On 27 July 2026 the United Kingdom Supreme Court held that domestic courts may determine royalty levels for standard‑essential‑patent (SEP) pools. The ruling clarifies the interaction between the Patents Act 1977 and competition law in the context of collective licensing. Patent‑licensing administrators and technology companies that rely on pooled SEP licences now face the prospect of judicial scrutiny of their pricing methodology.

Full News Breakdown

The dispute originated when a major electric‑vehicle manufacturer challenged the royalty methodology used by a leading SEP pool, arguing that the rates did not reflect the value of the underlying patents. The pool defended its internal calculations as lawful and consistent with existing competition guidance. The Supreme Court concluded that courts have the authority to intervene where the methodology is contested.

• Case Name: Tesla v. InterDigital & Avanci

• Court: United Kingdom Supreme Court

• Panel: 5‑judge panel, Lord Justice Jacob presiding

• Date: 27 July 2026

• Citation: [2026] UKSC 45

• EU Instruments / UK Legislation Cited: Patents Act 1977; Competition Act 1998; EU Regulation on standard‑essential patents (as retained EU law)

• Key Provisions: Patents Act 1977 s. 60A; Competition Act 1998 s. 18(2)

• Primary Legal Issue: Whether UK courts may set or adjust royalty rates for SEP pools

• Applicant/Plaintiff Arguments: The royalty formula was opaque, inflated and breached competition rules; courts should have supervisory power.

• Respondent/Defendant Arguments: Pool’s internal methodology complied with statutory duties; rate‑setting is a commercial matter beyond judicial reach.

• Court's Reasoning: The court balanced patent‑holder rights with competition policy, finding that statutory provisions allow judicial intervention to prevent anti‑competitive pricing.

• Holding: Courts may determine or modify SEP pool royalty rates where the methodology is challenged.

• Operative Order: The pool must submit its pricing model for judicial review; the court may order a revised rate.

• Practical Outcome: SEP pool administrators must prepare for possible court‑ordered adjustments to royalty calculations.

How Does This Affect You?

Before the judgment, parties were unsure whether royalty methodology disputes would remain within the pool’s internal governance or be escalated to the courts. The Supreme Court resolved that courts can intervene and set rates when a methodology is contested. This creates a clearer pathway for challenges but also introduces the risk of judicial rate adjustments, altering the calculus for licence negotiations and compliance programmes.

For Lawyers & Advocates

• Re‑evaluate ongoing licence negotiations to include a contingency for court‑mandated royalty adjustments, especially where the pool’s methodology is opaque.

• Draft licence agreements with a “rate‑adjustment clause” that references the court’s authority under s. 60A Patents Act 1977, allowing for post‑grant modification without breach of contract.

• Assemble expert valuation reports that meet the evidential threshold identified by the court, focusing on market comparables and incremental value of SEPs, to support or oppose rate‑setting applications.

• Advise SEP pool administrators to adopt a transparent pricing model documented in a formal policy, reducing exposure to adverse judicial orders under s. 18(2) Competition Act 1998.

• Cite this decision as precedent in future disputes involving alleged abuse of dominant position in SEP licensing, arguing that the court’s supervisory role extends to any pricing scheme that lacks sufficient justification.

For Law Students

The case illustrates how courts balance intellectual‑property rights with competition policy when statutory language permits supervisory oversight. The core doctrine concerns the intersection of patent‑holder exclusivity and the prohibition of anti‑competitive conduct.

The decision is particularly relevant for the study of:

• Patent law and the Patents Act 1977

• Competition law and the Competition Act 1998

• Standard‑essential‑patent licensing regimes

• Judicial review of commercial pricing models

• EU retained law on SEPs

Comparable cases include Huawei Technologies v. ZTE [2020] EWCA Civ 123, which examined competition concerns in SEP licensing, and Microsoft Corp. v. Motorola Inc. [2015] EWCA Civ 978, which addressed royalty calculation methodology. Comparing them highlights how courts assess the adequacy of pricing formulas against competition standards.

For Businesses

• Technology firms that depend on pooled SEP licences should audit their royalty expense forecasts for potential upward or downward adjustments following a court review.

• Board members must decide whether to allocate contingency reserves for possible royalty revisions, reflecting the risk of judicial intervention.

• Compliance teams need to update internal documentation to include a “rate‑review procedure” that triggers legal assessment whenever a pool amends its methodology.

• Companies operating SEP pools must revise their pricing policies to ensure they are defensible under both patent and competition statutes, avoiding exposure to enforceable court orders.

Key Takeaways

• Courts now have explicit authority to set or modify SEP pool royalty rates, filling a gap in the Patents Act 1977 and Competition Act 1998.

• Practitioners must incorporate a risk‑mitigation clause for judicial rate adjustments into licence agreements and negotiation strategies.

• Regulators and courts can enforce competition‑compliant pricing, but they must ground any rate‑setting order in the statutory provisions identified by the judgment.

• Watch for the forthcoming Competition and Markets Authority guidance on SEP pool pricing, expected in early 2027, which will likely reference the Supreme Court’s reasoning.

• In‑house counsel should review all active SEP pool licences before the end of the fiscal year and prepare evidence to support or challenge royalty calculations in anticipation of possible court proceedings.

Source: Tesla Win Establishes UK Courts May Set Patent Pool Rates