Kapischke on Interim Licenses and AILIs

Justus Kapischke has published an article titled Interim Licences and Anti-Interim-Licence Injunctions:  Semi-strict non-interference or rules for the race?, 5/2026 GRUR 275.  Here is the abstract:

This article analyses and provides background information on two recent decisions of the LG Munich I and the LD Mannheim.  In both decisions, the courts react negatively to the English practice of awarding interim licence declarations in FRAND disputes, enjoining implementers from applying for such relief.  The LD Mannheim further offers its opinion on the limits of final FRAND determinations in England.

The decisions at issue are, of course, Judgment of Nov. 26, 2025, LG Munich I, 21 O 12112/25, and InterDigital VC Holdings, Inc. v. Amazon.com, Inc., UPC_CFI_936/2025 (LD Mannheim Dec. 22, 2025), both of which entered anti-interim license injunctions (AILIs) directed against Amazon.  (Both decisions are also excerpted in this same issue of GRUR, at pp. 313-30.  The appeal from the Mannheim LD decision will be heard on May 28.)  The author ably illustrates the incompatibility of the English approach to FRAND disputes (under which the court’s task, ultimately, is to set a rate) and the German/UPC approaches (which to date have focused on conduct), writing that “[a] foreign court making injunctions unavailable by ordering the SEP holder to grant a licence interferes with the incentive structure of injunction focused approaches,” whereas “conduct-based injunctions may force settlement before any court had the chance to establish FRAND terms either by determining them or by confirming the FRANDness of the SEP-holder’s offer, frustrating a rate-setting approach” (p.177).  He questions some of the analysis of the above two decisions, noting that they both seem premised on the coercive effect of an English declaration concerning interim licenses (effectively equating them to antisuit injunctions), even though “it is clear that interim licences do not force an SEP-holder to accept rate-setting proceedings in the implementer’s preferred forum” (p.179).  True, the SEP holder’s refusal to comply with the declaration could result in its being deemed an unwilling licensor, but the author states that the SEP holder’s seeking an AILI is “unlikely to change anything about that” (p.180).  (In addition, it would seem to me, the odds that the SEP holder would obtain an injunction in the U.K. are pretty negligible anyway, aren’t they?)  In addition, he notes both courts’ emphasis on the territorial nature of patents, which however in a strictly jurisdictional sense “appears not to be the current law in Germany or the EU as exemplified by the ECJ’s judgment in BSH” (p.182).  I’m glad to see someone making this connection, which seems quite important to me.  The author argues, however, that strict territoriality is not the Mannheim LD’s position, but rather only what he refers to as “semi-strict” territoriality in the sense that “courts can, on behalf of SEP holders, impose their view of global FRAND licences on implementers by way of injunctions,” but implementers “may not use similarly coercive measures as means of imposing global FRAND determinations on SEP holders, since this would interfere with foreign infringement proceedings” (p.182).  I’m not entirely sure of the author’s view here, but I’m not convinced of the merits of this distinction.  (I plan to explore the question more deeply in a forthcoming essay I will contributing to the Research Handbook on Extraterritoriality and Intellectual Property, which I mentioned here the other day.  Consistent with the author’s observation that “both sides can at least plausibly accuse each other of having taken the first ASI-like measure” (id.), it has long seemed to me that when courts start issuing ASIs, AASIs, AILIs, declarations concerning interim licenses, and so on, it is awfully difficult to say which jurisdiction is the one violating the comity norm.)  The author closes by suggesting that it would be helpful “to obtain authoritative constructions of the relevant (F)RAND undertakings from the French of Swiss courts,” and also if SEP holders “offer[ ] to refrain from seeking injunctive relief if the implementer agrees to be bound by a rate-setting procedure in Germany or at the UPC” (id.).  Might the German courts and/or UPC ever head in this direction?      

