Today, January 20, 2025, the European Union requested consultations at the World Trade Organization regarding China’s practice of setting binding worldwide royalty rates for EU standard essential patents without the patent owner’s consent.  According to the press release of  January 19, 2025 (Sunday!), this practice “pressures European high-tech companies into lowering their rates worldwide, thus giving Chinese manufacturers cheaper access to those European technologies unfairly.”  The practice also “unduly interferes with the competence of EU courts for European patent issues.”  The EU also notes that it is of “the firm view” that these practices are inconsistent with WTO standards. 

The request for consultations also discusses China’s lack of compliance with TRIPS transparency obligations (Art. 63.3.) which were the subject of a prior official request of China from the EU on Dec. 20, 2023 for the yet-to-be-officially published November 28, 2023 decision of the Chongqing First Intermediate Court in OPPO v Nokia  (2021) Yu 01 Min Chu No.1232重庆市第一中级人民法院，渝01民初232号 2021)， 民神判决书. I have thus far been unable to locate the Chinese answer, although the EU’s request is on the WTO website.

The EU submission identifies lower Chinese rates as giving an unfair advantage to Chinese manufacturers. In discussing Oppo v Nokia on this blog shortly after the decision was announced, I also identified lower China-based rates established by Chinese courts for SEP royalties as potentially offending WTO rules mandating equal treatment of WTO members (national treatment and most favored nation treatment) in licensing and litigation disputes. I also testified on this topic on December 18, 2024, before the House Judiciary Committee. My earlier comments in my blog on differential pricing elicited a strong reaction in an editorial of the official China Daily, which noted in its concluding sentence that “the territory-based discount aspect of the ruling adheres to common industry practices and will stand the test of time.”

There may be some strategic considerations behind the timing of this EU filing.  The WTO panel established in the parallel case (DS611) is expected to issue a Report in the first quarter of 2025.  That case focused on China’s interference with EU courts through the granting by Chinese courts of antisuit injunctions (ASIs).   As I noted in a prior blog,  such concerns “appl[y]  with at least equal force to global rate setting compared to ASIs.”  The EU filing underscores the difficulties posed by long delays in WTO adjudications, which can ultimately pressure countries to adopt equally offensive policies to accomplish the same results not otherwise covered by the existing WTO case.

Another strategic consideration for the timing of this filing may have been to better engage the incoming Trump administration, which is being inaugurated on the same day as the filing (January 20, 2025).  In a prior brief in DS611, the EU noted that “the EU, Canada, and Australia all agree on the centrality of transparency” to the TRIPS Agreement.” The United States was conspicuously absent from this list.  The US brief in that proceeding instead quoted China’s arguments in its submission that a Chinese unpublished policy regarding ASIs is “completely fictitious.”   I have long been a critic of the US third-party submission in DS 611, in which USTR exhibited a “tacit alliance” with China and which did not address rule of law and industrial policy concerns, including the likely expansion of the Chinese courts into global rate setting, which is the subject of the current EU inquiry.

How will the Trump administration react to this latest development? Mr. Jamieson Greer, Trump’s prospective nominee to be the next US Trade Representative, has publicly criticized China’s lack of transparency, including its use of unwritten rules in testimony last year. He noted that “many U.S. companies report facing vague and unwritten rules, as well as local rules that diverge from national ones, which are applied in a selective and non-transparent manner by Chinese government officials to pressure technology transfer.”

During Trump’s first term in office, USTR also successfully prosecuted a WTO case involving China’s discriminatory technology transfer rules. Hopefully, the second Trump administration will continue to use multilateral WTO mechanisms to address US intellectual property interests again.

(Note: two additions made on Jan. 20, 2025: (a) to provide a link for the EU request for the OPPO v Nokia case, and (b) to discuss the history of differential licensing rates for different countries (third paragraph above).