The European Union has filed a legal challenge before the World Trade Organization against China’s use of “anti-suit injunctions” (ASIs) to restrict EU holders from enforcing standard-essential patents against Chinese companies in any non-Chinese court. The EU’s request for the establishment of a WTO panel challenges Chinese court-issued ASIs as they “forbid patent holders to commence, continue or enforce the results of any legal proceedings before any non-Chinese court and which are enforced through daily penalties in case of infringement.”
The EU asserts that ASIs restrict the right of SEP owners to conclude licensing contracts and to seek legal remedies in case of infringement of their rights. By filing this request, the EU “seeks to ensure that its high-tech industry can effectively exercise its patent rights to protect investment in innovation.” This request comes after the EU was unable to settle the dispute through political and diplomatic negotiations earlier this year, including three requested consultations with China.
The WTO will discuss the EU’s request at its meeting today, 20 December 2022, and China can thereafter oppose the establishment of a panel. If established, however, panel proceedings can last up to one and half years and the decision can be appealed, further delaying resolution. For the foreseeable future, therefore, foreign SEP holders will remain subject to potential ASIs and daily fines if they try to enforce their SEPs against Chinese companies in non-Chinese courts.
In the meantime, the EU published its initiative to adopt a new framework for SEPs. Under the current framework, patent-holders commit to negotiate a license of their SEPs to users of the standard on fair, reasonable and nondiscriminatory terms. The EU’s initiative acknowledges that “some users have found that the system for licensing SEPs is not transparent, predictable or efficient.” The new licensing framework may combine legislative and non-legislative action and is expected to be published in the second quarter of 2023.
For further information, please contact:
Kathryn L. Clune, Partner, Crowell & Moring