The European Union has lodged a formal complaint with the World Trade Organization against China over what it calls “unfair and illegal” practices involving intellectual property rights. The complaint escalates ongoing trade tensions between the two economic giants following disputes over electric vehicle import tariffs and Chinese investigations into European industries.
At the heart of the issue are standard essential patents (SEPs), which protect critical technologies, like 5G in the telecom sector, that underpin a wide range of products, including automotive. European companies, such as Nokia and Ericsson, own many of these patents, granting them a competitive edge in the high-tech sector.
Royalty rates
In the automotive sector, SEPs primarily pertain to vehicle cellular connectivity standards. As cars become more connected, technologies like 5G play a vital role in enabling features such as in-car Wi-Fi and connected services, including navigation and entertainment.
The EU accuses China of granting its courts the authority to unilaterally set global royalty rates for these patents without the consent of the intellectual property owner. This practice forces European tech companies to lower their rates worldwide, giving Chinese manufacturers an unfair advantage.
The EU claims this violates the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). “R&D is an engine for innovation that ensures EU leadership in developing future technologies, and it needs to be properly rewarded,” commented Maroš Šefčovič, Commissioner for Trade and Economic Security.
Consultation round
The European Commission’s filing marks the first step in the WTO’s dispute resolution process. The two parties will consult over the next sixty days. If no agreement is reached, the EU could request a WTO panel to rule on the matter, which typically takes twelve months.
China’s Ministry of Commerce expressed regret over the EU’s decision, stating that the matter would be handled according to WTO rules while protecting China’s legitimate rights and interests.
The EU views this action as necessary to safeguard its high-tech industries and ensure a level playing field. The Association of European Vehicle Manufacturers ACEA warned last year that these patents need stricter regulation to step up the EU’s ambition to provide more cost transparency for automotive suppliers.
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