Tesla, Inc & Anor v Idac Holdings, Inc & Ors

An implementer may bring a claim seeking FRAND relief before pursuing patent validity issues, and the patent claim is not abusive merely because licensing relief is intended to be determined first. A FRAND declaration must, however, be anchored to an enforceable legal right and serve a useful purpose. Representative proceedings cannot ordinarily be used to bind overseas parties who could not themselves be sued in England, particularly where conflicts of interest and serious evidential difficulties may arise. A licensing claim requiring evidence and participation from numerous patentees and a platform administrator cannot properly proceed against one patentee alone. The court must also identify the forum with the closest substantial connection to the worldwide licensing dispute.

Tesla sought declarations concerning the invalidity and non-essentiality of three UK-designated patents and, alternatively, declarations and a determination of FRAND terms for a worldwide 5G platform licence administered by Avanci. InterDigital and Avanci challenged jurisdiction, service out of the jurisdiction and the use of representative proceedings under Civil Procedure Rules 1998 rule 19.8. Tesla relied on the patent claims as an anchor for the licensing claim and sought to represent the other platform patentees. The central issues were whether the patent claims were genuine, whether the licensing claim disclosed a serious issue to be tried, whether representative proceedings could bind non-parties outside the jurisdiction, and whether England and Wales was the appropriate forum.

1. Patent claims. The validity, revocation and non-essentiality claims were real claims. It was permissible for Tesla to seek licensing relief first and to defer technical issues. The claims were not an abuse of process merely because the licensing claim was commercially more important or might make the patent claims unnecessary. Service on IDPH was valid under Civil Procedure Rules 1998 rule 63.14(2), and IDH was at least a proper party to the patent claims because it had made the relevant ETSI declarations and undertakings.
2. Avanci. There was no serious issue to be tried against Avanci alone. The pleaded French-law case established, at most, a contingent liability for failure by the patentees to perform their obligations in good faith. It did not provide a present legal dispute or a sufficient basis for the declaratory relief sought.
3. InterDigital and declarations. The ETSI undertaking supplied a legal standard against which FRAND terms could be assessed. A declaration could serve a useful purpose even though InterDigital could not itself grant the platform licence. Nevertheless, a worldwide rate-setting trial could not fairly or effectively be conducted against IDH alone. The other patentees were not before the court, could not reliably provide the necessary licences and valuation evidence, and might have conflicting interests.
4. Representative proceedings. Rule 19.8 is a broad and flexible procedural device, but it does not cure the absence of a properly constituted claim or remove the practical difficulties of a complex FRAND trial. It would ordinarily be jurisdictional overreach to use representation to bind persons who could not have been sued in England. The representative claim was therefore not permitted to continue.
5. Gateway and forum. Had there been a serious issue to be tried, the claim against IDH would have related to UK property within gateway (11) of Practice Direction 6B, notwithstanding the proposed worldwide licence. The licensing dispute had, however, a substantially closer connection with the United States. The Delaware Court of Chancery was an available and appropriate forum, and Tesla failed to show that England and Wales was clearly the appropriate forum.
6. Disposition. Service out was set aside, save for service on IDH as defendant to the patent claims. The licensing claim against IDPH was struck out if validly served under rule 63.14(2). The remaining strike-out application was dismissed.