Tesla v InterDigital

Hearing dates: 2–3 December 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on 6 March 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This is a jurisdictional dispute. The Claimants (“Tesla”) are respectively (i) a company incorporated in the State of Delaware, USA and headquartered in Texas which is the ultimate parent company of the multinational Tesla Group, and (ii) a wholly-owned indirect subsidiary incorporated in England and Wales which sells premium fully-electric vehicles, and provides services relating to such vehicles, in the UK. The First to Third Defendants (collectively “InterDigital”) are or were Delaware corporations whose principal place of business is in Delaware. The First Defendant has been dissolved and therefore can be ignored. The Second Defendant (“IDPH”) and the Third Defendant (“IDH”) are members of the InterDigital Group, which develops and licences wireless communications technology. The InterDigital Group owns a worldwide portfolio of patents which have been declared essential (“standard-essential patents” or “SEPs”) to the European Telecommunications Standards Institute (“ETSI”) 2G, 3G, 4G and 5G standards (“the ETSI Standards”). These include European Patents (UK) Nos. 3 455 985, 3 566 413 and 3 718 369 (“the Challenged Patents”), the registered proprietor of which is IDPH and which were declared essential to the 5G standard by IDH. The Fourth Defendant (“Avanci”) is a company incorporated in Delaware whose principal place of business is in Texas which carries on business as an administrator of patent pools or (to use Avanci's preferred term) platforms, including a platform for SEPs declared essential to the ETSI Standards for use in 5G-enabled vehicles (“the Avanci 5G Platform”). The InterDigital Group is among the licensor members of the Avanci 5G Platform. At the time of the hearing in the court below there were about 66 such members who owned around 170,000 SEPs. (Since then, those numbers have increased, but in this judgment I will for the most part continue to refer to the figures that were before the judge.)

Tesla wish to launch 5G-enabled vehicles in the UK. The UK is the Tesla Group's fourth largest market globally. The Avanci 5G Platform includes around 11,900 UK SEPs, all of which are the subject of undertakings given to ETSI which oblige their owners to offer licences of them on fair, reasonable and non-discriminatory (“FRAND”) terms to anyone who wishes to implement the ETSI Standards (or in some cases equivalent undertakings given to other standard-development organisations). Tesla accept that they will need a licence under these UK SEPs, and aver that a licence on FRAND terms will be a global licence in respect of all SEPs in the Avanci 5G Platform. Tesla complain that Avanci has only offered a flat rate of $32 per vehicle for such a licence on a non-negotiable basis. Tesla contend that this rate far exceeds a FRAND rate. Accordingly, Tesla have brought these proceedings with the objective of obtaining a determination by the Patents Court of what rate is FRAND. Tesla have undertaken to take a licence on the terms determined by the Patents Court to be FRAND (subject to adjustment as a result of any appeal).

Tesla commenced the proceedings on 5 December 2023 seeking (i) declarations of invalidity (and consequential revocation) and/or inessentiality (and hence non-infringement) of the Challenged Patents (“the Patent Claims”), and (ii) declarations essentially as to FRAND terms for a licence of the UK SEPs in the Avanci 5G Platform, alternatively the Challenged Patents (“the Licensing Claims”). The Patent Claims are brought against IDPH. The Licensing Claims are brought against all the Defendants, with InterDigital being sought to be joined as representing all relevant licensor members of the Avanci 5G Platform pursuant to CPR rule 19.8.

On 7 December 2023 Mellor J granted Tesla permission on a without notice application to serve the claim form on the Defendants outside the jurisdiction. Tesla served the claim form so far as it relates to the Patent Claims on IDPH in England, pursuant to CPR rule 63.14(2). Permission to serve out was needed and granted for the Licensing Claims pursuant to a combination of gateways (3) (in relation to IDH and Avanci), (4A) (in relation to IDH) and (11) (in relation to all the Defendants) in CPR Practice Direction 6B paragraph 3.1, although Tesla subsequently abandoned reliance on gateway (4A). Tesla served the claim form on Avanci and InterDigital on 8 December 2023.