The EWHC’s Ex Parte Order Against InterDigital

As noted here two weeks ago, following reports on ip fray, the Mannheim Local Division of the Unified Patent Court and the Munich Regional Court both recently entered ex parte orders forbidding Amazon from pursuing a declaration of entitlement to an interim FRAND license from the High Court of England and Wales.  In response, it was reported a few days ago, Amazon obtained an ex parte order from the Patents Court for England and Wales, enjoining InterDigital (on an interim basis, prior to an inter partes hearing next week) from trying to prevent Amazon from pursuing “Final Relief” (a declaration of the terms of a FRAND license and possibly an order of specific performance) against InterDigital in its action in the EWHC.  Mr. Justice Meade explains his reasoning here, stating inter alia that Amazon is complying with the Munich and Mannheim orders not to pursue an interim license in the U.K.  Amazon’s concern, he writes, is rather that “InterDigital may be formulating a position or an application to either the UPC in Mannheim or the German national court in Munich (or both, as before, or some other court):  an application to restrain Amazon from carrying on its claim to the substantive, final RAND relief, which remains within these proceedings” (para. 13).  (The judgment also sets out, in para. 22 et seq., a concise summary of English law relating to the entry of antisuit injunctions, though Mr. Justice Meade characterizes his order as an anti-antisuit injunction.) ip fray suggests, however, that the Munich and (possibly) the Mannheim judgments might be understood as implicitly forbidding Amazon from pursuing final relief in the U.K. (see discussion here and here).  I’m not in a position to evaluate whether it is likely the Munich and Mannheim decisions would be so interpreted under German (or still-to-be-determined UPC) law; I take it that Mr. Justice Meade is proceeding on the assumption that those orders are limited to the explicit prohibition on interim licenses, and that he views his order as a prophylactic one to prevent InterDigital from obtaining an order, somewhere, forbidding Amazon from litigating the matter to final judgment in the U.K.  But how all of this will play out after upcoming inter partes hearings in the U.K. and Germany, I cannot begin to guess.   

Bonadio and Solanki on Interim FRAND Licenses

Enrico Bonadio and Arjun Solanki have just published The emergence of FRAND interim licences, 47 EIPR 592 (2025).  The article provides an overview of  the English courts' practice, as developed over the past year, of granting declarations concerning interim FRAND licenses, from Panasonic v. Xiaomi though Samsung v. ZTE.  It also offers some arguments in defense of the practice, including some analogous practices elsewhere--though as I noted earlier this week, the recent decisions of the Mannheim Local Division of the UPC and of the Munich Regional Court, which came down too late for discussion in the article, would seem to present a substantial obstacle for the continued use of such declarations in FRAND litigation.  Anyway, here is the abstract (the paper itself can be found on Westlaw, if you don't have a hard-copy subscription to EIPR): 

This article analyses the emergence of FRAND interim licences in UK law, a judicial innovation addressing disputes over standard-essential patents (SEPs) during protracted negotiations or litigation. Reviewing landmark cases, i.e. Panasonic v Xiaomi, Alcatel Lucent v Amazon, Lenovo v Ericsson, and Samsung v ZTE, it explains how interim licences balance the interests of SEP holders and implementers by enabling continued technology use with provisional royalties, subject to retroactive adjustment. The study highlights the mechanism’s grounding in good faith obligations, its distinction from anti-suit injunctions, analogies in other legal fields, and its potential to influence global FRAND policy and standard-setting practices.

Bonadio and Solanki also have another paper, coauthored with Vansh Tayal, in the same issue, titled Brazilian antitrust authority's decision on SEP licensing practices, 47 EIPR 635 (2025), discussing a recent investigation launched by Brazil's competition authority into Ericsson's FRAND licensing practices.

UPC and Munich Courts Enter Anti-Interim License Injunctions

This news broke yesterday on ip fray (here and here) and on IAM.  The Mannheim Local Division of the UPC and the Munich Regional Court have both entered orders enjoining Amazon from seeking or enforcing a declaration for an interim license in the U.K.  (The English courts pioneered the practice of granting declarations regarding interim FRAND licenses in Panasonic v. Xiaomi one year ago today, see here, and have continued the practice since then, see, e.g., here.)  Translations of the decisions are available on ip fray; I plan to read them over the weekend and will probably have something to say about them next week. 

A Couple of New Articles on SEP Litigation in the UPC, Germany, and the UK

1. Matthias Leistner has posted a paper on ssrn titled The first SEP/FRAND decisions on the merits of the UPC—an overview in context.  Here is a link to the paper, and here is the abstract:

 

After a period of consolidation, in the past two years the European SEP/FRAND enforcement landscape has seen considerable movement. Significant decisions have been issued by the UPC (Local Division Mannheim – Panasonic v Oppo and shortly afterwards Local Division Munich – Huawei v Netgear) and the English Court of Appeal (most recently in Lenovo v Ericsson). In addition, the Commission intervened in a Munich SEP infringement case recommending a stricter interpretation of the Huawei v ZTE requirements. To this the Higher Regional Court Munich (Oberlandesgericht München) has since responded with an informative legal notice (Hinweisbeschluss) during the proceedings and, ultimately, a judgment nonetheless granting injunctive relief (HMD Global v VoiceAge). This case is currently under legal review before the German Federal Court of Justice, since the Higher Regional Court granted relief for an appeal in law. The focus of this contribution is on the decision of the UPC’s Local Division Mannheim, but also takes into account the judgment of the Local Division Munich and the aforementioned overall context.

