Avanci v. Tesla - The Emergence of Patent Licensing "Platforms"

The U.K.’s Supreme Court (“Court”) recently issued a decision in the case Tesla filed against InterDigital and Avanci (“Decision”).[1]  As is so often the case in FRAND disagreements, this dispute has a long and tangled history with cases filed in multiple different jurisdictions.  This post focuses on the U.K. lawsuit. The underlying UK case was filed by Tesla seeking a FRAND determination for a world-wide license to the cellular patents managed by Avanci in the Vehicle License Platform. There was a trial court and appellate decision in the case. Those did not go well for Tesla and it eneded up appealing to the U.K. Supreme Court.

The Court addressed both Interdigital’s and Avanci’s claims that the U.K. courts did not have jurisdiction over the dispute, finding that they do.  The Court also addressed whether the FRAND obligation applies to Avanci and very reasonably decided that SEP holders cannot evade their FRAND obligations by using a licensing platform.  Accordingly, Avanci, as an agent of the SEP holders, is obligated to the same FRAND obligation as those members. 

The Parties

Avanci is sometimes called a patent pool or patent pool administrator, but it is more properly called a patent aggregation or patent licensing platform.  This is the terminology that Avanci itself uses. Avanci claims to “streamline patent licensing, through platforms.”[2]  To put it in other words, Avanci is a non-practicing entity set up for the purpose of aggregating and licensing SEPs owned by other entities.  Avanci is run by the former Chief Intellectual Property Officer at Ericsson who helped establish it on behalf of Ericsson, Interdigital, Qualcomm, KPN and ZTE.[3]  In order to license cellular SEPs to automotive manufacturers, these founders, through the Avanci entity they created, established the "Avanci Vehicle Platform" to license their SEPs, collectively, to carmakers.[4]

Interdigital, which was one of Avanci’s founding members, is a “once were company,” i.e. an entity that at one time developed and sold products, but which no longer does.  Interdigital now is a non-practicing entity that attends standard development meetings in order to inject its patented technology into various standards.  Interdigital makes money not by making or selling useful products but by licensing its SEPs to companies that actually make and sell useful products.[5] 

Interdigital is an aggressive licensor on its own behalf.  In recent years, it has directly licensed various SEP implementers mostly through the blunt stick of large litigation campaigns in jurisdictions that grant injunctions.  For example, it has filed numerous cases against Apple, Amazon, Lenovo, Disney, Samsung and Transsion seeking injunctions, sometimes in remote locations.[6]  While directly pursuing larger implementers, Interdigital leaves the smaller implementers (e.g. car companies and IoT) to Avanci to license.   

Tesla needs no introduction – it is the EV car company run by Elon Musk.  What does bear mentioning is that over the last decade or so, cars have increasingly included telecommunications connectivity.  In the terminology of the Cellular Multiverse, carmakers were (until very recently) passive implementers of such connectivity, i.e. they buy off the shelf cellular, Wi-Fi and/or Bluetooth chips or modules to provide telecommunications connectivity and services in their cars.  However, the carmakers do not themselves make or sell these implementing chips/modules. Tesla, and the other car manufacturers, make automotive vehicles and historically have been indifferent to the technology that goes into making telecommunications connectivity work as long as it works. Tesla’s cars are cellular enabled.

Background

Back in 2020, Interdigital approached Tesla about licensing Interdigital’s 3G/4G SEP portfolio.  At that time, Interdigital told Tesla that Tesla could either negotiate directly with Interdigital or could instead get a license through the Avanci 4G platform which would cover all of the Interdigital SEPs.  Tesla chose to become an Avanci 4G licensee.  Decision at para. 40.

But, when it came to 5G, apparently Tesla thought Avanci’s demands were too high, and not FRAND.  Avanci’s “rack rate” for its 5G Vehicle Platform is, indeed, shockingly high - $32 per vehicle.[7]  That means that Avanci charges more per vehicle to license standardized cellular technology than the entire revenue received by some chipmakers for their implementing products, products which also use and include miraculous chip technology.[8] It thus seems reasonable that Tesla balked at paying the exorbitant amount Avanci demanded.

