European Union Filing Complaint with World Trade Organization against China
The European Union is pursuing legal proceedings against China with the World Trade Organization (WTO). The E.U. contends that China has violated the Trade-Related Aspects of Intellectual Property (TRIPS) Agreement. Intellectual property, commonly abbreviated as IP, refers to any product created by the human mind and can include inventions, artwork, designs, symbols, names, and/or images.
Traditionally, there are four categories of intellectual property: patent, copyright, trademark, and trade secrets. The TRIPS Agreement ensures that countries treat each other fairly in situations where IP is involved. The TRIPS Agreement is an agreement between all members of the WTO that sets standards for intellectual property (IP) use and set standards for how countries treat one another in the fair exercise of intellectual property law.
TRIPS offers minimum standards for protection of intellectual property rights of member nations; it also includes procedures that members should follow to enforce IP rights in their countries. The TRIPS also provides guidance on how to settle IP disputes between nations.
In a statement, the European Commission said that E.U. companies seeking to work with China, and particularly, establish operations in China, must “grant ownership or usage rights of their technology to domestic Chinese entities and are deprived of the ability to freely negotiate market-based terms in technology transfer agreements. This is at odds with the basic rights that companies should be enjoying under the WTO rules and disciplines, in particular under the TRIPS Agreement.”
The E.U.’s legal proceedings add extra pressure to a nation already under scrutiny from the United States for their intellectual property practices. The Trump Administration has threatened duties on up to $150 billion of Chinese goods sold in the American market due to their intellectual property practices. Such practices include the forced sharing of patents and other intellectual property information by American companies who seek to collaborate with Chinese countries as a prerequisite.
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The European Union has become more aggressive in its trade policies recently, as it also filed a WTO complaint against the United States’ metal tariffs, which they view as protectionist; in response to the US’s metal-import levies, the E.U. will tariff U.S. goods starting at the end of June.
“We are not choosing any sides,” E.U. Trade Commissioner Cecilia Malmstrom recently stated on the topic of their aggressive trade practices. “We are challenging […] both the U.S. and China at the WTO.” Malmstrom said, “We stand for the multilateral system, for rules-based global trade.”
Countries seeking to work with China must enter into joint ventures that force foreign companies to surrender sensitive patent and other IP information to their Chinese business partners, which effectively creates a competitor for the foreign company rather than a business ally. More and more, China is also forcing companies wishing to work with companies based in the nation to have operations on Chinese soil.
Just as the United States has suffered economically because of low-priced Chinese exports and steel that undercut rivals, as well as questionable intellectual property practices that put American innovation at risk, so has the European Union. Despite the fact that the E.U. is also pursuing aggressive WTO actions on the United States, this move by the European Union represents a commonality with the United States in its strained relations with China on intellectual property practices.
While the E.U. complaint is similar to the complaint levied by the United States, it cites China for a greater number of potential IP violations than the United States. The Trump Administration recently initiated a unilateral investigation into China’s trade practices in accordance with Section 301 of the Trade Act of 1974 to force China to halt their theft of trade secrets and their practice of forced technology transfer.
Kamil Idris on Protecting Intellectual Property Rights
Kamil Idris is the Former Director General of the World Intellectual Property Organization (WIPO) and has served as a former diplomat in Sudan. Currently, he is the President of the International Court of Arbitration and Mediation (ICAM).
Kamil Idris specializes in globalization and intellectual property issues, including IP law and economic development. Idris graduated with a Bachelors of Law (LLB) with honors from Khartoum Universty in Sudan and holds a Bachelor of Arts (BA) in Philosophy, Political Science, and Economic Theories from Cairo University in Egypt. He has earned honorary doctorates from 19 universities internationally and has authored many books on issues of intellectual property, international law and development.
Kamil Idris recently spoke to the Venture Source about the TRIPS Agreement, and took issue with many of the provisions included in the Agreement, namely, the fact that it does not uniformly apply the same IP standard to all nations. “The TRIPS provisions are minimum standards, giving countries broad flexibility to determine further details,” he explains.
Nations may also implement their own more stringent IP sharing standards, to provide additional safeguards against abuse of the framework and as a way to reduce barriers to trade. Countries can also opt out of various parts of the enforcement mechanisms.
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Least developed countries are given more leniency in implementing the TRIPS Agreement provisions so that they can develop a technological industry in their nations to boost their economies. Only a “limited level of harmonization of IP enforcement legislation exists around the globe,” Idris says. Therefore, although the TRIPS Agreement enforces fair IP sharing between countries, it is lenient in its provisions and does not apply the same standard to all nations.
Some may argue that such a setup can cause imbalances in trade and make the playing field unfair for more developed nations seeking to protect their IP laws especially in the face of less developed competitors. On the topic of whether all nations should be subject to the same provisions in the TRIPS Agreement, Kamil Idris tells Venture Source, “Whether or not further international harmonization of enforcement legislation is desirable is viewed differently among countries.
In the near future a global ‘TRIPS-plus’ harmonization in the field of enforcement appears unlikely.” However, he notes, many developed and developing nations do apply a higher standard to their IP enforcement, as evidenced by both the United States’ and European Union’s aggressive pursuit of policies and actions which protect their nations’ intellectual property.
What should international companies do to protect their Intellectual Property?
Kamil Idris advises companies working internationally that they must be careful in managing their intellectual property and that an IP-focused strategy will help companies get the most out of their international collaborations. To avoid tech transfer disputes, Idris suggests that companies must be judicious in selecting international partners, and maximize transparency to build trust among the members of a partnership.
International contracts should be drafted carefully and include as much detail as possible. Furthermore, the best international contracts include an established framework to resolve disputes when they do happen. Idris suggests coming up with arrangements agreed to by all parties in the event of a dispute between them.
What’s next for the US and EU in their disputes with China over IP?
China is currently pursuing several governmental initiatives involving cutting-edge science and technology. Later this year, they have announced, they will undertake a mission that will send a communications satellite that travels to the far side of the Moon. They have planned to transition all cars to electric cars by 2035.
The Chinese government has also published a strategic plan for China’s national Artificial Intelligence strategy that seeks to boost China’s prominence in tech and make it a more prominent player in the international tech sphere. Indeed, the future of Chinese technology seems very exciting. However, given the trade issues brought forth by both the United States and European Union, the future of these endeavors remains to be seen.
China’s questionable IP practices have contributed to poor trade relations between China and other nations. China and the U.S., in particular, are in the middle of what appears to be an escalating trade war. United States President Donald Trump has threatened China throughout his presidential campaign, labeling it a “currency manipulator” and threatening tariffs on steel, which China has mass-produced to force steel prices to down and undercut competitors.
As president, Trump has continued to be aggressive towards China on trade, continuing to threaten tariffs, blocking Chinese acquisition of companies such as telecommunications business Qualcomm, and most recently, fining Chinese smartphone giant ZTE $1 billion for their IP practices. It is possible, though unlikely, that the European Union could follow the example of the United States and pursue more aggressive trade policies against China; however, this remains to be seen.
Regardless of what happens with the Chinese IP actions levied by the United States and European Union, the fast pace of technological innovation is unstoppable. IP law, accordingly, should be smart, timely, and keep up with new technologies. Kamil Idris suggests that companies seeking to work with international partners develop a tech transfer plan centered on IP to ensure that it is maximally protected. An IP-centered trade agreement, says Kamil Idris, is the best option to ensure a win-win situation among all parties.
Find Kamil Idris’ books on Amazon.