This very thoughtful and detailed paper deserves wide attention.

2. Peter D. Camasesca and Konstantina E. Sideri have published an article titled Abusive Conduct of SEP Holders in Pursuing Injunctions Across Jurisdictions:  The EU Angle, 74 GRUR Int. 607 (2025).  Here is a link to the article (though you may need a subscription or institutional access), and here is the abstract:

The enforcement of a standard essential patent (SEP) has been fraught with complex legal and commercial considerations, particularly regarding the interplay between intellectual property rights and antitrust principles. SEPs occupy a unique position on the market as they support industry standards, granting their holders quasi-monopolistic power while imposing obligations to license on Fair, Reasonable and Non-Discriminatory (FRAND) terms. However, these obligations often conflict with SEP holders’ desire to assert exclusivity rights, creating tension within the licensing ecosystem. This tension is amplified when SEP holders seek injunctive relief in jurisdictions like Germany while simultaneously agreeing to, or having engaged in, FRAND determinations in venues such as the UK. The issue at hand is whether pursuing injunctions in Germany while a FRAND determination is underway in another jurisdiction constitutes an abusive practice. We argue that this behavior undermines the core principles established by the Court of Justice of the European Union in the Huawei v. ZTE case and represents a form of procedural manipulation that is both legally and ethically questionable.

The EWHC’s Interim License Decision in Samsung v. ZTE

While I was on vacation in late June, Mr. Justice Mellor handed down his decision in Samsung Elecs. Co. v. ZTE Corp., [2025] EWHC 1432 (Pat).  The decision grants the interim declaration that Samsung had sought, to wit:

i) a declaration that the Defendants (ZTE) are in breach of their obligations of good faith under ETSI;

 

ii) a declaration that a willing licensor in the position of ZTE and a willing licensee in the position of Samsung would enter into an interim licence in respect of each other’s standard essential patents (SEPs) with appropriate royalty terms to be determined by this Court, subject to adjustment and amendment upon final determination of global FRAND terms by this Court (or as otherwise agreed by the parties); and

 

iii) a declaration that if ZTE refuse to offer Samsung such an interim licence, ZTE are unwilling licensors (and unwilling licensees in view of the cross-licence).

Although other commentators have already written about the decision, I will provide a short summary and add a few thoughts of my own.

First off, however, for readers who are new to the topic of interim licenses, a little background on interim licenses for FRAND-committed SEPs may be helpful.  The foundational decision, still less than a year old, is Panasonic Holdings Corp. v. Xiaomi Tech. UK Ltd., [2024] EWCA Civ 1143, in which the Court of Appeal for England and Wales held that Xiaomi was entitled to a declaration that a willing licensor in the position of Panasonic “would agree to enter into, and would enter into, an interim licence of” Panasonic’s SEP portfolio “pending the determination by the Patents Court of what terms for a final licence” are FRAND.  In that particular case, the SEP owner had agreed to submit a global FRAND determination by the U.K. courts, but then appeared to renege on that commitment by proceeding with litigation in Germany, which might have had the effect of coercing Xiaomi to settle before the resolution of the matter in the U.K.  The EWCA concluded that the declaration “would serve a useful purpose in forcing Panasonic to reconsider its position” (and in fact, the case settled shortly thereafter), and stated that the requested relief would be less intrusive than an antisuit injunction (ASI).  Since then, the English courts have considered requests for declarations concerning interim licenses in four additional cases, including the present one.  The most far-reaching of these, arguably, is Lenovo Group Ltd. v. Telefonaktiebolaget LM Ericsson (Publ), [2025] EWCA Civ 182, in which the EWCA held that Lenovo was entitled to an interim-license declaration despite the fact that Ericsson, unlike Panasonic, had not agreed to the U.K. court’s determination of global FRAND terms, and the U.K. action (initiated by Lenovo) was not the first filed between the parties.  