Instead, “prior to launching 5G-enabled vehicles in the UK,” Tesla brought suit in the UK to seek a declaration that it was entitled to a FRAND license from Avanci for all patents in the 5G Vehicle Platform and a determination of what that FRAND rate should be.  Decision para. 42.  Telsa included Interdigital in the suit apparently because of the earlier communications from them, and also probably to forestall an all out global battle with Interdigital a la the Interdigital litigation campaigns mentioned above.

Interdigital argued that, despite being a founding member of Avanci (and one which previously had told Tesla to get a license from Avanci), Interdigital had been “unfairly singled out as a target” in the UK proceedings and the UK courts did not have jurisdiction to hear the case against Interdigital. 

Avanci argued that, even if its astronomically high rate was not FRAND, that was fine because, according to Avanci, Avanci has no obligation to license on FRAND terms.

Decision of the U.K. Supreme Court

Like so many of the U.K. SEP decisions, the Decision is a commonsense, well-reasoned, thoughtful and practical decision.  The U.K. Supreme Court decided that (a) implementers can proactively bring declaratory judgement proceedings against patent licensing platforms; (b) implementers can individually name pool members in such lawsuits; and (c) patent pools/platforms have to abide by the FRAND obligations made by its members. 

Jurisdiction

The Court decided that Tesla’s claims against both Interdigital and Avanci could proceed.  With respect to Interdigital, the Court found decisive that Interdigital had “repeatedly” asserted patent rights “in this jurisdiction” against Tesla.  For example, Interdigital did this by “writing to Tesla prior to Tesla entering into an Avanci 4G licence, informing it that it needed a licence under its SEP portfolio, including its 5G SEPs, and effectively giving Tesla the option of a bilateral licence or an Avanci Platform licence.”  Decision para. 130.  In addition, Interdigital was an “early participant” in the Avanci platform.  Finally, “InterDigital has also shown a preparedness to assert its SEPs in litigation in the courts in this jurisdiction and to seek FRAND injunctions and FRAND determinations, and it has done so on a number of occasions in recent years.  In such circumstances, ‘fairness’ required that Tesla’s claims against Interdigital proceed.”  Decision at 43. 

In other words, the Court held that Interdigital could not have it both ways.  Interdigital could not both tell Tesla to license the Interdigital SEPs from Avanci, and then deny that it was properly joined in a suit seeking a FRAND determination against Avanci.  Interdigital could not actively litigate in the UK against numerous entities and then claim that the UK courts had no jurisdiction over it.

In terms of the claims against Avanci, Avanci itself said that it wished to be joined in any ongoing claims against Interdigital as they related to Avanci’s 5G Platform.  Nonetheless, the Court examined whether the UK courts had jurisdiction over Avanci and found that it did.  In particular, Avanci was acting as an agent of the SEP holders, at least one of which had told Tesla to go get a license from Avanci.  The claim against Avanci involved a legal right to a FRAND license.  Practically speaking, if the Avanci members grant licenses primarily through the Avanci platform, then the only mechanism to make a binding FRAND determination against the SEP holders collectively is to review the Avanci platform rate and terms.  Decision at 128. 

In addition, the Court was motivated by the practicality of making a decision on Tesla’s claims: the Court recognized that it would be “immensely wasteful” if it were to deny Tesla’s claims against Avanci and require a determination of the FRAND rate with each individual SEP owner.  Finally, the Court considered that, because the SEP holders primarily licensed through Avanci, a holding that the UK courts were unable to review Avanci’s behavior would seriously undermine any effective review of whether the SEP holders were abiding by their FRAND obligation by licensing through Avanci.

FRAND Obligation

The U.K. Supreme Court paid short shrift to Avanci’s claims that it had no obligation to offer FRAND terms. 

The starting point is the FRAND obligation, undertaken by every patent owner, as a condition of having the technology described in the patent adopted in the standard, to make licences available on FRAND terms, and its important role in preventing “hold up”. This is a fundamental objective of the IPR Policy and an essential part of the background against which it must be construed.  Decision para. 70.

