The European Commission filed a complaint with the World Trade Organization (WTO) on Monday (January 20) accusing China of adopting “unfair and illegal” practices by unilaterally setting patent licensing fees for European Union (EU) companies.
The European Commission, responsible for overseeing trade policies of the 27 member countries, stated in a press release on Monday that the Chinese authorities illegally granted their courts the power to set global patent licensing fees for high-tech EU companies, especially in the telecommunications industry. The statement mentioned that without the consent of patent owners, Beijing set global patent licensing fees for European high-tech companies, particularly in the telecommunications sector.
“This forces innovative high-tech companies in Europe to lower patent fees globally, enabling Chinese manufacturers to access these European technologies at lower costs, which is unfair,” the statement said.
The Chinese Ministry of Commerce denies these allegations.
The case involves Standard Essential Patents (SEPs). SEPs are patents that are essential and universally required when producing products that meet specific international standards, particularly in products such as mobile phones and mobile devices, like 5G technology for mobile phones.
European holders of Standard Essential Patents include Nokia and Ericsson.
The European Commission has requested consultations with China, which is the first step in WTO dispute resolution. If a satisfactory solution is not reached within 60 days, the European Commission can request the establishment of a panel for arbitration.
The arbitration panel process typically takes 12 months.
The Commission stated that this case is related to another case filed by the EU with the WTO in 2022, involving Beijing’s retaliatory injunctions that restrict telecom patent holders from enforcing intellectual property rights in non-Chinese courts and face heavy penalties if they do so. The panel handling that case is expected to release a final report in the first quarter of 2025.
Since August 2020, Chinese courts have issued injunctions in four cases preventing foreign companies from initiating legal proceedings anywhere globally.
The EU believes that China is using legal measures to pressure EU companies holding high-tech patents and preventing them from properly protecting their technology. Additionally, Chinese courts use the threat of hefty fines to deter European companies from seeking relief in foreign courts, putting European high-tech companies at a significant disadvantage when protecting their rights, especially during licensing negotiations, where Chinese manufacturers use injunctions to quickly obtain cheaper licenses or even acquire European technology for free.
Three of the injunction cases favored Chinese companies, including Huawei, Xiaomi, and Guangdong BBK Electronics. The one case that ruled in favor of Samsung Electronics was an injunction against South Korean Samsung Electronics and Swedish telecom giant Ericsson.