Yesterday the U.K. Supreme Court handed down its decision in Tesla, Inc. v. InterDigital Patent Holdings, Inc., [2026] UKSC 27. The Court held, inter alia, that (contrary to the majority view of the Court of Appeal) there is a "serious issue to be tried" whether SEP owners' obligations to license their SEPs on FRAND terms applies to an offer to license those patents jointly through a platform, such as Avanci. Other sources, including ip fray, JUVE Patent, Patently-O, and Kluwer (one by Matthieu Dhenne, and another by Naomi Hazenberg and Patrick Newlands) already have written about yesterday’s decision in some depth, so I don't see any reason to present a detailed summary here. I will simply note that the Court's principal justification is that there is no apparent "basis for concluding that the FRAND obligation ceases to apply if two or more owners choose to offer a licence of their patents through or using a licensing agent appointed for that purpose" (para. 84), and that "the utility of the FRAND obligation would be severely compromised were it to cease to apply in circumstances such as these" (para. 85). In other words, there is an serious issue to be tried whether Tesla is correct in asserting that "joining a pool or platform does not release the SEP owner from the FRAND obligation it has already undertaken" (para. 89). From this, it further stands to reason, in the Court's view, that Tesla has a "real prospect of establishing" at trial that a FRAND license pertaining to the relevant U.K. SEPs would be a platform license at a FRAND rate (para. 95). Tesla therefore has a "real prospect of securing the declaratory relief it seeks in the Licensing Claims against InterDigital" and against Avanci, as agent for the individual SEP owners (paras. 131, 132).
I am of two minds on this case. As I wrote last year in my (fairly detailed) discussion of the Court of Appeal decision in this case, on the one hand an affirmation that an English court has jurisdiction to determine a pool rate for the entire world seems pretty breathtaking, especially given that the UK SEPs comprise a decidedly small portion of the overall portfolio. On the other hand, the Supreme Court has a point when it says that "the existence and operation of . . . pools and platforms of SEPs, without the possibility of court scrutiny of the pool or platform rates, would seriously undermine the effectiveness of the FRAND obligation of the SEP owners" (para. 138). Like the court, I am not convinced that the bilateral licensing option necessarily constrains the pool from charging an above-FRAND rate. I have suggested previously that, if the transaction costs savings from licensing through the pool are substantial, licensees may prefer the rate charged by the pool to bilateral licensing, even if the rate is non-FRAND. (See the last paragraphs of my March 10, 2025 post for why I think this is so. One thing I did not take into account there, however, is the possibility that the pool rate might be lower than the non-pool rate because pooling reduces the risk of royalty stacking. That doesn't necessarily change my overall conclusion, though.) Moreover, the licensors' representation that the pool will charge a FRAND rate can be a factor in determining that the pooling arrangement does not violate antitrust law; but if so, that would seem to suggest that some institution must have jurisdiction to determine if, in fact, the pool's terms are FRAND. Perhaps the matter could be left to antitrust enforcers in the U.S., the E.U., or elsewhere, but they may have little incentive to do engage, once the pool is up and running, in comparison with prospective licensees such as Tesla. That said, we still come back to the questions of whether the English judiciary is the right institution to make this determination for effectively the entire world; and if so, whether we can be reasonably confident that its determination will be correct.
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