On 2 January 2024 Avanci and InterDigital filed acknowledgements of service indicating that they intended to challenge the jurisdiction of the English courts. On 8 March 2024 InterDigital and Avanci separately applied pursuant to CPR Part 11 to challenge the English courts' jurisdiction to hear the claims, or for an order that they should decline to exercise their jurisdiction. On 8 May 2024 InterDigital also applied to strike out the claim, without prejudice to their jurisdictional challenge. On 16 May 2024 Tesla applied for permission to amend their Particulars of Claim.

The applications were heard by Fancourt J in late May and early June 2024. On 15 July 2024 the judge made an order, for the reasons given in his judgment of the same date [2024] EWHC 1815 (Pat), setting aside service of the claim form on the Defendants except for service on IDPH in relation to the Patent Claims. He also struck out the Licensing Claims against IDPH, if validly served pursuant to rule 63.14(2), but otherwise dismissed the application to strike out. Tesla's application to amend the Particulars of Claim was dismissed.

The judge granted Tesla permission to appeal against his jurisdictional orders on seven grounds and InterDigital permission to cross-appeal, if necessary, on two grounds. In addition, InterDigital have served a respondents' notice raising no less than 15 additional or alternative grounds for the judge's decision in so far as it was in their favour (although one of these relates to costs and therefore does not require consideration at this stage). The appeals raise important issues as to the jurisdiction of the courts of England and Wales to determine disputes as to what licence terms are FRAND at the behest of an implementer rather than a SEP owner in the context of a claim concerning a patent pool or platform.

The general background to FRAND disputes

I have set out the general background to FRAND disputes in a number of judgments, most recently in Lenovo Group Ltd v Telefonaktiebolaget LM Ericsson (publ) [2025] EWCA Civ 182 at [3]–[16]. I shall take that explanation as read and not repeat it.

The FRAND obligation

Clause 6.1 of the ETSI Intellectual Property Rights Policy (“the ETSI IPR Policy”), which is governed by French law, provides for persons who declare patents (or, more usually, patent applications) to be essential to an ETSI Standard to give an undertaking to grant irrevocable licences on FRAND terms in respect of such rights. Clause 6.1 is a stipulation pour autrui. Expressing this in language more familiar to English lawyers, the result of a declaration to ETSI in accordance with clause 6.1 is a contract between the declarant (usually, but not necessarily, the SEP owner) and ETSI for the benefit of third parties, namely implementers who wish to practice the relevant standard and thus the SEP in question. The contract obliges the declarant and its Affiliates (as defined in the ETSI IPR Policy) to grant a licence of the SEP to any implementer who wants a licence on FRAND terms.

There is a mounting body of case law in this jurisdiction on the interpretation and application of this obligation: see in particular the recent decisions of this Court in InterDigital Technology Corp v Lenovo Group Ltd [2024] EWCA Civ 743, [2024] RPC 24 and Lenovo v Ericsson. It is a rapidly developing field of law.

It is not necessary for present purposes to repeat most of the statements of principle to be found in the judgments referred to in the previous paragraph. The key point is that it has been established that, in the event of dispute between an implementer and a SEP owner, the Patents Court can determine what terms are FRAND, and to date it has done so in three cases.

It is also important to be clear as to how the Patents Court can enforce such a determination. I explained the general position in Optis Cellular Technology LLC v Apple Retail UK Ltd [2022] EWCA Civ 1411, [2023] RPC 1 at [73]:

“…. As discussed above, the twin purposes of the ETSI IPR Policy are to avoid hold up and hold out. To achieve this it is necessary, in the absence of agreement between the parties, for the national court to be able to enforce its determination against both parties. The national court can only enforce its determination against the SEP owner by withholding an...