WTO Arbitration Panel Finds the Chinese Court
Orders of Anti Suit Injunction (ASI) in Telecomm FRAND and SEP Cases were
Correct but Lacked Transparency
·
European
Union and China informed the DSB that they had agreed to Procedures for
Arbitration under Article 25 of the DSU in this dispute.
·
On
24 April 2025, the panel report was circulated to Members as an attachment to a
Notice.
·
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.
·
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.
·
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.
· Failing to publish the decision issuing an ASI in Xiaomi v. InterDigital, read together with the reconsideration decision in the same case.
Summary of key findings of
report
The European
Union has initiated arbitration proceedings under Article 25 of the Dispute Settlement
Understanding (DSU) to review the findings of a WTO dispute panel in “China — Enforcement
of intellectual property rights” (DS611). The notice of appeal was circulated to
WTO members on 24 April. The EU included the full text of the panel report in its
“Notice of Appeal”, as provided for in the agreed arbitration procedures between
China and the EU.
This is the second arbitration proceeding based on the Multi-Party
Interim Appeal Arbitration Arrangement (MPIA) to which both China and the EU are
participants.
On 4 July 2023, China and the EU notified the WTO Dispute Settlement
Body (DSB) that they had agreed on procedures for "arbitration under Article
25 of the DSU to decide any appeal from any final panel report" as issued to
the parties in dispute DS611, which the EU had initiated on 18 February 2022.
The panel report was issued to the parties on a confidential
basis on 21 February 2025. At the EU's request on 31 March — which under the agreed
procedures is deemed as a joint request from both parties — the dispute panel in
this proceeding suspended its work. It did not, therefore, circulate its final report
to all WTO members.
The EU has since then included the full text of the panel report
in its Notice of Appeal, as provided for in the parties' agreed arbitration procedures. The Notice of Appeal and panel report is available
here.
The summary below was up-to-date at 24 April
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. 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 24 April 2025, the panel
report was circulated to Members as an attachment to a Notice of Appeal under the
Multi-Party Interim Appeal Arbitration Arrangement (the MPIA) (see WT/DS611/7).
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.