Opinion
For Tesla’s lawyers (in-house and outside counsel alike), it was a heroic feat to persuade the UK Supreme Court (UKSC) to hear its case against Avanci (and strawman defendant InterDigital) despite losses in both prior instances. It can get its day in the top UK court in April. But even a stunning upset victory in the UKSC would not have commercial value.
I mean well with Tesla. It’s a company I like very much, one of the reasons being that I’m grateful to Elon Musk for the positions he takes on a number of political issues, well-documented by my activities and positions on X. Countless times have I defended him in real-life discussions with misinformed Europeans who fail to understand the idealism behind his political work and his defense of free speech. I support U.S. sanctions on EU and UK enemies of X who just can’t deal with free speech because they don’t want the failures of their policies to be exposed.
No company (short of, perhaps, Apple) will derive more value from wireless connectivity than a $10T Tesla
I can’t wait to call self-driving Tesla taxis where I live or wherever I go. The idea of turning all Teslas worldwide into a huge distributed AI data center is also brilliant — and yet another reason (if any more reasons were needed) for Tesla to recognize the enormous value that cellular standard-essential patents (SEPs) represent to its business. If the envisioned “mobile inferencing fleet” materializes and Teslas become the world’s most widely-used self-driving taxi, no company in the world (short of Apple, at best) will derive as much value from wireless connectivity as Tesla. They should recognize that value and pay a fair price for it as part of their plan to become the world’s first $10 trillion company.
Tesla argues in court that the Avanci license fee is not fair. At least they’re not prepared to consider it fair until a UK court has made a determination they like and it can’t be appealed. But since Tesla’s legal crusade against Avanci started, the value of those technologies to Tesla, more than any other company in the world, has increased. The price has not.
What has definitely decreased is the value of that UK litigation even in a realistic best-case scenario for Tesla. The realistic best case is that they win the appeal. It would take a highly unorthodox decision by the UKSC, but of course, until the court hasn’t spoken, anything could happen, and Elon Musk has also built rockets that can land safely and be reused. The problem here is that even if Tesla won that long-shot battle, it would still lose the war because the UK is just the UK: 2% of the global economy, and shrinking. Here’s why the UKSC case is a dead end either way:
To win the war, Tesla would have to prevail not only in London, but also in Munich, Luxembourg, Rio, and who knows where else
The Unified Patent Court’s (UPC) Mannheim Local Division (LD) has now spelled out in writing something that I already heard from a leading German patent judge back in 2019: coerced licenses won’t be recognized. That reminds me of three letters that many of us who sent product samples or documents abroad will remember: NCV.
No. Commercial. Value.
Tesla should thank Amazon for it, and I don’t mean it ironically: Amazon’s hyperaggressive course of action, which even targets non-SEPs, has given an early indication of what will happen. There’s now a writing on the wall for Tesla to read. Tesla can save money and avoid unnecessary friction by settling now instead of taking a belligerent stance in a court that simply can’t decide for the rest of the world.
UK judges have gotten their reality check. But they can keep doing what they’re doing because they’re not paying for it and they don’t have shareholders who are paying for it (if anything, one can question whether it’s a good use of taxpayers’ money). Tesla, however, would have commercial reasons to be smart and pull out of a pointless fight.
Sure, the Mannheim LD doesn’t have the final say. But the President of the UPC, acting as Stsanding Judge of the Court of Appeal (CoA), has already denied Amazon’s motion to stay enforcement, despite Amazon telling the CoA that the Mannheim LD insinuated Tesla may already be in breach of InterDigital’s anti-interim-license injunction (AILI).
That is not the final CoA decision. The order explicitly says that no position is taken for now on whether the Mannheim LD erred, just that there’s no manifest error. But what does that mean for the question of whether any coerced license (which wouldn’t work anyway because Avanci can’t extend licenses unless the actual patent holders have authorized it) would be recognized? It’s like this: if even the AILI, which is a cross-border injunction, is not stayed because it raises important and complex questions, then the Mannheim LD’s chances of a future non-recognition decision being affirmed are quite high. One could even argue that if getting the AILI lifted is not a slam dunk, then the affirmance of non-recognition probably is a slam dunk, but let’s be more conservative than that.
Let’s assume, for the sake of the argument, that after the AILI, which is at this stage, at best (for the implementer camp), a close call, the UPC CoA also decides against non-recognition. I really, really struggle with the notion because it would be like the UPC castrating itself, but again, we’re talking in the hypothetical. Well, then there are still other courts.
This game doesn’t favor Tesla. It would just take an injunction by the world’s number one patent (and particularly SEP) injunction venue, the Landgericht München I (Munich I Regional Court). That’s the epitome of a strict court, as evidenced by a recent order (not immediately enforceable) to imprison an executive over non-compliance with an injunction. Automotive SEP devaluation dreams have died in that court before. Ask Continental or Ford.
Don’t underestimate Rio de Janeiro either. They don’t like it when implementers play games. Ask Hisense.
And there are so many other venues I haven’t even mentioned, and don’t have to because the logic is simple: it just takes one major market anywhere in the world to agree with the Mannheim LD’s well-stated reasoning, and any UK specific-performance injunction would be useless.
By fighting on, at a stage where it stands nothing to gain in the end, Tesla just antagonizes the entire patent pool ecosystem when it’s actually not the pools that Tesla has a problem with. Tesla’s problem is what I just mentioned. It’s the risk of injunctions that could stop its sales or shut down its plants, such as the one near Berlin. The UKSC can say what it wants, but the rest of the world won’t submit to one country’s jurisdictional imperialism.
Tesla could mend fences with the patent pool ecosystem by making a rational decision now, or at least ahead of that hearing, which will just cost money and create confusion, but ultimately won’t move the needle. The commercial winner is gong to be Tesla. SEP holders and pool administrators will make very little money compared to Tesla’s opportunity with self-driving taxis and the world’s first mobile distributed data center.