U.S. and EU file WTO Complaint against China

By Pratyush Nath Upreti

On 23 March 2018, the United States launched a WTO complaint against China’s discriminatory licence practices. The request for consultations filed by the United States highlights the grounds for complaint as:

“China denies foreign patent holders the ability to enforce their patent rights against a Chinese joint-venture party after a technology transfer contract ends. China also imposes mandatory adverse contract terms that discriminate against and are less favorable or imported foreign technology. Therefore, China deprives foreign intellectual property rights holders of the ability to protect their intellectual property rights in China as well as freely negotiate market-based terms in licensing and other technology-related contracts.”^[1]

Later in April 2018, Ukraine, Saudi Arabia, Chinese Taipei (Taiwan), and the European Union (EU), formally requested to join the consultations requested by the US, citing a substantial interest in the matters related to the protection of intellectual property rights by WTO members, interpretation of TRIPS Agreement and trade interest.^[2]

On 1 June 2018, the European Union filed its own WTO complaint against China’s rules, which are applicable to technology transfer. According to the request for consultations, the European Union has accused China of using its domestic legislation to impose a different set of rules on the import of technology, including intellectual property rights, than the rules which are applicable to technology transfers occurring between Chinese companies.^[3] Further, in the consultations request, the EU argues;

“The Chinese measures at issue appear to (i) discriminate against foreign holders of intellectual property rights, and (ii) restrict the foreign right holders’ ability to protect certain intellectual property rights in China, contrary to China’s WTO obligations.”^[4]

 

What Next?

The WTO consultations give the parties an opportunity to discuss the issues and to find a satisfactory solution without resorting to litigation.^[5] In case of failure to produce a satisfactory solution within 60 days, the complainant may request for adjudication by a panel.

 

Conclusion

In recent years, there have been few IP disputes brought to the WTO Dispute Settlement Understanding (DSU).^[6] From 1995-2016, the TRIPS Agreement has been invoked only 33 times in WTO complaints- (20 cases in 1995-99: 5 cases in 2000-04; 1 case in 2005-09; 7 cases in 2010-14; 0 cases in 2015-16).^[7] In the past, the US and the EU had a history of IP related tension at WTO with China.^[8] However, the recent request for consultations by two key global actors has come at a time when the rise of bilateral and plurilateral trade agreements is at its peak. Thus, these requests for consultations depict their faith in the multilateral system.

[1] China-Certain Measures Concerning the Protection of Intellectual Property Rights- Request for Consultations by the United States  (WT/DS542/1, 26 March 2018)

<https://www.wto.org/english/news_e/news18_e/ds542rfc_26mar18_e.htm&gt; accessed 22 July 2018.

[2] See communication from the  Ukraine, Saudi Arabia, Chinese Taipei (Taiwan), and the European Union (EU) to join consultations requested by the United States.

<https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/ds542/*)&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true#>  accessed 22 July 2018.

[3] China-Certain Measures on the Transfer of Technology – Request for Consultations by the European Union ( WT/DS549/1, 6 June 2018)

[4] Ibid.

[5] For more information on WTO Dispute Settlement

< https://www.wto.org/english/tatop_e/dispu_e/disp_settlement_cbt_e/c6s2p1_e.htm> accessed 22 July 2018.

[6] Kara Leitner and Simon Lester, ‘WTO Dispute Settlement 1995-2016- A Statistical Analysis’ (2017) 20(1) Journal of International Economic Law 176. (Based on the statistical data, authors argue that with regards to intellectual property, the number of complaints has been limited and has been a decline in recent years.)

[7] Ibid.

[8] See China- Measures Affecting the Protection and Enforcement of Intellectual Property Rights (WT/DS362) < https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds362_e.htm> accessed 22 July 2018/