Brussels accuses Beijing of obstructing legal action by European companies whose patents, particularly in telecoms, are used illegally by Chinese firms.
Beijing prevents European companies “holding rights to crucial technologies, such as 5G” from taking legal action outside China, “when their patents are used illegally or without appropriate compensation, in particular by Chinese smartphone manufacturers “, says the European Commission, in a press release. The EU thus seized Friday the World Trade Organization (WTO) against Beijing.
Since August 2020, following a ruling by China’s Supreme People’s Court, courts across the country can prohibit patent holders from going to a non-Chinese court to enforce their rights through an “injunction against suit” in a third country. Any violation of this injunction can be punished with a daily fine of 130,000 euros (about 136,000 francs), according to the EU.
Four targeted companies
In its request to the WTO, Brussels mentions four injunctions of this type, issued in China against the Japanese electronics group Sharp, the Swedish telecom equipment giant Ericsson, and the Americans InterDigital (mobile telephone technologies) and Conversant (ex-Valueclick, online advertising technologies).
In the front line, crucial cutting-edge technologies for telecom networks and the Internet, “the patents concerned are essential for the manufacture of products that meet certain international technical standards”, in particular smartphones, we explain in Brussels.
Patents not respected
The holders of these patents deemed essential for compliance with these universal standards “undertake to grant them to manufacturers on fair, reasonable and non-discriminatory terms”, but a mobile phone manufacturer is still required to obtain a license for these patents, in negotiation with their holder, recall the Europeans. However, Chinese smartphone manufacturers, including global giants Huawei, ZTE and Oppo, have taken advantage of these injunctions to halve the fees they pay for these Western patents, European sources estimate.
Foreign groups are also rushing into the breach: the South Korean technological colossus Samsung has seized a Chinese court in order to block a dispute over the patents of its rival Ericsson before the courts of other countries, including Germany. Beijing’s policy is ‘extremely harmful to innovation and growth in Europe’, as it prevents EU tech companies from taking advantage of the competitive advantage their patents give them and ‘pushes them to accept rights license fees below market prices”, deplores the EU.
According to Brussels, “Chinese manufacturers are asking for these anti-lawsuit injunctions, in order to benefit from cheaper, or even free, access to European technology”, which puts Western groups in an “extremely unfavorable” position.
demand for justice
“Companies have the right to seek justice under fair conditions when their technology is used illegally,” insisted Commission Vice-President Valdis Dombrovskis. This new procedure comes at a time when the EU is already engaged in a showdown at the WTO with Beijing, accused of blocking Lithuanian imports amid diplomatic tensions over Taiwan.
WTO rules circumvented
After 20 years of membership in the WTO, the United States and Europeans regularly accuse China of circumventing the rules of the institution to protect its companies, by strictly controlling access to its market for foreign groups and by amplifying the domination by the state of whole sections of its economy. Critics deemed “unfounded” by Beijing.
The “consultations” requested by the EU are the first step in the dispute settlement procedure under the WTO. If these consultations fail within 60 days, the EU may request the establishment of a group to decide on the matter.