Context: Last summer, Mr Justice Fancourt of the High Court of Justice for England & Wales (EWHC) granted Avanci’s and InterDigital’s jurisdictional challenges to a claim brought against them by Tesla over the Avanci pool rate for a one-stop license to the vast majority of 5G standard-essential patents (SEPs) (July 18, 2024 ip fray article). InterDigital is one of Avanci’s dozens of licensors. Tesla has an Avanci 4G license, but has not yet taken the 5G license and may not have sold a 5G car yet (or if so, then only recently). The England & Wales Court of Appeal (EWCA) heard Avanci’s appeal three months ago (December 3, 2024 ip fray article).
What’s new: The judgment has just been handed down (PDF). Tesla lost, but Lord Justice Richard Arnold dissented as he would have sided with the car maker and given the English courts jurisdiction over such claims.
Direct impact: Tesla can appeal this decision to the UK Supreme Court (UKSC) just like Ericsson is trying to appeal last week’s EWCA judgment (where LJ Arnold persuaded the other panel members) in the Lenovo v. Ericsson interim license matter (February 28, 2025 ip fray article). Tesla would have to ask the EWCA for permission to appeal to the UKSC, and if denied, they could ask the UKSC to overrule that denial, which is the procedural state of affairs in Lenovo v. Ericsson (February 6, 2025 LinkedIn post by ip fray). For now, Tesla’s attempt to use the English courts against the Avanci rate (which almost everyone else accepts, apart from some Chinese car makers (February 24, 2025 ip fray article), which is why BYD is being sued now (February 19, 2025 ip fray article)) has failed at the earliest procedural stage.
Wider ramifications: This is a major setback for LJ Arnold’s judicial imperialism in the FRAND rate-setting context. He pursues a vision of the UK being the world’s sole FRAND jurisdiction by forcing SEP holders to accept UK jurisdiction. That attitude is a gross violation of the principle of comity and will sooner or later draw major blowback from other jurisdiction, such as the UPC, which has just ordered four anti-antisuit injunctions in as many months (February 5, 2025 ip fray article). Today’s decision shows that his extremist agenda has finally been rejected by judges who have far less patent expertise than he does. He may have built majority or even unanimous support for some other decisions only because he had dealt with far more patent cases than the other panel members. This time around, there were two critical thinkers who decided to outvote him.
The decision starts with LJ Arnold’s lengthy explanations as to why he would side with Tesla. But that part is followed by much shorter passages in which LJ Phillips and LJ Whipple dismiss the appeal.
LJ Phillips notes that “the owners who have joined the [Avanci] Platform have not somehow extended the scope of their undertaking to ETSI or entered any other binding agreement to license their SEPs on a collective basis.” He explains that Tesla is free to seek bilateral FRAND licenses or to accept the Avanci license, but it can’t get the discounts and convenience of the pool license by means of a judicial FRAND determination relating to the entire pool.
After the two other panel members, LJ Whipple has the last word, and she agrees with LJ Phillips, noting in particular that she “cannot identify any basis in Tesla’s pleaded case for suggesting that the SEP owners’ FRAND obligations are to be transposed to, or read into, a licence granted by Avanci over its 5G Platform.”
LJ Whipple stresses that Avanci is bound by the Master License Management Agreement (MLMA) with the actual patent holders. She does not deem Avanci to have assumed “the burden of the [patentees’] ETSI obligations.”
In para. 250, LJ Whipple explains that Tesla can’t get the best of both worlds, a judicial FRAND determination and a convenient, cost-effective pool deal:
“Secondly, it follows that Tesla has a choice: it can take the Avanci 5G Platform licence at the offered rate; or, if it does not want to do that, it can negotiate a licence on FRAND terms with each of the SEP owners bilaterally. But Tesla cannot legitimately claim to be entitled to the benefit of FRAND terms as part of the 5G Platform licence granted by Avanci. This is to claim the “best of both” – which to Tesla is doubtless commercially attractive, but which is quite simply not on offer. These are two commercial alternatives; they cannot be combined.”
She notes that Avanci already has a bilateral license from one of Avanci’s licensors. In the end, the two-judge majority does not see how there would be a useful purpose in what Tesla is seeking.
Interim licenses
Today’s majority decision against LJ Arnold may be an inflection point. It could be the beginning of the end of his expansive approach to interim licenses. The UKSC may see that something has gone awry one level below and needs to be fixed, ultimately in the interest of the UK judiciary and the country as a whole.
The fact that some EWCA judges are unwilling to support LJ Arnold’s FRAND stance may serve as an encouragement to judges in other jurisdictions to use their powers to dissuade implementers from seeking interim licenses (February 4, 2025 ip fray article).
Avanci statement
Avanci’s vice president of marketing & communications, Mark Durrant, provided the following statement upon request:
“Avanci is pleased that the Court of Appeal has affirmed the lower court decision by Mr. Justice Fancourt. Our optional licensing programs for connected vehicles provide a market-driven global level playing field. Our 4G Vehicle program spans more than 100 auto brands (including Tesla) and almost 60 licensors, while our 5G Vehicle program, launched in 2023, now includes 40 auto brands and over 70 licensors.
“Both the High Court and Court of Appeal have dismissed the case and found that Tesla’s claims did not constitute a serious issue to be tried. The door remains open for Tesla to take an Avanci 5G Vehicle license and benefit from the early licensee reduction if it does so before selling its first 5G capable vehicle.”
Panel and counsel
Panel: Lord Justice Arnold, Lord Justice Phillips and Lady Justice Whipple.
Counsel for Tesla: James Segan KC and Ligia Osepciu, instructed by Powell Gilbert (lead counsel: Bethan Hopewell).
Counsel for Avanci: Brian Nicholson KC, instructed by Osborne Clarke (lead counsel: Arty Rajendra) and EIP (lead counsel: Gary Moss).
Counsel for InterDigital: Thomas Raphael KC and Maxwell Keay, instructed by Gowling WLG (lead counsel: Alexandra Brodie).
Chinese legal situation
Given that there most likely won’t be any FRAND rate-setting decisions by the English courts with respect to patent pools anytime soon, and considering that the only automaker currently being sued by an Avanci licensor over 5G SEPs is China’s BYD, there is a Chinese angle here.
First, if Tesla had prevailed, that could ultimately have resulted in China becoming the world-leading pool rate-setting jurisdiction.
Second, in a non-automotive and non-cellular context, an implementer (TCL) sought a pool rate determination in a Chinese court against Access Advance. We analyzed the related decision by the Supreme People’s Court of China in detail (September 3, 2024 ip fray article) and found that many questions had been left unanswered. In any event, that dispute settled shortly thereafter before anything significant had happened in the Chinese FRAND case (October 30, 2024 ip fray article).