdiction) where Arnold LJ similarly saw a useful purpose in making a declaration that would force Ericsson to reconsider its position.

Discussion

This judgment confirms the second failed attempt by an implementer to bring an action for the determination of the terms of a FRAND ‘pool’ licence (the other being in Vestel). In both cases, the implementer failed to identify a free-standing legal right to underpin the claim. 

This is in contrast to the position in Mitsubishi v OnePlus [2021] EWHC 1541 (Pat) in which the pool administrator was allowed to continue as a claimant to the action despite not owning any of the patents in suit because there was an arguable case that the pool licence would be held to be FRAND. In that case Mellor J held that it would require “justification” for an implementer to refuse a pool licence and insist only on a bilateral licence.

It remains to be seen what this means for the future of FRAND pool licences, particularly in cases brought by implementers. With both a contractual route (in this case) and a competition law route (in Vestel) to review pool rates under against a FRAND benchmark having been closed off, there is a question mark as to how a substantive assessment of pool royalty rates may be achieved. Tesla may well seek to appeal this judgment, giving the Supreme Court the opportunity to rule on the issue. There would clearly be competing issues to be considered given the clear indication from the majority judgment of the Court of Appeal in this case that the ETSI obligation does not extend to collective rates, notwithstanding that such licences may form part of the usual commercial practices in the SEP space more broadly.