The Court also noted that patent pools and platforms are increasingly used by SEP holders as a mechanism to license FRAND committed patents. Decision para. 73. Some of these same SEP holders had taken the position that they were meeting their FRAND obligation by offering licenses through the Avanci platform.  Decision para. 77.  Avanci itself was given an antitrust pass by the U.S. Department of Justice because it claimed to be abiding by FRAND.[9]  Decision para. 75. 

The Court did not delve deeply into the competition law issues but did say it was a “significant” issue.  Decision para. 86.  But, as the Court quite reasonably decided, “joining a pool or platform does not release the SEP owner from the FRAND obligation it has already undertaken.”  Decision at para. 89.  Avanci was acting as an agent of the SEP holders.  Thus, even if Avanci had not itself given a FRAND obligation, it was obligated to offer to license under the same FRAND obligation as the entities on whose behalf it was acting.  Decision at para 132.

Conclusion – This Case Raises Significant Competition Law Concerns About Patent Licensing Platforms in General and About Avanci More Specifically

Avanci’s arguments come down to the following: (a) a group of competitors are entitled to get together to develop new technology; (b) these same competitors are entitled collectively to license and litigate their SEPs to companies that want to use the technology; (c) the group of competitors are entitled cooperatively to license their patents on this collective technology in a discriminatory way by using different terms and charging different rates to different implementers; (d) this group of competitors also is entitled to charge a collectively unreasonable and unfair amount to license their SEPs (e.g. they can chose to abide by FRAND but they are unentitled not to); and (e) these same competitors are entitled collectively to exclude other competitors and other implementers from using that technology if they do not agree to those non-FRAND rates and terms. 

This, however, is not what competition law allows. The competition law authorities should be looking much more closely into whether Avanci, or any other patent licensing platforms, have been practicing what they have been preaching. The competition law authorities should be examining whether Avanci, or other platforms, have engaged in the unreasonable, unfair and discriminatory practices they argue they are entitled to do.

With respect to Avanci, other troubling information has emerged.  You can find more about some of these issues here: Avanci's Admissions Cast Doubt on Pool's Procompetitive Effects by Michael A. Carrier, Brian Scarpelli, Priya Nair :: SSRN. Avanci is not a classic patent pool and so is not entitled to, and should not be given, the traditional competition law pass that was developed for real patent pools.  Given Avanci’s arguments to the UK court and the way it has behaved in general, and the questionable behavior of most of Avanci’s founding members, it is far past time for the competition authorities to take a much deeper look into Avanci’s (and its founding members’) SEP licensing practices.

[1]          Tesla v Interdigital Judgement (“Decision”).

[2]          Home - Avanci

[3]          See, Kasim Alfalahi - Avanci and Qualcomm And Ericsson Have Teamed Up With Others To Form Avanci.  I have written extensively about why Ericsson, KPN and Interdigital should be considered to be patent pirates see e.g., The ISO Holdouts: The "Nordic Companies" and Wi-Fi (Part 6 in Convergence and Competition – A Tale of Two Standards).  Qualcomm also has a long and tangled SEP licensing history replete with allegations of unfair licensing practices, albeit allegations that for the most part have failed in court. See, e.g., 23-3354.pdf.

[4]          Avanci Vehicle - Avanci

[5]          I have written about them a number of times as well.  See, SEARCH RESULTS: 'interdigital' - SEP Essentials

[6]          See discussions about licensing and litigation in InterDigital-2025-Annual-Report-2026-Proxy-Statement.pdf.

[7]          Avanci 5G Vehicle - Avanci.  Avanci charges $29 if the license is signed before the first sale of 5G connected vehicles but “other conditions apply.”

[8]          See Homage to the Semiconductor Chip for the various and amazing technologies that go into making a functioning semiconductor chip which the cellular SEP licensing world fails to take into account when valuing cellular SEPs.

[9]          https://www.justice.gov/atr/page/file/1298626/dl (letter from the DoJ in response to Avanci’s request for a business review letter).