Coming back to the present case, the facts, briefly, are as follows.  On December 19, 2024, Samsung filed an action in the EWHC for the infringement of certain SEPs, and requested the determination of global FRAND terms including a cross-license for ZTE’s SEPs.  (Samsung will be a net licensee rather than licensor.)  The next day, Samsung filed an E.U. competition law claim against ZTE in Frankfurt, Germany.  On December 23, ZTE filed an action in the Chongqing Intermediate People’s Court for a global FRAND cross-license.  Thereafter, ZTE commenced actions for the infringement of individual SEPs in Germany, the UPC, Hangzhou (China), and Brazil, obtaining a preliminary injunction in the last of these.  Samsung also filed additional actions, including an antitrust action in the Northern District of California and claims for the infringement of certain patents in Germany, the UPC, and China.  Unlike the previous English cases involving requests for interim declarations, however, in this dispute both parties have offered to agree to interim licenses, the difference being that Samsung wants the declaration to state that the terms of the interim license will be adjusted to bring them “into line with the terms of the final global license determined to be FRAND by the High Court of Justice of England & Wales at the UK FRAND Trial, and subject to any later adjustments or amendments following any appeals in the UK FRAND Proceedings, or the license that is otherwise agreed between the Parties” (para. 10), whereas ZTE wants the interim license to be adjusted “in accordance with the final determination of FRAND terms in an action brought by ZTE in Chongqing (absent earlier agreement by the parties)” (para. 9; see also para. 71).  

In reaching its decision in favor of Samsung, the court concludes, first, that ZTE breached its obligation to negotiate in good faith.  According to the court, ZTE’s purpose in proceeding with the Brazilian, German, UPC, and Hangzhou litigation is “to try to force Samsung into accepting that global FRAND terms would be decided in Chongqing”—that is, to use “the exclusionary power of national injunctions to enforce its jurisdictional preference” for the Chongqing forum, which ZTE perceives as advantageous—despite the fact that the U.K. courts were the first seised (a matter that the court describes as not being “a trump card in all situations,” but a possible “tie-breaker in an appropriate case”) (paras. 99-100, 105, 117, 119).  Moreover, given the UKSC’s decision in Unwired Planet, recognizing the English courts’ jurisdiction to determine global FRAND royalties even in the absence of the consent of both parties, there was nothing improper about Samsung’s resort to the English courts to make a global FRAND determination here (para. 120).  All of this leads the court to conclude as follows:

127. In my judgment, a willing licensor in the position of ZTE would have engaged with this action and proceeded as speedily as possible to the FRAND trial, in the absence of earlier agreement between the parties. In my view, a willing licensor would not commence a wave of injunctive proceedings, whatever the aim of the pressure which those proceedings would exert on the SEP licensee. The wave of injunctive proceedings commenced by ZTE were completely unnecessary since Samsung were and are actively seeking fresh global FRAND  cross-licence terms, to replace the previous global cross-licensing terms which the parties abided by for several years. There is no suggestion that Samsung were operating other than as a willing licensee (and as a willing licensor).

 

128. I acknowledge that a SEP licensor who seeks to persuade what they perceive to be an unwilling licensee to take a licence on FRAND terms will necessarily seek injunctive relief as the ultimate incentive to force the licensee into accepting the FRAND terms determined (in this instance) by the Court. In the UK, a so-called FRAND injunction presents the licensee with that choice. There is, however, a clear difference between seeking final injunctive relief in the FRAND proceedings on the one hand and seeking interim injunctive relief in many jurisdictions to try to force the other party off various markets. In FRAND proceedings, the licensor’s ultimate remedy is money and the risk of irreparable damage is rare or non-existent where substantial companies are involved.

 

129. Of course, from ZTE’s standpoint, the wave of injunctive proceedings was necessary to fulfil a principal aim of ZTE: to force Samsung into accepting a global FRAND determination in Chongqing.

 

130. Overall, and notwithstanding the manoeuvring by ZTE to narrow the gap between the two sides, the conclusion in my judgment is inescapable. ZTE have acted in bad faith with their wave of unnecessary injunctive proceedings, and by using the continuing threat imposed by them to seek to sideline or displace the jurisdiction of this Court and in seeking to secure their preference for a determination in Chongqing.

The court’s statement that, in FRAND cases, “the licensor’s ultimate remedy is money and the risk of irreparable damage is rare or non-existent where substantial companies are involved,” is of course consistent with the views expressed in other English decisions, particularly those authored by Lord Justice Arnold, and is quite different from the views expressed by the German and UPC judges (see, e.g., here). 

Second, the court concludes that the requested declaration would serve a useful purpose because it may “force ZTE to reconsider its position”:   “Faced with a decision by this Court that ZTE are in breach of their obligation of good faith and a formal declaration that a willing licensor would enter into the interim licence proposed by Samsung, would ZTE really persist in conduct that the Court has unequivocally and publicly condemned? I not only hope that ZTE will see the error of their ways but consider there is a prospect of them doing so” (paras. 135-36).  More specifically, in view of the declaration “a number of possibilities arise, including the following: i) First, both actions will proceed to trial, yielding two global FRAND determinations. From an academic and practical perspective, it would be interesting to have the opportunity to compare those outcomes even if they are unlikely to match due to the fact that each court is likely to hear different evidence. ii) Second, the parties agree that only one of these actions should proceed. If the parties manage to agree that, I suspect they would have moved closer to agreeing FRAND terms. iii) Third, the parties agree FRAND terms” (para. 139).

