The EU, on Friday, Feb. 18, filed a lawsuit against China at the World Trade Organization (WTO), accusing Beijing of using domestic courts to undermine intellectual property laws and allowing Chinese telecom giants such as Huawei and Xiaomi to obtain low-cost technology licenses.

The European Commission said that since August 2020, Chinese courts have been issuing so-called “injunctions” to prevent EU companies from seeking help from foreign courts and using hefty fines as a deterrent.

The injunctions provide that if patent holders file a lawsuit in a court outside of China, they typically face significant fines, up to almost $150,000/day.

The European Commission said in a statement:

“China severely restricts EU companies with rights to key technologies (such as 3G, 4G, and 5G) from protecting these rights when their patents are used illegally or without appropriate compensation by, for example, Chinese mobile phone manufacturers. Furthermore, the patent holders that do go to court outside China often face significant fines in China, putting them under pressure to settle for licensing fees below market rates.”

International companies are suing because Chinese companies use their technology without a license or permit.

According to The South China Morning Post, Brussels officials say that Chinese companies such as Huawei, Xiaomi, ZTE, and Oppo have taken full advantage of the Chinese regime’s “injunctions.”

The South China Morning Post also cited EU officials saying that they have raised the issue with the Chinese side at the WTO, bilaterally and in various other legal forums, but Beijing’s response has been unsatisfactory.

EU Trade Commissioner Valdis Dombrovskis said,

“We must protect the EU’s vibrant high-tech industry, an engine for innovation that ensures our leading role in developing future innovative technologies. EU companies have a right to seek justice on fair terms when their technology is used illegally. That is why we are launching WTO consultations today.”

After the EU refers the allegations against China to the WTO, the procedure will start with 60 days of formal consultations between the parties. Then, if they cannot resolve the dispute, the EU can ask a WTO panel to rule on the matter. However, it could take several years for the WTO to resolve the dispute.

The EU has also consulted with the United States and Japan because their companies face similar problems.

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