The EU, Japan, Saudi Arabia, Taiwan and Ukraine have formally asked to join the WTO consultations between the U.S. and China over the protection of intellectual property rights. The U.S. requested consultations with China last month, alleging that China discriminates against foreign patent holders. In its request for consultations, the US delegation to the WTO writes:
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.
The Japanese request to join the consultations noted:
Japanese companies which transfer technologies to Chinese companies by contracts are directly affected by the Regulations of the People’s Republic of China on the Administration of the Import and Export of Technologies, one of the measures identified by the United States, because this measure mandates contractual terms in technology transfer agreements between foreign and Chinese partners, which are disadvantageous to foreign partners, including Japanese companies.
The EU request cited trade figures to show how it was effected:
EU exports of high-tech products and high-tech knowledge intensive services, for which the protection of intellectual property rights is of fundamental importance, is estimated at a value of EUR 680 billion annually. EU exports of high-tech to China are worth over EUR 30 billion annually. At the same time, the EU is a large investor in China with an aggregated value of direct investments of currently 180 billion EUR. Much of the investments are concluded under joint-venture requirements and are thus potentially affected by the measures as regards which the United States requested consultations.
The U.S. request for consultations is the first step in the WTO’s dispute settlement process. If parties fail to reach an agreement through consultations, a panel will be formed to adjudicate the dispute.
The WTO dispute is a separate process from the U.S.’s unilateral Section 301 review of China’s practices regarding intellectual property. China has protested that the Section 301 review may violate the WTO’s Dispute Settlement Understanding (DSU), which requires Members to adjudicate alleged violations of the TRIPS Agreement through the WTO’s multilateral system. However, the U.S. claims its Section 301 review does not allege Chinese violations of TRIPS, and therefore falls outside the scope of the WTO’s Dispute Settlement Understanding.
