The decision by the WTO’s arbitration mechanism, necessitated by the effective blockade of the organization’s Appellate Body since December 2019 due to the United States’ refusal to approve new judge appointments, overturns a WTO panel ruling from February that was partially favorable to Beijing. This previously led the EU to appeal the decision.
The case concerns certain measures adopted by Chinese courts regarding the enforcement of intellectual property rights, which now require modification.
The interim arbitration mechanism of the WTO was agreed upon by Brussels and Beijing in July 2023 to have the final say in trade disputes between the parties.
This process was initiated in February 2022 by the EU, which contends that some Chinese judicial decisions on intellectual property rights in China do not comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
The European bloc particularly disagreed with the use of specific “anti-suit injunctions” in a series of litigations concerning European and Chinese trademarks adjudicated in China. These measures prohibited one of the parties involved from pursuing legal proceedings in another jurisdiction or court.
The EU accused Beijing of significantly obstructing legal action by European companies whose patents, notably in the telecommunications technology sector, are being illegally used by firms in the Asian giant, emphasizing that billions of euros are at stake.
Responding to the EU’s appeal, the WTO arbitrators concluded that the principal measure, allowing Chinese courts to bar patent holders from asserting their patent rights in jurisdictions outside China in the context of domestic patent disputes, was incompatible with the TRIPS Agreement obligations.
Contrary to the initial WTO panel opinion, the arbitration mechanism now determined that China’s measures were “undermining the intellectual property system of other countries,” preventing rights holders from exercising their rights abroad, thus obliging China to alter this practice or face trade retaliation.
In their adopted conclusions, the experts emphasized that WTO members must implement the TRIPS Agreement “without harming the functioning of the protection and enforcement systems for industrial property rights implemented by other members in their respective territories.”