 Third, the court concludes that the declaration would not undermine comity, writing that “[i]f the declaration does induce ZTE to reconsider their position and grant Samsung an interim licence on the terms Samsung seek, that would promote comity because it would relieve the courts and tribunals of Brazil, Germany, the UPC and Hangzhou of a great deal of burdensome and wasteful litigation commenced by ZTE, but also the retaliatory litigation in those jurisdictions plus the USA commenced by Samsung” (para. 152).  To be sure, “the various offers made by ZTE would, if accepted, also relieve the same courts of the same amount of burdensome and wasteful litigation”; but in the court’s view “there is no basis . . . for criticizing Samsung for not accepting ZTE’s terms” given that the English court has jurisdiction over the matter, whereas “there is a basis for criticizing ZTE’s conduct in trying, through their interim licence terms, backed by their wave of litigation, to either derail or displace this action. ZTE’s terms interfere with the jurisdiction of this Court which they have accepted . . . . In practical terms, ZTE’s terms are designed to render this action pointless, so that Samsung effectively has to abandon it, unless they can bear the prospect of the costs of two FRAND determinations” (paras. 155-57).  The court acknowledges “that one of the unintended consequences of this judgment is that it enhances the significance of the Court first seised of a claim to determine FRAND terms, with the consequences mentioned by Arnold LJ in Nokia CA at [16] and particularly the first”—that is, the “rush by each party to the court to establish jurisdiction in a forum which is perceived to be favourable to that party’s position”—but states that “[t]here is nothing I can do about that. It is a further reminder that ETSI and other Standard Setting Organisations need to focus attention on incorporating some dispute resolution procedure(s) into their terms” (para. 161).

 I’ll be giving this case a good deal of thought over the next week, and may speak about it at the upcoming IP Day Conference at Boston University a week from today.  For now, I’ll just note a few initial thoughts.  First, on one view this case might seem similar to Microsoft v. Motorola (in which Judge Robart issued an ASI) and Panasonic v. Xiaomi (in which Lord Justice Arnold concluded that an interim license was appropriate), in that the SEP owner can be viewed as using litigation in another forum to derail proceedings that are properly before the forum issuing the requested relief.  (See, e.g., para. 159:  “If ZTE were right in their opposition to this application and the position they have adopted, it would add a powerful weapon to the SEP licensor’s armoury, in this sense. Any action for FRAND terms commenced by an implementer or net payer under a cross-licence, could be derailed in short order by the SEP licensor offering an interim licence on condition that the other party must accept the SEP licensor’s choice of forum, the offer being backed with injunctive relief in other jurisdictions, most likely targeted to cause the maximum damage to the SEP licensee’s business.”)  On the other hand, although ZTE is not challenging the English court’s jurisdiction, it hasn’t committed to agreeing to whatever the court’s global FRAND determination happens to be, which might distinguish this case from Microsoft and Panasonic.  Second, as the court acknowledges, the EWHC’s conclusion that ZTE has acted in bad faith is not binding on any of the non-U.K. courts and does not preclude those courts from proceeding as they see fit—though it may have consequences in the U.K. litigation, if it leads to the conclusion that ZTE is an “unwilling” licensor/licensee (see paras. 5(iii), 28-29).  Third, however, if ZTE doesn’t back down and the Chongqing court reaches a global FRAND determination first, what then?  If Samsung were to accede to the Chinese court’s terms, that would seem to be the end of the matter, I would think, and perhaps that is what ZTE is hoping for—though whether the Chongqing litigation is likely to terminate first is unclear (see paras. 35, 47), and the decision surely shifts some bargaining leverage to Samsung.  Fourth, as noted above, the decision would seem to encourage forum shopping by exacerbating the race-to-the-courthouse phenomenon—though perhaps only marginally so, since even if the decision had come out the other way I should think that both net licensors and net licensees would have a substantial incentive to strike first in their favored forums.  Fifth, is it possible that there would be less strategic maneuvering in cases like the present one if the English courts hadn’t first embraced global FRAND determinations in Unwired Planet–or would the Chinese courts have adopted that practice eventually anyway, and in so doing encouraged the U.K. to do the same?  I suppose we will never know—though even without courts making global FRAND determinations, SEP owners would surely use the prospect of injunctive relief in jurisdictions such as Germany, the UPC, and Brazil to nudge licensees into global settlements on licensor-friendly terms, forum shopping being one of those things that everyone condemns and that every advocate nevertheless does to serve their clients’ interests.  (In the words of La Rochefoucauld, “l'hypocrisie est un hommage que le vice rend à la vertu.”)  Sixth—although I think it is unlikely things will actually get this far—perhaps this will be the first case in which two different courts each establish global FRAND terms for the very same portfolios.  As Mr. Justice Mellor notes, if that came to pass it would “be interesting to compare the FRAND ranges or rate determined by each Court and the reasoning which led to each result”—although “because the evidence heard and accepted by the English Court may well be different to that heard and accepted by the Chongqing Court, the two Courts might reach differing conclusions, but one would hope their FRAND ranges would overlap to a significant extent” (paras. 28(iv), 91).  One would, indeed, hope so.       

