CHINA – ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS

On July 21, the World Trade Organization (WTO) issued a landmark ruling under the Multi-party Interim Appeal Arbitration Arrangement (MPIA) regarding the EU-China WTO dispute concerning anti-suit injunctions on standard-essential patents (DS611).

 

 

On 7 December 2022, the European Union requested the establishment of a panel. At its meeting on 20 December 2022, the DSB deferred the establishment of the panel.

 

At its meeting on 27 January 2023, the DSB established a panel. Australia, Brazil, Canada, Colombia, India, Indonesia, Japan, Korea, Norway, Peru, the Russian Federation, Singapore, Switzerland, Chinese Taipei, Thailand, Ukraine, the United Kingdom, the United States, and Viet Nam reserved their third-party rights.

 

On 4 July 2023, the European Union and China informed the DSB that they had agreed to Procedures for Arbitration under Article 25 of the DSU in this dispute (“Agreed Arbitration Procedures”). Such procedures were entered into by the European Union and China to give effect to the communication JOB/DSB/1/Add.12 (“Multi-Party Interim Appeal Arbitration Arrangement Pursuant to Article 25 of the DSU (MPIA)”) and with the objective of setting a framework for an Arbitrator to decide on any appeal from any final panel report issued in this dispute, if the Appellate Body is not able to hear such an appeal under Articles 16.4 and 17 of the DSU.

 

On 2 November 2023, the Chair of the panel informed the DSB that, in accordance with the panel's timetable adopted following consultations with the parties, taking into account the parties' availability due to other commitments, the panel estimated that it would issue its final report to the parties not before the second half of 2024. The Chair apprised the DSB that the report would be available to the public once it was circulated to the Members in all three official languages, and that the date of circulation depended on completion of translation. On 11 December 2024, the Chair of the panel informed the DSB that, due to a combination of factors including logistics and the time required for thorough scrutinity of the many exhibits, the panel now expected to issue its final report to the parties by the end of the first quarter of 2025.

 

On 21 February 2025, the panel, having consulted with the parties, adopted Additional Working Procedures to facilitate arbitration under Article 25 of the DSU (“Additional Working Procedures”). On the same day, the panel issued its final report to the parties and informed them that the panel report would be circulated to Members, following translation, on 10 April 2025.

 

Further to a request by the European Union to suspend its work in accordance with Article 12.12 of the DSU with a view to initiating arbitration under the Agreed Arbitration Procedures, the panel granted the suspension, effective on 2 April 2025. The Panel further decided not to circulate its final report to Members unless it was subsequently requested to resume its work within the time-period specified in Article 12.12 of the DSU.

 

On 22 April 2025, the European Union filed a notice of recourse to Article 25 under the Agreed Arbitration Procedures. This notice, which the parties referred to as a “Notice of Appeal”, was circulated to the DSB on 24 April 2025. It included the full text of the panel report in the three official languages, transmitted by the panel to the parties, third parties, and the pool of arbitrators and, absent circulation by the panel to Members, thereby made the panel report public.

 

On 28 April 2025, China filed a “Notification of an other appeal” under Article 25 of the DSU, the Agreed Arbitration Procedures, and the Working Procedures for Appellate Review.

 

On 2 May 2025, Members were informed of the Arbitrators selected for this dispute and the election of the Chair.

 

On 21 July 2025, the final award was issued to the parties, and was notified to the DSB and the TRIPS Council in accordance with Article 25.3 of the DSU, in the three official languages of the WTO.

 

 

 

 

 

 

Panel's Original Finding: This provision merely required Members to implement the provisions of the TRIPS Agreement within their own domestic legal systems.

 

Arbitrators' Award: Reversed the Panel's interpretation. The Arbitrators found that the obligation in Article 1.1, first sentence, contains a crucial corollary: a Member, in implementing the TRIPS Agreement, must not undermine or frustrate the systems for the protection and enforcement of intellectual property rights established by other Members in their respective territories.

 

This interpretation formed the cornerstone of the case. It effectively reinterpreted the TRIPS Agreement from a purely territorial standards agreement into one interpreted as imposing a "negative obligation" – prohibiting Members from using domestic measures to interfere with intellectual property protection within the territories of other Members.

 

 

Panel's Original Finding: The EU failed to demonstrate that China's ASI policy was inconsistent with this article.

 

Arbitrators' Award: Reversed the Panel's finding. The Arbitrators found that the ASI policy, by preventing patent holders from initiating or enforcing patent infringement proceedings in other WTO Members, substantially frustrated the exercise of the exclusive rights conferred by Article 28.1 upon those patent holders within the territories of those other Members. Consequently, the policy was found inconsistent with Article 28.1 (read in conjunction with Article 1.1).

 

 

Panel's Original Finding: The EU failed to demonstrate that China's ASI policy was inconsistent with this article.

 

Arbitrators' Award: Reversed the Panel's finding. The Arbitrators found that, in the context of Standard-Essential Patents (SEPs), where the patent owner has committed to license its patents on FRAND terms, the core of its "right to conclude licensing contracts" entails the ability to engage in good faith negotiations over FRAND terms. The ASI policy disrupted the negotiating balance; it removed the incentive for implementers to negotiate stemming from the risk of facing infringement proceedings abroad, thereby pressuring patent owners to accept potentially non-FRAND licensing terms. This effectively negated the meaningful exercise of the "right to conclude licensing contracts." Therefore, the policy was found inconsistent with Article 28.2 (read in conjunction with Article 1.1).

 

 

Panel's Original Finding: The EU failed to demonstrate a violation.

 

Arbitrators' Award: Upheld the Panel's finding (albeit for somewhat different reasons). The Arbitrators determined that Article 44.1 pertains to the requirement that Members' "judicial authorities" possess the "authority" to issue injunctions. China's ASIs constitute in personam orders directed at the parties to the litigation and do not directly affect or strip the judicial authorities of other Members of their own statutory powers. Thus, the ASI policy was found not inconsistent with Article 44.1.

 

 

Panel's Original Finding: This provision was not applicable to the ASI policy, as the policy did not constitute an "enforcement procedure... against any act of infringement" as specified in Part III.

 

Arbitrators' Award: Upheld the Panel's finding. The Arbitrators agreed that the "enforcement procedures" specified in Part III are designed to enable right holders to take effective action against infringement. China's ASIs, initiated by implementers in the context of FRAND royalty rate litigation, aim not to prevent infringement but rather to restrict right holders from acting against infringement. Therefore, the policy fell outside the scope of procedures governed by this provision.

 

 

China's Appeal: Challenged the Panel's finding that the ASI decision in Xiaomi v. InterDigital constituted a "final judicial decision... of general application" requiring publication or public availability.

 

Arbitrators' Award: Dismissed China's appeal and upheld the Panel's finding. The Arbitrators concurred that the decision established new principles and was promoted as a typical/model case by a local Chinese court, indicating its intended role as a reference for future cases. Therefore, it constituted a "final judicial decision... of general application," which China was obliged to publish or make publicly available.