On July 21, 2025, the arbitrators in DS/611 (the EU complaint regarding Chinese SEP practices) made their decision on the appeal from the initial panel decision.  From my perspective, this decision was a significant improvement, although it still leaves a range of questions only partially answered. 

Several commentators have already written on the Arbitral Award.  I have benefited from reviewing their various writings, although the opinions expressed below represent my own personal perspective on these issues.

In addition to China and the European Union, there were 19 third parties involved in the case, including the United States.  Seven of the third parties also provided written or oral testimony to the arbitrators.  I noted in a prior article that I believed an earlier brief submitted by the Biden Administration before the panel was harmful to US interests.  The Trump administration’s decision to not submit a written statement or deliver an oral statement is, at least, an improvement over that position.  Nonetheless, the Trump administration might have considered submitting a brief on certain issues such as transparency, which have far-reaching implications for rule of law in China as well as our understanding of China’s IP system.

Perhaps the most important aspect of the arbitral decision was their was their reversal the of panel’s report regarding whether Antisuit Injunctions (ASIs) involving Standards Essential Patents (SEPs) matters violated TRIPS (Art. 1.1 and 28.1).  The arbitrators found that “Article 28.1, read in conjunction with Article 1.1 … requires that Members not frustrate the patent owner’s ability to exercise the exclusive rights conferred on it by another WTO Member, i.e. to prevent third parties not having the patent owner’s consent from making, using, offering for sale, selling, or importing the patent product”  (para. 4.86).  Of particular concern was whether the ASI policy of China frustrates the SEP holders’ exercise of their right to conclude licensing contracts in territories of other members (para 4.123).   The arbitrators noted that at a minimum China’s ASI policy impacted the negotiating position of SEP holders by diminishing the risk that SEP implementers will face patent infringement proceedings in the territory of other WTO members where the patent is registered (para. 4.142).  This policy furthermore also diminishes the patent holders’ ability to conclude license agreements on “mutually agreeable terms” (para 4.163) in these other jurisdictions. 

The arbitrators however declined to view enforcement of SEP agreement as necessarily being an “enforcement procedure” under the enforcement provisions of the TRIPs Agreement.  The arbitrators also noted that a determination of whether rights are being frustrated by a particular policy is dependent on the provisions at issues and the specific circumstances of a  case (para. 4.93).  These two statements suggest that licensing agreements may not necessarily be subject to the same rights as set forth in the TRIPS enforcement provisions (such as rights to counsel, right to a written decision, availability of injunctive relief, etc).  Indeed, there may also be circumstances where ASIs are TRIPS-compatible.  The decision does not discuss the types of guardrails that the WTO might find acceptable for an IP-related ASI.

How might an ASI be TRIPS-compatible? One area that may be TRIPS-compatible is an anti-interference injunction, which prohibits a foreign court from interfering in a domestic proceeding, such as was issued in Ericsson v. Samsung.  Another possibility of non-interference would arise if there was consent by the parties to having one court decide a rate.  An ASI might similarly be permissible if it is carefully crafted to leave open the possibility of reducing its extraterritorial effect if a party decides to sue in a third country, such as by suspending fines or penalties.

 The arbitral award does little to clarify whether lower royalty rates by Chinese courts for products made or sold in China are consistent with TRIPs Most Favored Nation and National Treatment obligations.   I believe that when national courts set lower royalty rates for their country for a SEP they may run the risk of offending these obligations by devaluing foreign patent rights compared to domestic patent rights within their jurisdiction or by failing to base a royalty rate on objective economic indicia.  Such lower-value patent rights may be grandfathered as a comparable license rate in a rate setting decision long after the local economy has become more competitive and economically developed.  Interdigital encountered such a circumstance in its lawsuit involving Huawei of over a decade ago, when a disadvantageous earlier agreement was brought forth as a comparable license agreement.  Whatever rate is decided, it should be based on the local economy and its stage of development, and not advancing national industrial policies that may devalue patent rights or favor implementors over innovators.

Another area of concern in the opinion involves transparency.  The arbitrators interpreted the language of TRIPS Art. 63.1 regarding the need to publish cases of “general application” as encompassing more than formal laws and regulations.  They rejected China’s position that only “guiding cases” which other Chinese courts must follow need to be published (para. 4.232).  They noted that China is not a common law country and therefore follows different case publication practices.  The arbitrators agreed with the panel that Xiaomi v Interdigital was designated as a “typical case” which served as a “reference for courts in future similar cases” and as “persuasive authority in other courts” (para. 4.233).  In my view, this is an overly formalistic analytical framework.  The fact that China is not a common law country sets up a false dichotomy regarding countries that are nominally bound by cases and those that are not.  There are numerous civil law countries that follow cases to varying degrees.  Nor are civil law countries necessarily prohibited from publishing cases, whatever their binding effect.   Furthermore, China has recognized a range of cases as having persuasive or educational effect.  Finally, the arbitrators may wish to have looked at the current state of Chinese publication of court cases, the role of transparency in ensuring adherence to TRIPS obligations, and other positive effects that derive from a more robust adherence to transparency by Chinese courts and administrative agencies.

China’s Ministry of Commerce has expressed dissatisfaction with the restrictions on extraterritoriality of ASIs set forth in the arbitral decision, while at the same time committing to implement it in accordance with WTO rules.   The European Commission predictably characterized the arbitral decision as “an important win for EU based high tech companies whose research outcomes were undermined by the Chinese policies in questions. It ensures European companies can continue to defend their intellectual property in European courts.”

The Arbitrators for the decision included Dr. Penelope Ridings, a barrister from New Zealand who served as a chairperson.  Based on an internet search, she appears to have considerable trade experience, while her experience in Chinese legal matters and IP issues appear to be somewhat less extensive.  Other arbitrators included Claudia Orozco, a former Colombian Trade Official with degrees from the United States,  and Mateo-Diego-Fernandez Andrade, a former Mexican trade official, who have similar extensive trade backgrounds.  The panel decision, by contrast, included individuals who had been involved in a prior case WTO dispute brought by the United States involving the transparency of China’s IP enforcement system.

Minor corrections made August 2, 2025.