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Much ado about nothing? A preliminary assessment of the EU’s WTO complaint against China on IP enforcement
Dr. Weinian Hu says the EU's WTO case against China is a Distraction from Useful Dialogue on the Enforcement of IP Rights.
The following is an abstract of and commentary based on the Policy Insights: Much Ado About Nothing? EU’s WTO Complaints Against China Have Distracted from Useful Dialogue on the Enforcement of IP Rights at the Institute for China-Europe Studies (ICES), a Brussels-based think tank.
The author is Dr. Weinian Hu, an independent researcher whose research interests include China-EU trade relations and multilateral EU-Asia relations, with a focus on international trade law, patent law, and intellectual property rights protection. She has served as team leader for the EU for coordination of the Asia-Europe Meeting (ASEM), the multilateral political dialogue process between Asia and European regions.
In December 2022, the EU lodged a complaint against China with the WTO regarding the power of Chinese courts to issue worldwide and prospective anti-suit injunctions (ASIs) that extend beyond its jurisdiction. As a result, standard essential patents (SEP) holders may be prohibited from asserting their patent rights protected by the TRIPS Agreement in non-Chinese jurisdictions. Such ASIs may not be limited to the specific scope, conditions or circumstances related to the concrete cases before a Chinese court, either. The EU substantiated its allegation by taking the examples of ASI orders granted in 2020 by various Chinese courts in four licensing disputes related to SEPs. In the same context, the EU complained that China has not applied and administered its laws, regulations and other measures in a uniform, impartial and reasonable manner.
In each of the four licensing disputes mentioned above, an ASI was sought by the complainant in a Chinese court while being sued by the respondent for patent infringement in non-Chinese jurisdictions in parallel proceedings. However, despite the litigation, the parties continued their negotiations. Licensing agreements were reached, and lawsuits were withdrawn, even before the EU submitted its complaint.
The ASIs granted by the Chinese courts are not without controversy, indeed, in relation to their respective scope. Nonetheless, however unjustifiable, they were all neutralised subsequently by the anti-ASIs issued by non-Chinese courts when adjudicating the patent infringement cases in front of them. Thus, although presently there are no international rules that govern ASI application, courts in different jurisdictions are efficient in preserving judicial sovereignty and protecting patent rights. In other words, judges are competent in fixing unjustifiable ASIs.
It is regrettable that the EU and China were not able to resolve their differences on ASIs through dialogue. This is despite the fact that both sides have succeeded in resolving many IPR issues, including IP legislation, in the past two decades thanks to the comprehensive EU-China IPR Dialogue mechanism. With its robust telecoms innovation landscape, China will emerge as a global IP litigation centre, epitomised by ASI litigation. Meanwhile, Chinese jurisprudence will also gradually influence international IP law-making, which should encourage the EU to cooperate more closely with China on IP protection.
On 9 December 2022, the EU lodged a complaint against China at the WTO on intellectual property (IP) rights enforcement (China-Enforcement of Intellectual Property Rights). The complaint is two-fold. First, it concerns IP rights protection; second, it is about judicial transparency.
On IP rights protection, the EU claimed that, through the anti-suit injunction (ASI) procedure, Chinese courts prohibit holders of standard essential patents (SEPs) from asserting their rights as protected under the TRIPS Agreement in non-Chinese jurisdictions. The EU substantiated its claim with four litigation cases adjudicated by Chinese courts concerning SEP-licensing disputes in quick succession in the course of 2020.
On judicial transparency, the EU alleged that China has failed to publish the relevant judicial decisions invoked as ‘guiding materials’ by the courts when granting the ASIs in question; and, later China failed to respond the EU’s request for information. Due to this failure, China has breached its obligations on transparency within the meaning of the TRIPS Agreement.
This commentary focuses on the issue of IP protection. It will submit that the EU’s complaint may be a case of ‘much ado about nothing’ for the following reasons:
1. The EU seems to have involved itself in private disputes that were all settled by the parties – even before its complaint was lodged at the WTO.
Reflecting on the chronology of each case in the EU’s complaint, including Xiaomi v. InterDigital, parallel litigation that took place across half a dozen of jurisdictions around the globe appeared to be more a negotiation tactic engaged by the disputing parties (in a spirit of revenge occasionally). Their overall purpose seemed rather to gain an upper hand in the SEP-licensing negotiations. In fact, although the relationship showed the signs of viciousness at the time of multiple litigation, the disputing parties continued to negotiate. In the end, for all the cases that the EU quoted, the SEP-licensing agreements were concluded and the multiple law suits were withdrawn – even before the EU submitted its complaint at the WTO.
