Brussels first brought its case against China to the World Trade Organization three years ago, charging that Beijing was preventing European tech companies from using foreign courts to defend their patents.
A panel of WTO experts set up in December 2022 to examine the case issued a ruling last April rejecting most of Brussels’ claims, and saying it had not demonstrated that China’s actions violated the global trade organisation’s rules on intellectual property.
But an arbitration body created as an alternative to WTO’s moribund appellate system has now largely reversed that ruling.
“The arbitrators disagreed with the Panel’s interpretation,” a Geneva-based trade official, who asked not to be identified, said, explaining the decision.
The arbitrators, the official said, “found that the main measure at issue – which empowered Chinese courts to prohibit patent holders from enforcing their patent rights in jurisdictions outside of China in the context of patent litigation in China – was inconsistent with TRIPS obligations concerning those patent rights”.
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TRIPS, or the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights, sets minimum standards for IP protection among member states.
Washington brought the WTO’s own Appellate Body to a grinding halt in December 2019 through years of blocking the appointment of new judges.
This has left many rulings by the WTO’s lower Dispute Settlement Body (DSB) hanging, with dozens of dispute panel ruling so far appealed “into the void”.
In the meantime, nearly 30 WTO members, including the European Union and China — but not the United States — have developed an alternative appellate process allowing some cases move forward.
The ruling published Monday was the second to date by the so-called Multi-Party Interim Appeal Arbitration Arrangement (MPIA).
In their conclusion, the arbitrators said WTO members were obligated to implement the TRIPS agreement “without frustrating the functioning of the systems of protection and enforcement of IP rights implemented by other Members in their respective territories”.
“Accordingly, we recommend that China bring into conformity with the TRIPS Agreement those measures found in this (decision), and in the Panel Report as modified by this (decision), to be inconsistent with that Agreement,” they said.