EWCA (2-1) Rejects Tesla’s Request for a Declaratory Judgment that Avanci Rate Is Not FRAND

Last Thursday the Court of Appeal for England and Wales released its approved judgment in (I’m going to give the full caption here) Tesla, Inc. and Tesla Motors Limited v. InterDigital Patent Holdings, Inc., InterDigital Holdings, Inc. and Avanci LLC, [2025] EWCA Civ 193.  Others have published more timely posts than mine (see, e.g., here and here); and I am not inclined to go into the 64-page decision in all its particulars, which involves many fine points on English civil procedure and declaratory judgment law.  Instead, I will give a brief summary, and then a bit of commentary.

In effect, the decision affirms (as we would put it in the U.S.) the decision of Mr. Justice Fancourt from last July (see my post here), but by a 2-1 margin.  Lord Justice Arnold would for the most part allow the appeal, while Lord Justice Phillips and Lady Justice Whipple would not.  So InterDigital and Avanci prevail, as they did before the Patents Court last summer.

Briefly, Tesla sought among other things a declaration “of what the FRAND terms would be a for licence between Tesla and Avanci covering the Avanci 5G pool,” including 3 U.K. patents owned by InterDigital.  Under English law, courts have broad discretionary authority to make declarations that would serve a useful and legitimate purpose; in addition, “for a legal issue to be properly justiciable, it is necessary for there to be an applicable legal rule or standard” (para. 83).  Further, “to serve a foreign defendant [such as Avanci] out of the jurisdiction, the claimant has to satisfy three requirements: (1) that in relation to the foreign defendant there is a serious issue to be tried on the merits i.e. a real prospect of success (the summary judgment standard); (2) a good arguable case that the claim falls within one of the gateways for service out specified in paragraph 3.1 of Practice Direction 6B; and (3) that England and Wales is clearly or distinctly the appropriate forum for the trial of the dispute, and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction” (para. 40). 

I’m not going to go into all of these issues, but most importantly here the judges differ over whether there is a “serious issue to be tried on Tesla’s claims against Avanci” (para. 85), which relate to Tesla’s allegation that the rate Avanci charges is non-FRAND.  The judicial disagreement stems from the fact that Avanci “acts as agent for all of the [66 SEP] licensors . . . offering a standard patent licence agreement . . .  subject to a modest set of pre-approved possible modifications” (para. 19), but it is not itself a SEP owner. Avanci itself, therefore, unlike the 66 SEP owners (including InterDigital), has never made a FRAND commitment to ETSI; and while it sets the rate it offers based on information provided by those licensors and by licensees, it determines those rates independently of the SEP owners.   Each owner, however, reserves the right to offer individual licenses, and at least one Avanci member (anonymized in the decision) has made its own bilateral deal with Tesla.  So in effect, as Lord Justice Arnold puts it, "Avanci operates in a similar manner to that of collective management organisations in the field of copyright” (para. 21). 

The key question therefore is whether, in the absence of any claim that Tesla is a third-party beneficiary of any commitment made by Avanci itself, there is a serious issue to be tried in the sense that Tesla has “a real prospect of successful claiming one or more of the declarations claimed . . . at trial” (para. 89).  Avanci argues that “it is a requirement for the grant of declaratory relief concerning a legal right that the defendant is either the owner of, or subject to, the legal right relied upon” (para. 90).  Therefore, “Avanci’s argument amounts to saying that the royalty rate of $32 per vehicle which it charges for licences under the Avanci 5G Platform does not have to be FRAND, because (i) Avanci does not itself owe any FRAND obligation and (ii) the FRAND obligations owed by the members are irrelevant because those obligations can only be enforced bilaterally against each SEP owner. It is implicit in this argument that the royalty rate can only be challenged, if at all, through the mechanism of competition law” (para. 94).  Tesla, on the other hand, argues

that the royalty rate charged by Avanci does have to be FRAND. Tesla accept that Avanci does not itself owe any FRAND obligation, but contend that that is not determinative. Tesla allege that, as a matter of commercial reality, the only licence of UK SEPs covered by the Avanci 5G Platform which can be FRAND is a global platform licence of the kind offered by Avanci as agent for the SEP owners because negotiating bilateral licences with more than 65 SEP owners is impracticable. Tesla also allege that, in reality even if not formally, most members of the Avanci 5G Platform rely upon the availability of a licence under that platform as fulfilling their FRAND obligations (para. 95).

