EU Says Chinese Courts Illegally Set Global Royalty Rates for EU Patents
The EU requested consultations with China at the World Trade Organization, alleging that China has empowered its courts to set worldwide royalty rates for EU standard essential patents, without the consent of the patent owner. The EU alleged that the measures violate Article 64.1 of the Agreement on Trade-Related Aspects of Intellectual Property Rights and Article XXII:1 of the General Agreement on Tariffs and Trade 1994.
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The request said Chinese courts have the authority to determine royalty rates for "portfolios of standard essential patents" that include non-Chinese standard essential patents. Such a decision is "binding on both parties and is enforceable in China." The EU said the move "curtails the ability of the courts of the jurisdictions where the non-Chinese patents were granted to adjudicate actions relating to those patents in the respective jurisdictions."
The EU gave an example of such a practice. In November 2023, China's Chongqing First Intermediate People's Court made a decision over the objections of the patent owner "setting worldwide patent conditions, including royal rates," for standard essential patents. The court set the rates Chinese phone maker OPPO has to pay globally for using Nokia's patented technology in 2G, 3G, 4G and 5G "smart terminal products," such as mobile phones, the EU said.
The request said the measures violate the TRIPS Agreement "because China's measure has as its effect to restrict the possibility for the parties subject to a decision to start or continue proceedings before the courts of another Member, and thus for the courts and other authorities of that other Member to decide questions relating to the registration or validity of a patent issued in its jurisdiction." The measures also violate the agreement by restricting the possibility for parties subject to a decision to start or continue proceedings before another nation's court, the EU alleged.