EC files fresh WTO proceeding against China over global rate-setting of EU SEPs

Context: In November 2023, China’s Chongqing First Intermediate People’s Court handed down a decision in Nokia v Oppo setting the rates that the Chinese manufacturer had to pay worldwide for using Nokia’s patents related to 2G, 3G, 4G and 5G “smart terminal products”, such as mobile phones. The European Union sent China an official request for it to supply the court’s judgment under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), alleging that the ruling affected the EU’s rights under the agreement. A couple of months later the companies settled their dispute by signing a cross-licensing deal. 

What’s new: The EC has today announced that it is targeting China in a new dispute settlement consultation at the WTO, aiming to “remove unfair and illegal trade practices” (January 20, 2025 European Commission press release). The EC has alleged that China has empowered its courts to set binding worldwide royalty rates for EU standard-essential patents (SEPs), without the consent of their patent owners. This is giving Chinese manufacturers cheaper access to those European technologies unfairly, it alleged. China “attempted to force EU companies to give Chinese manufacturers cheaper access to that European technology”, and “unduly interfere” with the competence of EU courts for European patent issues, the EC has stated.

Direct impact: This consultation request is the first step in WTO dispute settlement proceedings. If this does not lead to a satisfactory solution within 60 days, the EU can move towards the litigation phase and request that the WTO set up a panel to rule on the matter.

Wider ramifications: Chinese courts are not the only ones that have assumed jurisdiction over global FRAND rates in the past. In the EU, the Unified Patent Court and German national courts, for example, have done this by requiring implementers to take global portfolio licenses, to avoid the risk of being enjoined in the respective European jurisdiction.