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European Union takes China to WTO over smartphone patents

Alleges Middle Kingdom's courts make it impossible to chase manufacturers who won't respect IP rights

The European Union has signaled its intention to file a dispute with the World Trade Organization (WTO) over China's treatment of intellectual property used in mobile phones.

Announced late last week, the EU's action is yet to appear on the WTO's disputes list, but a statement outlines the dispute as centring on an allegation that "China severely restricts EU companies with rights to key technologies (such as 3G, 4G and 5G) from protecting these rights when their patents are used illegally or without appropriate compensation by, for example, Chinese mobile phone manufacturers."

The statement allows that some cases do make it into Chinese courts, but that Chinese companies use a legal gambit called an "anti-suit injunction" that prevents a complainant pursuing similar action in jurisdictions other than China – despite such actions often being necessary to press a case.

Fines for ignoring such injunctions can reach €130,000 ($147,000) a day. So companies pursuing action outside China can see the injunctions issued, resulting in fines being threatened or issued within China. As legal bills and fines mount, the EU feels its tech companies feel pressure to settle – often agreeing to licence fees for their IP that are below market rates.

China's Supreme Court – which does not enjoy the same independence and freedom from political influence as courts in other nations – has approved the use of such injunctions.

The EU's statement claims its efforts to discuss the situation with China have been ignored, leaving it with no alternative but to seek a consultation with the WTO.

While the trade organization tries to move things along, disputes can take years to reach a resolution.

The EU argues that it just wants its telecoms innovators to get a fair price for their IP. China's foreign ministry has not given a briefing since last Friday, and the conclusion of the Beijing Winter Olympics has dominated government output in recent days, so no response to the EU action is apparent.

If China acts true to form, it will deny everything and proclaim its phone-makers are paragons of legal compliance and innovative spirit.

Many allege otherwise, with recent complaints that Chinese firms have pinched tech for chipmaking and walkie-talkies, used front companies to invest in Taiwanese tech firms to access their secrets, and attacked US businesses every 12 hours in search of trade secrets. ®

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