In a relationship between the SEP holder and the implementor/manufacturer, each side has a significant business stake in reaching a SEP-licensing deal after all. Therefore, it might not be such a surprise that the parties have concluded their respective SEP-licensing agreement based on the FRAND principle in the end. The EU’s involvement looks superfluous.
2. Judges in non-Chinese jurisdictions know how to protect IP rights by engaging the ASI procedure in different ways.
With an extraterritorial nature, ASI, a common law procedure established in the 15th century, is inherently controversial. Still, however unjustifiable an ASI may be, judges are capable of fixing it by granting an anti-ASI upon application, for example. This was exactly what the Delhi High Court did to inhibit the ASI granted by the Wuhan Intermediate Court from enforcement in Xiaomi v. InterDigital. According to the Delhi court, judges are ‘… duty bound to protect such incursion on its jurisdiction and on the fundamental rights of its citizen to seek legal redress’.
Indeed, even though the scope of the ASIs issued by the Chinese courts were unjustifiable according to the EU, when a respondent chose to apply for an anti-ASI procedure in a non-Chinese jurisdiction, the anti-ASI granted was capable of neutralising the ASI swiftly.
Overall, by engaging the ASI, one jurisdiction is capable of preventing its proceedings from being hindered by another. As a result, judicial sovereignty will be preserved, and a patent holder’s rights for protection will remain intact.
One cannot help but ask why the EU didn’t leave the judges to fix unjustifiable ASIs, especially since they have already succeeded doing so?
3. Criticisms against China’s ASIs
Nonetheless, despite the above, the EU’s criticisms against the ASIs granted by the Chinese courts have their merits. In summary, the EU’s criticisms focus on 1) the unlimited scopes of the ASIs granted by the Chinese courts that were ‘not limited to specific scope, conditions or circumstances related to the concrete cases submitted to the court in question’; 2) the power of Chinese courts beyond the jurisdiction of China, when the ASIs issued by them prohibit a party from applying for enforcement of, or from seeking judicial relief in, non-Chinese courts.
On the first question of scope, when deliberating an ASI order, a domestic court should compare its action with the parallel action in foreign courts in order to address the same subject matter. The scope of each ASI granted by the Chinese courts was much more expansive than the scope of the decision on patent infringement issued by the non-Chinese jurisdictions. Therefore, the four ASIs were hard to justify.
As seen in Xiaomi v. InterDigital, InterDigital sued Xiaomi in the Delhi High Court for infringing six patents owned by InterDigital and enforced in India, such as REDMI NOTE8 and REDMIK20. InerDigital also asked the Delhi court for one temporary and one permanent injunction restricted to the SEP-specific products. But the ASI order granted by the Wuhan court, as a response to the action in the Indian Delhi High Court, prohibited InterDigital from enforcing the entire portfolio of all SEPs held by InterDigital. The scale and sweeping scope of the Wuhan ASI order were overwhelmingly larger than that of InterDigital’s infringement litigation against Xiaomi in Delhi.
The EU’s second criticism in essence is that the Chinese courts disregarded the difference between the patent infringement lawsuit submitted in non-Chinese jurisdictions and the SEP-licensing disputes in their purview.
Simply put, the ASI applications in front of the Chinese courts did not concern SEP-licensing terms, which might warrant a more global scope due to the practice of the telecom industry, the nature of the FRAND principle, and the intentions of the parties to a SEP-licensing agreement. The ASI applications were, however, confined to the patent infringement decisions specific to the jurisdiction upon which the patent rights were enforced. Therefore, the scopes of the ASIs should have been jurisdictional-specific, too – while the Chinese courts seemed to have mixed the subject matters of patent protection and SEP-licensing. The facts highlighted above in Xiaomi v. InterDigital illustrates this point.
Although the ASIs issued by the Chinese courts were controversial, it is regrettable that the EU and China were not able to resolve their differences on ASIs through dialogue. This is despite the fact that both sides have succeeded in resolving many issues on IP protection in the past two decades. With its robust telecoms innovation landscape, China will emerge as a global IP litigation centre, epitomised by ASI litigation. Meanwhile, Chinese jurisprudence will also gradually influence international IP law-making, which should encourage the EU to cooperate more closely with China on IP protection. (Enditem)