The past few years have seen an ongoing jurisdictional back-and-forth between national courts over international fair, reasonable, and nondiscriminatory (FRAND) licensing issues. In August 2021, China’s Supreme People’s Court became the second national court, following the UK Supreme Court one year before, to assert the authority to set the terms of a global FRAND license. The Chongqing Intermediate People’s Court then became the first Chinese court to exercise that power in November 2023, issuing a decision in Oppo v. Nokia that reportedly set lower rates for devices sold in China and other “price-sensitive” countries than for those sold elsewhere. Now, the European Commission has announced that it has challenged these global rate-setting practices before the World Trade Organization (WTO), the second such action it has brought against China over FRAND issues. The Commission argues that these practices “pressure[] innovative European high-tech companies into lowering their rates on a worldwide basis”, and that decisions like Oppo v. Nokia and the laws enabling them “unduly interfere[]” with other national courts in violation of the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

The Commission brought its challenge against China’s rate-setting practices as a request for consultation. This is the first step in the WTO’s dispute resolution proceedings, under which the EU can move into the litigation phase and request that the WTO convene a panel to address the matter if the parties do not reach a resolution within 60 days.

In a letter sent on January 20 in conjunction with that request for consultation—which Ambassador João Aguiar Machado, the EU’s Permanent Representative to the WTO, addressed to his Chinese counterpart, Ambassador LI Chenggang—the Commission lays out various ways that Chinese laws enabling these practices and cases implementing them, including Oppo v. Nokia, allegedly violate China’s obligations under the TRIPS Agreement, a 1994 treaty that establishes minimum standards for IP enforcement.

In particular, the letter asserts that the FRAND rate-setting decisions at issue have violated certain TRIPS provisions by restricting patent owners’ ability to file or continue litigation in the courts of other TRIPS member states over patent registration, validity, infringement, and licensing issues (as covered in part by Articles 28.1 and 28.2 of the TRIPS Agreement) with respect to patents issued in those member states. The letter further contends that these practices violate TRIPS by barring patent owners from enforcing their right to prevent third parties from offering products practicing their patents without consent, including through the courts of member states (under TRIPS Article 1.1 alongside Articles 28.1 and 28.1); and by restricting the rights of the owners of “non-Chinese [standard essential patents (SEPs)]” to “freely negotiate and agree” on FRAND terms covering the use of those SEPs in the applicable member states.

The letter additionally notes that the Commission had filed a request for information with the WTO pursuant to TRIPS Article 63.3 in December 2023, asking that the Chinese government provide the full text of the Oppo v. Nokia decision. The request reflected concerns by the Commission and other stakeholders over the relative lack of judicial transparency in China, where courts release a far more limited set of data than in other jurisdictions (especially compared to the US) and often do not report decisions, even significant ones, for months—preventing those stakeholders from gaining insight into Chinese courts’ approach to SEP issues. While the Commission did not specify the nature of China’s response to that request, it indicated that the response had been insufficient, stating that it “appears to be inconsistent with its obligations under Article 63.3, second sentence, of the TRIPS Agreement”.

This is not the first time that the Commission has pushed China on SEP transparency issues. In July 2021, it sent the country another request for information stating that out of four notable decisions that reportedly detailed courts’ approach to anti-suit injunctions (ASIs)—which in relevant part bar parties, here patent owners, from pursuing or enforcing injunctions in foreign courts—just one had been made available in China’s public caselaw database. As a result, the Commission sought the full text of the remaining three rulings, also asking China to clarify the precedential effect of certain cases being designated as “big” and “typical”. The request additionally sought further details on the scope of Chinese ASIs (as well as the process courts must follow to issue them).

The Chinese government largely declined to provide this information in a one-page response sent in September 2021, explaining that “big” and “typical” rulings are “cases for reference and have no legal effect of general application” but asserting that otherwise, China is not obligated to provide the requested information under the TRIPS Agreement. China instead countered that the country stands ready to have bilateral discussions on these topics through the existing China-European Union IP Working Group.

The Commission reiterated its concerns over the delayed reporting of, and guidance on, SEP decisions in the prior WTO action mentioned above, which it initiated in February 2022. That action primarily targets Chinese courts’ issuance of ASIs, arguing that the practice violates certain TRIPS provisions by unduly restricting EU patent owners’ enforcement rights and thereby creating “barriers to legitimate trade”. Its complaint implicitly distinguishes Chinese courts’ use of ASIs from the same practice in other countries—such as the US and UK, where courts generally have some degree of independence—by noting that the overarching Chinese policy favoring ASIs has been endorsed by the Chinese government.

The Commission asked the WTO to convene a panel to address its allegations in December 2022, which the WTO did the next month. Since then, the panel held a hearing in late October and early November 2023, with a series of written submissions followed by another hearing in March 2024. No activity after that is reflected in the public docket, though a panel decision is reportedly expected in the first quarter of 2025.

For more on other notable FRAND developments this past year in other key venues, including the Unified Patent Court, the US, and Germany as well as China, see RPX’s review of the fourth quarter and 2024.