EU Partial Victory in Arbitrators Award in EU-China
IPR Dispute, Chinese Law Not Transparent, But Law Applied Correctly
WTO Panel findings regarding the unwritten
Anti-Suit Injunction (ASI) policy of China and its consistency with the TRIPS
Agreement and China's WTO obligations:
1. ASI
Policy and WTO Panel Jurisdiction
·
The unwritten ASI policy was:
o
Within the Panel’s terms of reference
o
Proven to exist by the European Union
2.
Consistency with TRIPS Agreement
·
The Panel found no violation of the
following TRIPS provisions:
o
Article 28.1 and 28.2 (exclusive
rights & licensing rights of patent holders)
o
Article 41.1 (IP enforcement)
o
Article 44.1 (injunctions)
o
All above read with Article 1.1, which
requires Members to “give effect” to TRIPS in domestic law
·
Key interpretation:
Article 1.1 does not impose extra obligations about purpose-frustration
or how other Members implement TRIPS
3.
Individual Chinese ASI Court Decisions
·
EU raised the same arguments as for the ASI
policy
·
Panel declined to rule again on these five
decisions, as it would be duplicative
4.
Transparency Violations
·
China violated TRIPS Article 63.1:
o
Failed to publish the Xiaomi v. InterDigital
ASI and its reconsideration decision
·
China also violated Article 63.3 (first
sentence):
o
Refused to supply requested information to
the EU
·
Claim under Article 63.3 (second sentence)
was outside the Panel’s scope
5.
China’s Accession Protocol – Section 2(A)(2)
·
EU alleged Chinese courts applied laws non-uniformly,
unfairly, or unreasonably
·
Panel found no evidence to support this
claim
Conclusion
·
EU succeeded partially:
Proved the existence of an unwritten ASI policy and won on transparency
violations
·
EU failed to prove inconsistency of the
policy or decisions with core TRIPS provisions or Accession Protocol
obligations
On 21
July, the WTO circulated the arbitration award in the proceedings initiated by
the European Union under Article 25 of the Dispute Settlement Understanding to
review the findings of a WTO dispute panel in “China — Enforcement of
Intellectual Property Rights” (DS611).
This is the second appeal arbitration conducted under the Multi-Party
Interim Appeal Arbitration Arrangement (MPIA) to which both China
and the European Union are participants.
The MPIA was agreed upon among its original 18
participating members in April 2020 to provide the possibility of resorting to
arbitration under Article 25 of the
DSU
in case of an appeal in disputes between any two or more participating members.
Currently the following WTO members are parties to the MPIA: Australia; Benin;
Brazil; Canada; Chile; China; Colombia; Costa Rica; Ecuador; the European
Union; Guatemala; Hong Kong, China; Iceland; Japan; Macao, China; Malaysia;
Mexico; Montenegro; New Zealand; Nicaragua; Norway; Pakistan; Paraguay; Peru;
the Philippines; Singapore; Switzerland; Ukraine; the United Kingdom; and
Uruguay.
·
China
- Enforcement of Intellectual Property Rights - Arbitration under article 25 of
the DSU - Award of the Arbitrators
·
WT/DS611/ARB25 | 21
July 2025
The summary below was up-to-date at 21
July 2025
Complaint by the European
Union
On 18 February 2022, the European Union requested
consultations with China with regard to measures that allegedly adversely
affect the protection and enforcement of intellectual property rights.
The European Union claimed that the measures at issue
appear to be inconsistent with:
·
Articles
1.1, 28.1, 28.2, 41.1, and 44.1 of the TRIPS Agreement; and
·
·
Section
2(A)(2) of China's Accession Protocol.
The European Union also claimed that:
·
by
failing to publish certain judicial decisions regarding the measures at issue,
China appears to have acted in a manner inconsistent with its obligations in
Article 63.1 of the TRIPS Agreement; and
·
·
by
failing to supply to the European Union information about three judicial
decisions related to the measures at issue that the European Union had
requested, China appears to have acted in a manner inconsistent with its
obligations under Article 63.3 of the TRIPS Agreement.
On 4 March 2022, Canada, Japan and the
United States requested to join the consultations.
On 7 December 2022, the European Union requested the
establishment of a panel. At its meeting on 20 December 2022, the DSB deferred
the establishment of the panel.
At its meeting on 27 January 2023, the DSB
established a panel. Australia, Brazil, Canada, Colombia, India, Indonesia,
Japan, Korea, Norway, Peru, the Russian Federation, Singapore, Switzerland,
Chinese Taipei, Thailand, Ukraine, the United Kingdom, the United States, and
Viet Nam reserved their third-party rights.
Following the agreement of the parties,
the panel was composed on 28 March 2023.
On 4 July 2023, the European Union and
China informed the DSB that they had agreed to Procedures for Arbitration under
Article 25 of the DSU in this dispute (“Agreed Arbitration Procedures”). Such
procedures were entered into by the European Union and China to give effect to
the communication JOB/DSB/1/Add.12 (“Multi-Party Interim Appeal Arbitration
Arrangement Pursuant to Article 25 of the DSU (MPIA)”) and with the objective
of setting a framework for an Arbitrator to decide on any appeal from any final
panel report issued in this dispute, if the Appellate Body is not able to hear
such an appeal under Articles 16.4 and 17 of the DSU.
