The European Union (EU) has filed a case against China at the World Trade Organisation (WTO), claiming it restricts EU smartphone companies from going to a foreign court to protect and use their patents.
The EU claimed that China severely restricts EU companies from protecting their rights to key technologies, like 3G, 4G, or 5G, when their patents are used illegally or without appropriate compensation, giving Chinese mobile phone manufacturers as an example.
It added that the patent holders that go to court outside of China often face significant fines in the country, putting them under pressure to settle for licensing fees below-market rates. The EU said that this policy is extremely damaging to innovation and growth in Europe, effectively depriving tech companies of the possibility to exercise and enforce rights that give them a technological edge.
"We must protect the EU's vibrant high-tech industry, an engine for innovation that ensures our leading role in developing future innovative technologies,” said Valdis Dombrovskis, executive vice-president and commissioner for Trade. “EU companies have a right to seek justice on fair terms when their technology is used illegally. That is why we are launching WTO consultations today.”
The EU claims that since August 2020, China’s Supreme People’s Court decided that Chinese courts can prohibit patent holders from going to a non-Chinese court to enforce their patents by putting in place an “anti-suit injunction”. The court also decided that violation of the order can be sanctioned with a €130,000 daily fine. Since then, Chinese courts have adopted four of these injunctions against foreign patent holders.
The union said it had raised the issues with China on a number of occasions to find a solution, to no avail. Now, it believes China’s actions are inconsistent with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), so has requested consultations at the WTO.
The dispute settlement consultations the EU has requested are the first step in WTO dispute settlement proceedings. If they do not lead to a satisfactory solution within 60 days, the EU can then request the WTO to set up a panel to rule on the matter.
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