In February 2022, we wrote about the European Union’s dispute with China over anti-suit injunctions at the World Trade Organization (WTO). Effectively, the EU accused China of violating the international Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) as Chinese courts have granted a number of anti-suit injunctions (ASIs) in disputes surrounding standard essential patents (SEPs) since 2019. ASIs, while generally more prevalent in common, rather than civil law, jurisdictions, are a tool to prevent a party to legal proceedings from bringing or continuing a second case in a different (foreign) court if that second case is deemed vexatious and interferes with the first case. Although the ASI-practice of Chinese courts has developed quickly, they were not the first courts to grant ASIs in SEP disputes, but ultimately adopted legal traditions from other jurisdictions, particularly US courts, as academic research suggests.
In the context of SEPs, the proceedings that seek to halt the foreign litigation are often cases brought by a standard user aimed at having a court set fair, reasonable, and non-discriminatory (FRAND) terms for a particular SEP portfolio. The ASI aims at blocking litigation in which the SEP holder seeks to enforce its SEPs – usually by seeking injunctions or other exclusionary measures – to create momentum towards reaching a license agreement under terms that that SEP holder deems FRAND. ASIs that "protect" the rate-setting case in this context will prevent the enforcement of SEPs, which is precisely why the EU claims that such ASIs would violate TRIPS.
Japan, Canada, US join the dispute
If you wonder how the case has progressed since the EU filed its request for consultation at the WTO in February 2022, a presentation by an official of the European Commission at this year’s annual meeting of the GRUR (German Association for the Protection of Intellectual Property), speaking in his own capacity and not as a representative of the European Commission, provided some insight on developments. His presentation is available here. Here is what happened: Following the request for consultations, Japan, Canada, and the US each sought to join consultations between China and the EU in March 2022 (respective requests available here). Other member states can request to join consultations brought by a WTO member if they have a substantial trade interest in the matter being discussed. While Japan and Canada made it clear that they not only had such interest in ASIs and SEP enforcement, and therefore wanted to have a seat at the table, they also voiced support for the EU’s position. The request to join the consultations by the United States, in turn, remained silent on the US views on ASIs in substance, focusing exclusively on the substantial trade interest in the issue.
The European Commission has made public that the parties met for consultations multiple times in April 2022. But it appears no real progress was made, as China still published policy documents supporting use of anti-suit injunctions after the request for consultation was launched. This is hardly surprising given the fundamentally different views on what role, if any, ASIs can or should play in SEP licensing disputes. The different positions seemed to have become more entrenched when China’s State Administration for Market Regulation (SAMR) released a draft of the Provisions on Prohibiting the Abuse of Intellectual Property Rights to Exclude and Restrict Competition (Draft IPR Regulation). The Draft IPR Regulation is part of a larger bundle of six draft regulations that seek to support and implement China’s new Anti-monopoly Law that came into effect on 1 August 2022. It contains various regulations outlining which actions can constitute an abuse of a dominant market position in the context of SEP licensing. Notably, the Draft IPR Regulation requests that SEP holders shall not, without having engaged in good faith negotiations, request a court ruling prohibiting the use of its respective SEPs. Whether that or any other provision of the Draft IPR Regulation is substantially different from what the European Court of Justice requires SEP holders to do before enforcing SEPs against standard users is a whole different story. In any case, it appears that Chinese legislative efforts on SEPs have not helped advance the EU-China dialogue on the use of ASIs at the WTO.
Next step: panel stage to arbitrate the dispute?
It would therefore be unsurprising if the EU were to escalate the dispute further. If a resolution is not found at the consultations stage, the member that brought the case can take the dispute to the panel stage and request that a panel be set up to adjudicate the dispute. The EU apparently has not yet taken a decision to request a panel, as such a request would become public.
Interestingly, it appears that the EU views this matter as a conflict over the issuing of ASIs in the context of SEP enforcement and rate setting for SEP license agreements, that are usually worldwide agreements, by one particular WTO member, China, as consultations are only requested with China. This is noteworthy as ASIs have been issued in the context of SEP licensing disputes in other jurisdictions as well.
It remains to be seen whether the EU will take that next step in its dispute with China over SEP enforcement. Similarly, given that other WTO members would have the opportunity to provide written submissions in any future panel stage, it is unclear whether this seemingly bilateral disagreement will transform into a wider international forum that could provide guidance on ASIs in the SEP ecosystem. Should Japan, Canada, the US, or other WTO members that can still join at the panel stage make their voice heard (again) at a potential future panel stage, it would present yet another interesting element to this dispute.