On 2 November 2023, the Chair of the panel
informed the DSB that, in accordance with the panel's timetable adopted
following consultations with the parties, taking into account the parties'
availability due to other commitments, the panel estimated that it would issue
its final report to the parties not before the second half of 2024. The Chair
apprised the DSB that the report would be available to the public once it was
circulated to the Members in all three official languages, and that the date of
circulation depended on completion of translation. On 11 December 2024, the
Chair of the panel informed the DSB that, due to a combination of factors
including logistics and the time required for thorough scrutinity of the many
exhibits, the panel now expected to issue its final report to the parties by
the end of the first quarter of 2025.
On 21 February 2025, the panel, having consulted with the
parties, adopted Additional Working Procedures to facilitate arbitration under
Article 25 of the DSU (“Additional Working Procedures”). On the same day, the
panel issued its final report to the parties and informed them that the panel
report would be circulated to Members, following translation, on 10 April 2025.
Further to a request by the European Union to suspend its
work in accordance with Article 12.12 of the DSU with a view to initiating
arbitration under the Agreed Arbitration Procedures, the panel granted the
suspension, effective on 2 April 2025. The Panel further decided not to
circulate its final report to Members unless it was subsequently requested to
resume its work within the time-period specified in Article 12.12 of the DSU.
On 22 April 2025, the European Union filed a notice of
recourse to Article 25 under the Agreed Arbitration Procedures. This notice,
which the parties referred to as a “Notice of Appeal”, was circulated to the
DSB on 24 April 2025. It included the full text of the panel report in the
three official languages, transmitted by the panel to the parties, third
parties, and the pool of arbitrators and, absent circulation by the panel to
Members, thereby made the panel report public.
The following is a
summary of the panel report as included in the European Union's Notice of
Appeal:
On 28 April 2025, China filed a “Notification of an other appeal”
under Article 25 of the DSU, the Agreed Arbitration Procedures, and the Working
Procedures for Appellate Review.
On 2 May 2025, Members were informed of the Arbitrators
selected for this dispute and the election of the Chair.
On 21
July 2025, the final award was issued to the parties, and was notified to the
DSB and the TRIPS Council in accordance with Article 25.3 of the DSU, in the
three official languages of the WTO.
The European Union challenged aspects of the Panel's
findings with respect to Article 1.1, first sentence of the TRIPS Agreement and
also challenged the Panel's findings with respect to Articles 28.1, 28.2, and
44.1 read in conjunction with Article 1.1, first sentence, as well as Article
41.1 of the TRIPS Agreement.
·
With
respect to Article 1.1,
first sentence, the arbitrators considered that the Panel erred
in its interpretation of the obligation in Article 1.1, first sentence to “give
effect” to the provisions of the TRIPS Agreement in a WTO Member's territory,
and found that the corollary of that obligation is to do so without frustrating
the functioning of the systems of protection and enforcement of IP rights
implemented by other Members in their respective territories.
·
With
respect to Article 28.1,
read in conjunction with Article 1.1, first sentence, the
arbitrators considered that the Panel erred in finding that this obligation is
limited to ensuring a patent owner's exclusive rights in each Member's domestic
legal system and nothing more. Instead, the arbitrators found that Article
28.1, read in conjunction with Article 1.1, first sentence, requires that
Members not frustrate a patent owner's ability to exercise the exclusive rights
conferred on it by another WTO Member under that provision, i.e. to prevent
third parties not having the patent owner's consent from making, using,
offering for sale, selling, or importing the patented product. The arbitrators
considered the European Union's request to complete the analysis with respect to
ASI policy and found that the European Union had demonstrated that the ASI
policy is inconsistent with Article 28.1, read in conjunction with Article 1.1,
first sentence.
·
With
respect to Article 28.2,
read in conjunction with Article 1.1, first sentence, the
arbitrators considered that the Panel erred in finding that this obligation is
limited to ensuring a patent owner's “right… to conclude licensing contracts”
in each Member's domestic legal system and nothing more. Instead, the
arbitrators found that Article 28.2, read in conjunction with Article 1.1,
first sentence, requires that Members not frustrate a patent owner's ability to
exercise its “right… to conclude licensing contracts” as conferred in the
territory of another WTO Member under that provision. The arbitrators
considered the European Union's request to complete the analysis with respect
to ASI policy and found that the European Union had demonstrated that the ASI
policy is inconsistent with Article 28.2, read in conjunction with Article 1.1,
first sentence.
·
With
respect to Article 44.1,
read in conjunction with Article 1.1, first sentence, the
arbitrators upheld the Panel's finding, albeit for different reasons, that the
European Union had not demonstrated that the ASI policy is inconsistent with
Article 44.1, read in conjunction with Article 1.1, first sentence.
