The European Union (EU) has filed a lawsuit against China in the World Trade Organization (WTO) for preventing EU companies from going abroad to protect and use their patents.
China significantly restricts EU companies that have rights to key technologies (such as 3G, 4G and 5G), reducing their ability to protect these rights when, for example, Chinese mobile phone manufacturers use their EU companies’ patents illegally or without adequate compensation.
Patent owners who go to court outside China are often subject to significant fines in China, which puts pressure on them to set licensing fees below market rates.
Such a Chinese policy is very detrimental to innovation and growth in Europe and, in fact, prevents European technology companies from exercising and exercising the rights that confer technological advantages on them.
“We need to protect the EU’s dynamic high-tech industry, the driving force behind innovation that gives us leadership in developing the innovative technologies of the future. EU companies whose technology is being used illegally have the right to go to court on fair terms. That is why we are launching WTO consultations today,” Valdis Dombrovskis, Executive Vice President and Trade Commissioner.
Since August 2020, Chinese courts have banned EU companies holding high-tech patents from depriving them of legal protection in another jurisdiction or court. Chinese courts are also threatening heavy fines to deter European companies from going abroad.
This puts European high-tech companies fighting for their rights at a disadvantage. Chinese manufacturers are demanding these bans to take or continue legal proceedings in another jurisdiction or court in order to gain cheaper or even free access to European technology.
The EU has repeatedly approached the Chinese authorities to find a solution to this issue, but to no avail. The EU considers that China’s actions do not comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and has requested consultations with the WTO.
The consultations requested by the EU are the first step in the WTO dispute settlement procedure. If this does not lead to a satisfactory solution within 60 days, the EU may request the WTO to set up an expert group to decide on the matter.
In August 2020, China’s Supreme People’s Court ruled that Chinese courts could prohibit patent holders from taking or continuing legal proceedings in another jurisdiction or court to enforce their patent rights. In addition, the Supreme People’s Court also ruled that in case of violation of the order, a fine of 130 thousand. per day. Since then, Chinese courts have issued four such injunctions against foreign patent holders to initiate or pursue legal proceedings in another jurisdiction or court.