EU takes China to WTO over high-tech patent royalties

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BRUSSELS (Reuters) -The European Commission filed a complaint at the World Trade Organization on Monday against what it said was China’s “unfair and illegal” practice of setting worldwide royalty rates for EU standard essential patents without the patent owner’s consent.

The Commission, which oversees the trade policy of the 27-nation European Union, said China had empowered its courts to set worldwide rates for high-tech EU companies, notably in the telecoms sector.

“This pressures innovative European high-tech companies into lowering their rates on a worldwide basis, thus giving Chinese manufacturers cheaper access to those European technologies unfairly,” it said in a statement.

China’s commerce ministry said it regretted the EU’s decision to complain and that China would handle the matter in accordance with WTO rules while safeguarding its legitimate rights and interests.

The case concerns standard essential patents (SEPs), which protect technologies essential for the manufacture of goods that meet a certain standard, such as 5G for mobile phones.

European SEP holders include Nokia and Ericsson.

The Commission has requested consultations with China, the first step in WTO dispute settlement. If no satisfactory solution is found within 60 days, the EU executive can ask that an adjudicating panel be set up.

Panel proceedings take an average of 12 months.

The Commission said the case was connected to another dispute the EU brought to the WTO in 2022 related to Chinese anti-suit injunctions, which limit telecom patent holders’ ability to enforce IP rights at non-Chinese courts, with the threat of heavy fines if they do so.

The panel handling that case is expected to issue its final report in the first quarter of this year.

(Reporting by Philip Blenkinsop. Editing by Ed Osmond and Mark Potter)