The European Union has launched a lawsuit against China, claiming that it is using domestic courts to undermine intellectual property laws and allowing Huawei, Xiaomi and other telecom companies to secure cut-price technology licenses, the South China Morning Post reports. A World Trade Organization (WTO) case lodged in Geneva last week said Beijing was using new legal mechanisms known as “anti-suit injunctions” to prevent international companies from suing Chinese counterparts in foreign courts for their use of technology without licenses or permission. The new WTO case concerns standard-essential patents (SEPs) used by manufacturers to copyright goods that meet certain international technical standards.
Firms that have made complaints – including Sharp, Ericsson and Nokia – have been threatened with daily fines of €130,000 or criminal charges, meaning executives could be jailed in China for non-compliance, according to the EU. Swedish company Ericsson has said that the losses stemming from anti-suit injunctions run up to €150 million per quarter. EU officials said Chinese firms such as Huawei, Xiaomi, ZTE and Oppo had taken advantage of these injunctions – which were ushered in by a Chinese Supreme Court ruling in August 2020 and subsequently approved by the National People’s Congress (NPC) – to cut their licensing fees in half. The EU sees it as part of an overall Chinese strategy to transfer technology for 3G, 4G and 5G to China for a reduced fee, but also to set global rules governing intellectual property protection.
Officials said they had raised the issue with China at the WTO, bilaterally and in various other legal forums, but did not receive a satisfactory response from Beijing. It marks a further decline in the EU-China trading relationship. It also shows a continuation in the EU’s willingness to play hardball with Beijing over trade grievances. Last month, in a high-profile move, the EU sued China at the WTO for allegedly blocking imports of Lithuanian goods following a dispute over the naming of Taipei's representative office. The Lithuania case has frayed broader EU-China relations. Companies from Germany, France, Sweden and other EU members have also had their goods blocked because they contained Lithuanian parts.
The EU is aiming to finalize a powerful anti-coercion tool that would seek to combat perceived economic bullying by the end of this year, but member states are skeptical as to whether that timeline is realistic. “We must protect the EU’s vibrant hi-tech industry, an engine for innovation that ensures our leading role in developing future innovative technologies,” said EU Trade Commissioner Valdis Dombrovskis. “EU companies have a right to seek justice on fair terms when their technology is used illegally. That is why we are launching WTO consultations today.” The threat of daily fines of €130,000 deterred European companies from going to foreign courts, the EU said, as reported by the South China Morning Post.
