This is a brief follow-up to my previous post on the dispute between the EU and China concerning standard essential patents (SEPs). In that post, I discussed how the dispute regarding anti-suit injunctions (ASI) was resolved by Arbitrators at the WTO. In this post, I will be focusing on another aspect of the dispute between the EU and China regarding SEPs i.e. worldwide or global licensing terms for SEPs. In January 2025, prior to the recent resolution of its ASI dispute with China, the EU initiated another dispute with China at the WTO challenging the authority of Chinese courts to determine, without the consent of both parties (i.e. the SEP owner and the implementer), worldwide licensing conditions (including royalty rates) for portfolios of SEPs which include non-Chinese SEPs. For my money, I think this dispute is even more important than the ASI dispute as this dispute has implications for other countries such as the United Kingdom. It goes without saying that this iteration of the EU/China SEP wars also has implications for the principle of territoriality in international intellectual property law.

In its request for consultations with China (the first stage of the dispute settlement process at the WTO), the EU cited the November 2023 decision of China’s Chongqing First Intermediate People’s Court which set worldwide licensing conditions (including royalty rates) for SEPs despite the objections of the patent owner in OPPO v. Nokia. In that case, the Chinese court set the royalty rates that OPPO had to pay worldwide for using Nokia’s patented technology in products such as mobile phones. According to the EU, by setting worldwide licensing conditions and royalty rates that includes non-Chinese SEPs, this measure curtails the ability of parties (i.e. SEP owners and implementers) ‘to enforce their rights and ensure the respect of obligations with respect to non-Chinese SEPs in the courts of the jurisdictions where the non-Chinese patents were granted’. The EU also contends that this measure ‘curtails the ability of the courts of the jurisdictions where the non-Chinese patents were granted to adjudicate actions relating to those patents in the respective jurisdictions.’

The EU contends that this measure is inconsistent with China’s obligations under Article 4bis of the Paris Convention (as incorporated into the TRIPS Agreement via Article 2.1 of the Agreement), Article 28.1 of the TRIPS Agreement (alone and in conjunction with Article 4bis of the Paris Convention), and Article 28.2 of the TRIPS Agreement (alone and in conjunction with Article 4bis of the Paris Convention). The EU also argues that this measure is inconsistent with the first sentence of Article 1.1 when read together with Articles 28.1, 28.2, and 44 of the TRIPS Agreement.

With specific reference to Article 44 of the TRIPS Agreement, the EU’s contention is that, because China’s measure can restrict the possibility for a patent owner to request the judicial authorities of other WTO Members to order a party to desist from an infringement, the measure is inconsistent with Article 44 read together with the first sentence of Article 1.1 of the TRIPS Agreement. In light of the award of the Arbitrators in the ASI dispute, the EU’s claim with regard to Article 44 of the TRIPS Agreement is unlikely to succeed. In the ASI dispute, the Arbitrators noted that, while an ASI may restrict SEP holders from requesting judicial authorities in other WTO Members to exercise their authority, ‘this in no way has an effect on the “authority” of the judicial authorities of the WTO Member where the patent is registered.’

As this dispute is still at the consultation stage, it remains to be seen whether the claims of the EU with regard to the inconsistency of this measure with the other provisions (i.e. Article 4bis of the Paris Convention and Articles 1.1 (first sentence), 28.1, and 28.2 of the TRIPS Agreement) will be upheld by a dispute settlement panel. In my view, perhaps the strongest argument of the EU in this case is its argument regarding the inconsistency of the Chinese measure with Article 28.2 read together with the first sentence of Article 1.1 of the TRIPS Agreement. In this regard, the EU contends that China’s measure has the effect of restricting ‘the right of the owner of a non-Chinese SEP to freely negotiate and agree on FRAND contractual licence terms for the use of the SEP within the territory of the Member that has granted that patent’ and that this is therefore inconsistent with the first sentence of Article 1.1 read together with Article 28.2 of the TRIPS Agreement.

Unsurprisingly, the United Kingdom was the first WTO Member to submit a request to join the consultations in this dispute. In its request, the United Kingdom noted that it is ‘a major global forum for adjudicating on disputes concerning SEP licensing’ and that ‘UK courts have accepted jurisdiction to determine global licensing rates in appropriate cases.’ Thus, ‘any decision in these proceedings could impact on the United Kingdom’s ability to adjudicate on such licensing disputes.’

Indeed, in Unwired Planet v. Huawei, the United Kingdom’s Supreme Court held in 2020 that English courts have the jurisdiction, without the agreement of both parties, to grant an injunction to restrain the infringement of a UK patent that is an SEP unless the implementer enters into a global licence and to determine the royalty rates and other terms of such a licence. The Supreme Court justified its approach in this case by drawing a distinction between questions regarding the validity and infringment of a national patent on the one hand and the determination of the royalty payable pursuant to the undertaking given by Unwired Planet to the European Telecommunications Standards Institute (ETSI) wherein Unwired Planet had agreed to license its portfolio of SEPs on FRAND terms to implementers on the other hand. According to the Supreme Court, ‘questions as to the validity and infringement of a national patent are within the exclusive jurisdiction of the courts of the state which has granted the patent.’ Nevertheless, it held that ‘the contractual arrangement which ETSI has created in its IPR Policy’ gives the English courts the jurisdiction to determine the terms of a licence of a portfolio of patents which includes foreign patents.

As at the time of writing, this dispute remains at the consultation stage and no dispute settlement panel has been established. It will therefore be interesting to see if the EU will proceed to the next stage by requesting for the establishment of a panel to resolve this dispute. Crucially, it would be quite interesting to know what the WTO thinks about the practice in those states where the courts have decided that they do in fact have the jurisdiction to set the global licensing terms for SEPs and whether this is consistent with the principle of territoriality in international intellectual property law.