The EU is suing China at the World Trade Organization for alleged patent infringements that cost companies billions of euros, as officials in Brussels say Beijing is “seizing power” to set licensing rates for smartphone technology.
Businesses, including Sweden’s Ericsson, Finland’s Nokia and Japan’s Sharp, lost money after China’s Supreme Court banned them from protecting their patents by securing licensing deals in foreign countries, the European Commission said.
Chinese courts set license fees at about half the market rate previously agreed between Western technology vendors and manufacturers such as Oppo, ZTE and Huawei, the report added.
“This is part of the Chinese government’s global seizure of power by legal means,” said a spokesman for the European Commission. “It’s a means to squeeze Europe out.”
Smartphone manufacturers have agreed on global standards for telecommunications networks. In return, technology manufacturers must license their patents to others. If they cannot agree on a price, they go to court to determine it. Chinese courts typically set prices twice as low as in the West, which means their companies pay less for technology from foreign suppliers.
In August 2020, China’s Supreme People’s Court ruled that Chinese courts could impose “bans on lawsuits” that prohibit companies from suing outside the country. Those who do so are liable for a daily fine of 130,000 euros, and court decisions elsewhere are ignored.
The policy of reducing the cost of licenses was supported by the Congress of People’s Representatives, the National Assembly of China, although it was not legislative, the commission said.
After Ericsson lost the lawsuit, it said licensing revenue would fall by 100-150 million euros in the quarter. Also affected are the American company InterDigital and EU research institutes such as the Fraunhofer network in Germany, which also license new technologies. The companies used licensing fees to reinvest in the study to stay ahead, the commission said.
Valdis Dombrovskis, European Commissioner for Trade, said: “We need to protect the EU’s vibrant high-tech industry, the engine of innovation that provides our leading role in the development of future innovative technologies. EU companies have the right to seek justice on fair terms if their technology is used illegally. That’s why today we are starting consultations in the WTO. ”
The EU considers that China’s actions are not in line with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (Travel).
The US and Japan have also expressed concerns and are expected to join the EU’s request for consultations. China has 60 days to respond, after which Brussels may ask the Dispute Settlement Board to rule on the issue.
This is the second case the commission has launched against Beijing in the WTO in a month, after China blocked all imports from Lithuania in a dispute over its relations with Taiwan.