On March 6, 2025, the UK Court of Appeal rejected Tesla’s appeal requesting that the UK court rule on the global FRAND licensing rate for Avanci’s 5G SEP patent pool. This decision sharply contrasts with recent UK rulings in the Panasonic v. Xiaomi and Lenovo v. Ericsson cases, where the courts granted interim licenses. The decision may also influence the patent litigation strategy between an Avanci licensor and BYD, which has recently garnered attention. This is not the first time a UK court has refused to rule on patent pool royalty rates; earlier, the UK court rejected Vestel's request to determine the Access Advance patent pool royalty rates.

In June 2024, the Supreme People’s Court of China ruled on the jurisdictional objection in the case where TCL sought determination of the global FRAND licensing rate for the Access Advance patent pool (AA). The court ruled that Chinese courts had jurisdiction over the global FRAND rate dispute. PurpleVine IP, a Chinese intellectual property firm, played a key role in assisting TCL with resolving the global licensing dispute related to the HEVC/H.265 standard-essential patents through strategic and innovative actions.

There is still significant disagreement across various courts on whether they have jurisdiction to rule on the global FRAND licensing rates of SEP patent pools.

The Tesla v. Avanci case began in 2023. Tesla filed a lawsuit against Avanci and InterDigital, a licensor in its 5G automotive SEP patent pool, in the High Court of England and Wales. Tesla sought declarations that three SEP patents held by InterDigital were either invalid or not essential to the 5G standard, and requested the court to determine the FRAND licensing rate for the Avanci 5G automotive SEP patent pool. Unlike Vestel’s request in the UK for determination on the AA patent pool’s royalty rate, Tesla approached the matter more from a contract law perspective, arguing that if the patent pool violated FRAND obligations, its market sales in the UK would be harmed accordingly. Tesla also sought to have the three SEPs declared invalid and not essential, seemingly linking the case to potential infringement damages to strengthen its connection to the UK.

The High Court of England and Wales, however, ruled that it did not have jurisdiction over Tesla’s claims. The court questioned whether it had jurisdiction to rule on the FRAND rate for the patent pool, given that the patent pool, as a "platform," does not own patents, has not made a FRAND commitment, and cannot control or represent the licensors. The court further concluded that, as a representative of the licensors, InterDigital could not assert the rights of other licensors in the litigation, and that ruling on the pool's royalty rate would unfairly impact those licensors. Furthermore, this situation made it complex and less feasible to rule on the patent pool's royalty rate. The proportion of patents in the Avanci 5G automotive SEP pool held in the UK was also low, further preventing the court from exercising jurisdiction. The court also believed that the US courts would be more appropriate to hear the case, as the defendants were US companies.

In fact, the three judges of the UK Court of Appeal who rejected Tesla’s appeal had differing opinions. Judge Arnold LJ partially supported Tesla’s claim, stating that the UK court could potentially exercise jurisdiction over the case. He believed that even if Avanci itself was not bound by FRAND obligations, its royalty rates should still be subject to FRAND constraints, and the FRAND obligations of SEP licensors should be reflected in Avanci’s agreements. He also did not agree with the view that the US courts were more appropriate for the case. The other two judges largely agreed with the High Court’s opinion. Ultimately, the Court of Appeal rejected Tesla's claim, though it did not entirely dismiss the UK court's jurisdiction over disputes involving the FRAND licensing rates of SEP pools. Despite this, Tesla's quest for determination on the global FRAND licensing rate for Avanci’s 5G automotive SEP pool in the UK is now much more challenging.

This ruling demonstrates that the UK courts adopt a complex and cautious approach when dealing with SEP patent pool licensing disputes, considering not only the legal basis, procedural issues, feasibility, and enforceability of judgments but also the potential impact of the ruling. However, the core issue remains whether SEP patent pools are bound by FRAND obligations and to what extent.

This decision also echoes an earlier ruling in the Vestel v. AA case, where the UK court similarly determined that they lacked jurisdiction to rule on the global FRAND licensing rate for the AA patent pool.

