European Commission accuses China of unfair trade practices

January 21, 2025 — In a significant move aimed at strengthening the protection of intellectual property (IP) rights for European high-tech industries, the European Commission has announced it will seek consultations at the World Trade Organization (WTO) to address what it deems unfair and illegal trade practices by China.

At the crux of the matter is China's controversial empowerment of its courts to unilaterally set binding worldwide royalty rates for EU standard essential patents. This decision, made without the consent of patent owners, exerts undue pressure on innovative European companies, particularly in the high-tech and telecommunications sectors, to reduce their royalty rates globally. As a result, Chinese manufacturers gain unfairly cheaper access to critical European technologies, undermining the investments made by European firms in research and development, the European Commission’s announcement states.

The European Commission argues that such practices not only threaten the competitiveness of EU firms but also interfere with the authority of EU courts regarding European patent issues. These actions, according to the Commission, violate the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), leading to a necessary intervention on the international trade front.

“China's practices are undermining our technological edge and our commitment to fair and equitable trade,” stated a spokesperson for the European Commission. “We aim to ensure that our high-tech industries can effectively exercise their patent rights and protect their investments in innovation.”

The request for consultations marks the initial step in a formal dispute settlement process at the WTO. If discussions do not yield a satisfactory resolution within 60 days, the EU is prepared to escalate the matter, requesting the establishment of a WTO panel to adjudicate the issue.

This developing case specifically revolves around standard essential patents—patents that protect crucial technologies necessary for manufacturing goods that adhere to established standards, such as 5G technology for mobile communications. European firms hold a significant number of these patents, granting them a substantial competitive advantage in the global market, the European Commission states.

Adding to the existing tensions, the EU is also challenging another Chinese practice at the WTO concerning anti-suit injunctions. These injunctions penalize patent holders who attempt to enforce their IP rights in courts outside of China, further complicating the landscape for European firms seeking to protect their innovations. A WTO Panel has been established to examine this case, with a report expected in the first quarter of 2025.

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