US Files WTO Case Against China For Violations Of Global Patent Rules

It has been considered for years that China has not been as strong as developed country trading partners in protecting intellectual property rights. Now, as China gains ground in building its own patent war chest, it has received a World Trade Organization challenge from the top patent-filing nation in the world, arguing that China’s treatment of foreign companies’ IP rights is unfavourable and its policies violate international trade rules. 

The 2-page US filing is available on the WTO website here: WT/DS542/1.

The US charges: “China denies foreign patent holders the ability to enforce their patent rights against a Chinese joint-venture party after a technology transfer contract ends. China also imposes mandatory adverse contract terms that discriminate against and are less favorable for imported foreign technology. Therefore, China deprives foreign intellectual property rights holders of the ability to protect their intellectual property rights in China as well as freely negotiate market-based terms in licensing and other technology-related contracts.”

Among the allegations, the US identifies various Chinese laws on importing and foreign businesses that it says violate articles of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). For instance, it raises TRIPS Art. 3 on national treatment, under which foreign firms must receive equal treatment to domestic firms.

It also raises possible violation of Arts. 28.1(a) and 28.2, the latter of which states that “Patent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts.”

The full TRIPS Art. 28 is as follows:

Article 28
Rights Conferred

1.  A patent shall confer on its owner the following exclusive rights:

(a)  where the subject matter of a patent is a product, to prevent third parties not having the owner’s consent from the acts of: making, using, offering for sale, selling, or importing ⁽⁶⁾ for these purposes that product;

(b)  where the subject matter of a patent is a process, to prevent third parties not having the owner’s consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by that process.

2.  Patent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts.

As the WTO explains, “The request for consultations formally initiates a dispute in the WTO. Consultations give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the complainant may request adjudication by a panel.”

In a related development, the US also announced late last week an investigation of China’s treatment of US intellectual property, which was a subject of discussion among WTO members in committee today. See separate story.

 

Image Credits: WTO