Context: Earlier this year, the European Commission’s (EC) Directorate-General for Trade (DG TRADE) brought a second World Trade Organization (WTO) complaint against China over its standard-essential patent (SEP) case law (January 20, 2025 ip fray article). The first one started with a so-called request for consultations in February 2022 (PDF).
What’s new: There are pretty clear signs now of the EC having lost the first case. A panel decision was handed down to the parties on February 21, 2025 and supposed to be published today, but it turns out that the EC made a request on March 31, 2025 to keep it under wraps with a view to an appeal (PDF). On its own, but even more so when taken together with the fact that the EU’s second WTO complaint over China’s SEP case law is practically redundant (the first one dealt with antisuit injunctions and the second talks about rate-setting), the EU’s desire not to make the decision public because of an appeal suggests that the EU is going to be the appellant, i.e., the losing party.
Direct impact: The EU and China had already agreed in 2023 that an appeal from the final decision would be resolved through arbitration under WTO rules. Therefore, “the final Panel Report in all three WTO languages remains confidential until the filing of a Notice of Appeal.” The EU complaint appeared weak from the outset. It was not China who started making SEP-related rulings with extraterritorial effect. Before the first Chinese court assumed jurisdiction over global FRAND (fair, reasonable and non-discriminatory) licensing terms, German courts already forced implementers into global license agreements, as did UK courts starting with Unwired Planet v. Huawei. Any attempt to distinguish the two approaches does not withstand scrutiny. It ultimately comes down to courts using their power to create a Hobson’s Choice for a party that didn’t consent to global FRAND jurisdiction in a particular place.
Wider ramifications: In these times of geopolitical divide and trade war, the EU’s dogged pursuit of a meritless matter is unhelpful. And if the EU wanted to actually complain over extraterritorial overreach with respect to SEPs, the UK with its “interim license” extremism would be a more critical target now than China (January 26, 2025 ip fray article).
The following sentence from the latest (April 4, 2025) document in the first proceedings recalls that the panel decision was supposed to be published today:
“Taking into account paragraph 3 of the Agreed Arbitration Procedures, the Panel informed the parties that circulation of the Panel Report to Members in all three WTO languages was scheduled for 10 April 2025.”
The document quotes from the Agreed Arbitration Procedures:
“… [f]ollowing the issuance of the final panel report to the parties, but no later than 10 days prior to the anticipated date of circulation of the final panel report to the rest of the Membership, any party may request that the panel suspend the panel proceedings with a view to initiating the arbitration under these agreed procedures.”
That ten-day notice period requierd the EU to make the request on March 31, 2025. And it did:
“On 31 March 2024 the European Union, pursuant to paragraph 4 of the Agreed Arbitration Procedures and Article 12.12 of the DSU5, made such a request. Upon receipt of this suspension request, on 1 April 2025, the Panel transmitted its Report in the three WTO languages to the parties and third parties and instructed the Dispute Settlement Registry to transmit the same to the pool of arbitrators, in accordance with paragraph 1 of the Additional Working Procedures.”
Technically, the panel proceedings are suspended, but in reality the panel had completed its work and the next step is apparently going to be an appeal by the EU, which be resolved through arbitration.
It now looks very much like the EU brought its second WTO complaint just to have another bite at the apple, hoping to get a better outcome when relitigating largely the same questions. And the EU’s credibility is even weaker now, given that the Unified Patent Court (UPC) is jointly operated by a majority of EU member states (the others will follow sooner or later) and has adopted German case law with respect to requiring implementers to take global licenses.
Times have changed since the EC brought its first complaint, but the EC may not have fully understood it yet. When the “request for consultations” was made in early 2022, extraterritorial overreach by EU and UK courts appeared to benefit SEP holders by accelerating dispute resolution. But more recently, the UK courts have become a threat to intellectual property owners.
In the second EU-China WTO proceedings, three countries want to intervene: the UK (PDF), Canada (PDF) and Japan (PDF). It is ip fray‘s theory that the UK primarily just wants to explain how its own SEP case law works. But no matter what the UK will say, its courts have been engaging in extraterritorial overreach since the late 2010s, and one appellate judge has recently radicalized himself on the question of global FRAND jurisdiction.
When the decision is finally published, the outcome will be officially known. But the EU’s conduct makes it hard to imagine that its first complaint has not failed.