Lord Justice Arnold concludes that Tesla has “a real prospect of establishing” its position, and that if it succeeded in doing so the sought-after declaration (that a FRAND rate would be below $32) would serve a useful purpose, insofar as this “would force Avanci to reconsider its position” and would make it clear that the Avanci licensors could not rely on the $32 rate “as discharging their FRAND obligation” (para. 97).   

By contrast, Lord Justice Phillips concludes that there is no serious issue to be tried, because “[t]he jurisdiction of the courts of England and Wales to determine a FRAND licence of a portfolio of SEPs which includes foreign patents is based entirely upon the contractual undertaking of the owner of those patents to grant such licences” (para. 222).  He continues:

What the owners have not agreed to do, on any sensible interpretation of the contractual arrangements with ETSI, is to license their SEPs on a collective basis with other SEP owners, whether on “FRAND terms” or on any terms. The undertaking clearly and distinctly creates an obligation on individual owners to license the Patent Family of their declared SEPs, but it cannot be interpreted as extending to include licensing a portfolio which includes many SEPs owned by other organisations altogether. . . .

 

Does the fact that the owners have voluntarily placed their SEPs on the Avanci 5G Platform change the contractual analysis? I cannot see how it does. The fact that the owners have given undertakings to ETSI, derogating from their rights under the general law to that extent, in no way limits their freedom to exploit their rights in any legitimate way, whether on their own or jointly with others. . . . In my judgment the owners who have joined the 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. . . .

 

A further question is what is meant by a licence on FRAND terms of the SEPs on the Avanci 5G platform. . . . Tesla is plainly contending that the FRAND rate for a licence of all the SEPs on the Platform would be a single collective rate, heavily discounted for bulk and convenience. But the owners of the SEPs have simply not agreed to license their SEPs on discounted collective terms. They may offer to do so voluntarily (as they are in fact doing through the Platform), but they have not undertaken to do so and they cannot, in my judgment, be subjected to an English court’s examination and determination of the rate Avanci is offering (paras. 228-30).

Thus, “[i]n the absence of a contractual foundation for English jurisdiction,” there is no justification for “the English court engaging in the extensive exercise of determining FRAND terms in relation to foreign SEPs as against parties who have not given any relevant contractual undertaking”; “there is no such thing as a free-standing FRAND claim” (paras. 232, 236). 

Similarly, in the view of Lady Justice Whipple:

 

Before this Court, Tesla does not suggest that it has any legally enforceable right against Avanci . . . but still it submits that there is a serious issue to be tried between Tesla and Avanci. In oral submissions, Mr Segan returned to his unamended Particulars of Claim and focused on paragraph 40 where Tesla asserts a right to a licence on FRAND terms covering InterDigital’s SEPs (that is not, I think, of itself a controversial assertion), that it is a beneficiary of the FRAND commitments of all the Avanci 5G Platform members (again, that is probably not a controversial assertion) and then this: that Tesla is “accordingly, entitled to a licence on FRAND terms covering the Avanci 5G Pool” (my emphasis). The “accordingly” is not explained and I cannot see that it follows from the first two statements. Tesla goes on, at paragraph 42 of its Particulars, to assert that “it would be impractical and onerous” for Tesla to have to negotiate bilateral licences with the individual SEP owners, and at paragraph 58 repeats the assertion that Tesla is entitled to enforce the FRAND commitment of each Avanci 5G Pool member, “by seeking a licence from and/or through Avanci covering the entirety of the Avanci 5G Pool” but again without explaining the basis for that asserted entitlement. In short, I 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 (para. 245).   

There is much more to each of the three opinions, especially Lord Justice Arnold’s, but I think the above quotes provide an adequate distillation of the crucial portions.  Because Avanci itself has not made a FRAND commitment, it would not be appropriate, in the majority’s view, for a court in the U.K. to exercise jurisdiction to determine whether the terms offered by Avanci are FRAND.   

