EU escalates China SEP patent challenge
‘Anti-suit’ injunctions in SEP cases carry fines of up to €130,000 a day, says EU | Blocking of Lithuanian exports and content also on the table | Full details of dispute and next steps.
The EU is set to proceed with two cases against China at the World Trade Organization (WTO) after attempts to resolve the disputes failed.
In an announcement shared yesterday, December 7, the European Commission said that it had requested the formation of two adjudicating panels at the WTO for the trade disputes with China.
One dispute focuses on China’s trade restrictions against Lithuanian exports and EU exports containing Lithuanian content, which have been in place since December 2021.
The other dispute concerns the legality of China restricting EU high-tech patent owners from accessing EU courts.
In February, the European Commission—on behalf of the EU’s 27 members—launched a legal challenge at the WTO, arguing that China is restricting EU companies from protecting and using their patents.
“In both cases, the Chinese measures are highly damaging to European businesses. Furthermore, China's discriminatory measures against Lithuania affect intra-EU trade and intra-EU supply chains and they impact the functioning of the EU internal market, including by forced market adjustments. The removal of these measures is in both the economic and strategic interest of the EU,” said the Commission.
China courts ‘deterring SEP owners’
According to the Commission, EU companies are being deterred from protecting their standard-essential patents (SEP) in foreign courts.
In August 2020, Chinese courts began issuing anti-suit injunctions in SEP cases. These injunctions prevent patent owners from going to a non-Chinese court to enforce their patents.
The Commission has also claimed that the courts are using the “threat of heavy fines to deter European companies from going to foreign courts”. Violation of these anti-suit injunctions can to fines of up to €130,000 ($136,900) per day.
The Chinese measures are inconsistent with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights, said the EU.
Consultations with China were held over three days in April this year but failed to settle the dispute.
“Through these anti-suit injunctions China unilaterally imposes rules for the benefit of its own enterprises, to the detriment of the WTO multilateral system for the protection of intellectual property rights. By requesting a WTO panel in this case, the EU seeks to ensure that its high-tech industry can effectively exercise its patent rights to protect investment in innovation,” said the Commission.
The WTO Dispute Settlement Body will discuss the EU's request at its next meeting, which is due to be held later this month.
China can oppose the establishment of a panel once and, if it does oppose, the EU will renew its request. The panel is set to be established at the meeting of the settlement body on January 30 next year. Panel proceedings can last up to one and a half years.
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