In 2019, Vestel, a major Turkish consumer electronics manufacturer, and its UK subsidiary initiated a lawsuit in the UK court against the AA and one of its HEVC Advance patent pool licensors, Philips, seeking determination on the licensing rate for the patent pool. Vestel argued from a competition law perspective that the patent pool and its licensors abused their dominant market position by demanding excessive royalty fees, which harmed their product sales in the UK market. It is worth noting that when Vestel filed its rate lawsuit in the UK, the patent pool and its licensors had not initiated infringement lawsuits against Vestel in either the same or separate cases. The UK court ruled that Vestel failed to successfully demonstrate that it had been or would be harmed in the UK, even though its UK market sales could be impacted by excessive patent licensing fees, it could not prove the existence of direct harm. Additionally, the AA patent pool’s patents in the UK accounted for a very small proportion (allegedly less than 5%), and the primary litigation targets were outside the UK. Ultimately, the UK court ruled that it did not have jurisdiction over the case. Despite modifying its litigation strategy during the appeal, Vestel was unable to alter the UK court’s stance. After the UK court rejected Vestel’s request, Vestel sought determination on the AA patent pool’s licensing rate in the Netherlands. The Dutch court initially believed it had jurisdiction over the global FRAND licensing rate dispute. The case was withdrawn after both parties reached a settlement, with no further details disclosed.

In August 2020, some of AA patent pool licensors – including GE, filed a lawsuit in the German court against Vestel for infringing their HEVC/H.265 standard-essential patents, seeking an injunction. In December 2021, the German court found that Vestel was a willing licensee. The court also ruled that the AA patent pool's duplicated royalty policy violated the FRAND principle. The court held that the licensors, such as GE, should bear the consequences of AA's actions. The German court also found that GE, as a licensor, did not act as a willing licensor during bilateral negotiations with Vestel. Therefore, although infringement was established, the German court did not support the injunction request from the licensors due to the violation of the FRAND principle. The German court indirectly addressed key issues, such as whether SEP patent pools are bound by FRAND obligations and whether licensors should bear the consequences of their pool’s illegal actions.

Looking at the conflicts between Vestel and the AA patent pool and its licensors in the UK, Germany, and the Netherlands, it appears that after Vestel filed its lawsuit for determination of the patent pool’s royalty rate in the UK in 2019, the AA patent pool licensors did not rush to initiate infringement lawsuits. It wasn’t until 2020 that AA patent pool licensors filed a patent infringement lawsuit against Vestel in Germany, rather than the UK, seeking an injunction. In fact, by that time, the UK court's appellate ruling had not yet been made. From a litigation strategy perspective, it seems that if the patent pool and its licensors do not engage, implementers like Vestel may struggle to gain the upper hand. However, patent pools and licensors have the option to choose more favorable jurisdictions for litigation.

Although Tesla adopted a different strategy in suing Avanci and avoided the jurisdictional reasons cited in the Vestel case, seeking declaration that several patents did not infringe, it ultimately could not change the UK court’s perspective.

The Avanci patent pool welcomed this decision, which may also impact the patent litigation strategies between an Avanci licensor and BYD, as the Chinese court previously ruled in the TCL v. AA case that it had jurisdiction over global FRAND licensing rate disputes for SEP patent pools.

As a major force in the SEP licensing market, patent pools have had a significant impact on the global SEP licensing ecosystem and the landscape. The question of whether courts have jurisdiction to rule on patent pool SEP licensing rates is not only crucial for patent pools but also raises important issues about how licensors fulfill their FRAND obligations within the patent pool framework. It also touches on how the balance of power between licensors and implementers is managed. This issue is bound to become a focal point for further exploration and development within the industry.

Author Bio

Mr. John Jiang brings over 8 years of expertise in intellectual property (IP), specialising in corporate IP management, IP-related litigation, licensing dispute resolution, patent monetisation, and patent pools. His expertise extends to antitrust and competition matters. Throughout his career, Mr. Jiang has successfully led numerous complex patent licensing and litigation cases in various jurisdictions, including the United States, Germany, the Unified Patent Court (UPC), Brazil, Japan, South Korea, and the People's Republic of China, across a wide range of technical fields. Before joining PurpleVine IP, Mr. Jiang served as an IP consultant for TCL Industries, Head of IP at Coolpad Group, and as an engineer at CETC Cyberspace Security. Mr. Jiang holds a Master's degree in Law from the South China University of Technology. He is a qualified lawyer in the People's Republic of China and a qualified Chinese patent attorney. He can be contacted at zhongfan.jiang@purplevineip.com.