Here are some initial thoughts:

First, just to be clear, under Unwired Planet, Tesla can request that a U.K. court determine the terms of a global FRAND license in an action against InterDigital or any other SEP owner with relevant U.K. patents.  These would all be bilateral licenses, however, not licenses to the entire Avanci portfolio.

Second, while I am by no means an expert on U.K. procedural law, I’m inclined to agree with Lord Justice Phillips and Lady Justice Whipple that, if Tesla is not a third-party beneficiary of a FRAND commitment made by Avanci itself, the declaration requested here would be going a step too far, by conferring authority on the U.K. courts to establish a pool rate for the whole world.  If, however, that is correct—and if no other forum would be both willing and appropriate for this task either—that may suggest a gap in the regulatory system.  The U.S. Department of Justice’s July 28, 2020 Business Review Letter concerning Avanci, which is cited in Lord Justice Arnold’s opinion (para. 25), noted that “Avanci represents that its current rates for the 4G Platform are FRAND . . . and that Avanci intends its 5G rates also to be FRAND” (p.20).  To the extent, however, that that was a relevant consideration in the DOJ’s conclusion that the Avanci platform was unlikely to harm competition, how exactly is it supposed to be enforced?  Moreover, what exactly does it mean for a pool to charge a FRAND rate?

Consider the following stylized example.  Assume that there are x owners of SEPs relevant to some standard, each of whom owns a portfolio of identical value, for which the FRAND licensing rate per owner would be r.  (I know, FRAND is a range, not a point, but this is a stylized example.)  Assume further that if each owner were to engage in bilateral negotiations with an implementer, it would incur identical transaction costs of c_O.  Therefore, if each owner complies with its FRAND commitment, it earns on net (r – c_O), per implementer.  Assume in addition that there are y implementers, and that if each implementer engages in bilateral negotiations with an owner it incurs transaction costs of c_I.  Each implementer therefore incurs on net (r + c_I) to obtain a bilateral license from any given owner.   Now assume that there is a patent pool that can license all of the SEPs in one package, and in doing so reduce everyone’s transaction costs to zero.  For each pool license, the implementer would pay r_px, and each owner would earn r_p per implementer.  From each owner’s standpoint, the pool offers a better deal as long as r_p > (r – c_O).  From each implementer’s perspective, the pool offers a better deal as long as the pool rate per owner is less than the amount the implementer would incur in connection with a bilateral license, that is, as long as (r + c_I) > r_p.  For the pool rate to be acceptable to both sides, then,

(r + c_I) > r_p > (r – c_O).

For purposes of illustration, let’s plug some (admittedly arbitrary) numbers in.  Suppose that r = 15, c_O = 5, and c_I = 6; and that there are ten owners (x = 10).  Under bilateral negotiations, each implementer pays each owner $15, for a total royalty burden of $150; but each implementer also incurs $6 of transaction costs for each negotiation, or aggregate transaction costs of $60, so it actually incurs $210 in total.  Each owner earns on net $10 per implementer after transaction costs.  With the pool, as long as 21 > r_p > 10, owners and implementers are both better off.  At one extreme, if the pool were to discount the per-owner FRAND rate by $5, owners would be no worse off (still realizing on net $10 each from each implementer), and implementers quite lot better off (incurring only $100 in total to obtain a license from all ten owners, instead of $150 + $60 = $210).  But at the other extreme, if the pool were to charge $21 per owner, implementers would be no worse off (still incurring on net $210 to obtain a license from everyone), and owners would be a lot better off (each earning $21 per implementer as opposed to $15).  If they split the difference in half, the pool rate per owner would be $15.50, and implementers would be somewhat better off (each incurring $155 instead of $210) and owners also would be somewhat better off (each earning on net $15.50 instead of $10, per implementer).  But anything within the range would be mutually acceptable to the parties.

So what would a FRAND pool rate be?  Would it be rx (that is, $150), the FRAND rate with bilateral negotiations multiplied by the number of owners?  Or would it be (r – c_O)x (that is, $100, passing along all of the owners’ avoided transaction costs to implementers)?  Or anything in between those two?  Or could it be anything just shy of (r + c_I)x (that is, anything under $210, passing along the implementers’ avoided transaction costs to owners, but still on net benefiting implementers)?  Note that even if this last option is not FRAND, it nevertheless would be mutually acceptable to the parties.  But if it isn't FRAND, and if its non-FRANDness were effectively unreviewable, because the pool was not a party to a FRAND commitment, that seems like a problem.  Owners might be able to effectively evade their FRAND commitments by setting up pools, on the (perhaps tacit) understanding that the pool would charge an above-FRAND rate.  If this were to happen, antitrust intervention might be an option, but it may be very difficult to prove a violation.