EU challenges China at WTO over royalties for EU high-tech sector

Brussels – By now, it is an open and daily war. The European Commission announced today (Jan. 20) that it has requested consultations at the World Trade Organization (WTO) to eliminate China’s unfair and illegal trade practices in intellectual property.

The Commission complains that China empowered its courts to set binding worldwide royalty rates for EU standard essential patents without the patent owner’s consent, forcing innovative European high-tech companies to lower their rates globally, thus giving Chinese manufacturers cheaper access to European technologies.

In addition, Brussels believes that China unduly interferes with the competence of EU courts in European patent issues. The European Commission strongly believes such practices are incompatible with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Since no satisfactory negotiated solution has been forthcoming from China, the EU “is compelled to request consultations as a first step in this dispute settlement procedure at the WTO, with the aim to ensure that its high-tech industries – notably in the telecoms sector – can effectively exercise their patent rights and protect their investments in innovation,” the Commission said in a statement.

This case concerns ‘Standard Essential Patents‘ that protect technologies essential to produce goods that meet a standard, for example, 5G for cell phones. European companies hold many of these high-tech patents, particularly in telecommunications, giving them a technological advantage. By setting global royalty rates for such patents, China is attempting to force EU companies to give Chinese manufacturers cheaper access to such European technology.

The practice of Chinese courts to set global royalty rates for standard essential patents relates to another dispute, that of anti-suit injunctions, currently being challenged by the EU at the WTO. Chinese counter-suit injunctions effectively restrict high-tech patent holders by fining or otherwise sanctioning them if they try to enforce their intellectual property rights through a non-Chinese court. The WTO panel established in this case (DS 611) should issue a report in the first quarter of 2025.

The consultations requested by the EU are the first step in the WTO’s dispute settlement procedure. Without a satisfactory solution within 60 days, the EU can move to the contentious stage and ask the WTO to establish a panel to rule on the issue.