Legal proceedings have commenced in the World Trade Organization (WTO) against Chinese intellectual property legislation that undermines the rights of European companies.
The intellectual property legislation sees European companies coming to China being forced to grant ownership or usage rights of their technology to domestic Chinese entities and deprived of the ability to freely negotiate market-based terms in technology transfer agreements.
This goes against the basic rights that companies should be embracing under the WTO rules and disciplines, in particular under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).
No companies can surrender
Cecilia Malmström, commissioner for trade, commented: “Technological innovation and knowhow is the bedrock of our knowledge-based economy. It’s what keeps our companies competitive in the global market and supports hundreds of thousands of jobs across Europe.
“We cannot let any country force our companies to surrender this hard-earned knowledge at its border. This is against international rules that we have all agreed upon in the WTO. If the main players don’t stick to the rulebook, the whole system might collapse.”
What is the basis of the case?
The case initiated last week by the EU targets specific provisions under the Chinese regulation on import and export of technologies, known as Tier, and the regulation on Chinese-foreign equity joint ventures (JV Regulation) that discriminate against non-Chinese companies and treat them worse than domestic ones.
These provisions violate WTO obligations to treat foreign companies on an equal footing with domestic ones, and to protect intellectual property like patents and undisclosed business information.
If the consultations requested do not reach a satisfactory solution within 60 days, the EU will then be able to request that the WTO sets up a panel to rule on the issue.
While the EU’s request is similar to the one brought recently to the WTO by the US, it also identifies further potential violations of WTO rules.