·
With
respect to Article 41.1,
the arbitrators upheld the Panel's finding that the obligation in the second
sentence of Article 41.1 is not applicable to the ASI policy, as the ASI policy
is not an enforcement procedure as specified in Part III of the TRIPS
Agreement.
China challenged the Panel's application
of the legal standard for the existence of an unwritten measure with respect to
the ASI policy, and also challenged the Panel's finding with respect to the
case Xiaomi v. InterDigital under Article 63.1 of the TRIPS Agreement.
·
With
respect to the Panel's
application of the legal standard for the existence of an unwritten measure,
the arbitrators upheld the Panel's finding that the European Union had provided
sufficient evidence and argumentation to demonstrate the existence of the ASI
policy and that its specific nature is that of a rule or norm of general and
prospective application.
·
With
respect to Article 63.1,
the arbitrators upheld the Panel's finding that the decision issuing an ASI in
Xiaomi v. InterDigital, read together with the reconsideration decision in the
same case, is a judicial decision "of general application" within the
meaning of Article 63.1 of the TRIPS Agreement.
Factual
background:
If a
technical standard requires the use of a patent-protected product or process
(i.e. a standard essential patent (SEP)), a producer implementing that standard
will need to obtain a licence for its use or risk infringing upon patent
owners' rights and the attendant legal consequences of doing so. As part of a
SEP holder's patent being included in a standard, the SEP holder typically
commits to license the subject matter of the patent to implementers of the
standard on fair, reasonable, and non-discriminatory (FRAND) terms. This is
known as a FRAND undertaking.
Legal
disputes may arise between patent holders and implementers as to whether a
particular royalty rate paid by the implementer to the patent holder is FRAND.
This may result in domestic litigation in the territories in which the product
or process is protected by a patent. As patents are territorial, multiple
jurisdictions may be implicated in disputes between parties on the FRAND rate.
Several
implementers filed lawsuits in China asking Chinese courts to set the FRAND
licensing rate for certain patents required to produce mobile
telecommunications products and requesting anti-suit injunctions (ASIs)
prohibiting the other party from taking certain legal actions in other
jurisdictions. Beginning in August 2020 with a decision from the Supreme
People's Court of China (SPC), ASIs were issued in five cases before Chinese
courts (and denied in one).
Before
the Panel, the European Union challenged the five court decisions granting an
ASI, as well as an alleged unwritten ASI policy in SEP litigation. The European
Union claimed that China's measures were inconsistent with certain of China's
obligations under the TRIPS Agreement and that China failed to comply with the
transparency obligations in the TRIPS Agreement. Additionally, the European
Union claimed that the five Chinese court decisions granting ASIs were also
inconsistent with China's obligation under its Accession Protocol to apply its
laws, regulations, and other measures in a uniform, impartial, and reasonable
manner.
The
Panel's key findings
With
respect to the unwritten ASI policy, the Panel found that (1) it was properly
within its terms of reference, and that (2) the European Union had proved its
existence. As to the consistency of the ASI policy with the TRIPS Agreement,
the Panel found that the European Union had not demonstrated an inconsistency
with: Article 28.1, whether or not read in conjunction with Article 1.1, first
sentence (concerning certain exclusive rights of patent holders); Article 28.2
read in conjunction with Article 1.1, first sentence (concerning patent
holders' right to licence their patents); Article 41.1 (concerning intellectual
property enforcement procedures); and Article 44.1, first sentence, read in
conjunction with Article 1.1, first sentence (concerning injunctions). In
particular, the Panel found that the obligation in Article 1.1, first sentence
stating that Members must “give effect” to the provisions of the TRIPS
Agreement requires Members to implement the provisions of the TRIPS Agreement
within their own domestic legal systems. The Panel concluded that Article 1.1,
first sentence contains no additional obligation relating to frustrating the
object and purpose of the TRIPS Agreement or other WTO Members' implementation
of the TRIPS Agreement.
With
respect to the consistency of the five individual Chinese court decisions
granting ASIs with the TRIPS Agreement, the European Union had advanced
identical claims and arguments as those raised with respect to the ASI policy.
The Panel therefore declined to make findings on these claims concerning the
five individual decisions, as any findings would be duplicative of the findings
on the ASI policy.
With
respect to the transparency obligations under the TRIPS Agreement, the Panel
found that China had acted inconsistently with the publication obligation in
Article 63.1 of the TRIPS Agreement by failing to publish the decision issuing
an ASI in Xiaomi v. InterDigital, read together with the reconsideration
decision in the same case. The Panel found that China was not prepared to
supply information requested by the European Union and had thus acted
inconsistently with Article 63.3, first sentence. The Panel found that the
European Union's claim with respect to the provision of specific judicial
decisions under Article 63.3, second sentence was outside its terms of
reference.
Finally,
with respect to the European Union's claims that the five ASI decisions by
Chinese courts were inconsistent with Section 2(A)(2) of China's Accession
Protocol, the Panel found that the European Union had not demonstrated that
Chinese courts had applied China's laws, regulations, or other measures in a
non-uniform, not impartial, or unreasonable manner.