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Australia, US, and EU Submissions at the WTO on China and Anti-Suit Injunctions

Republished By Plato
Republished By Plato

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In early November 2023, the WTO held hearings on DS611, the China IP enforcement case brought by the EU.  The case involves two claims: (a) China should publish its antisuit injunction (ASI) cases and policies under the transparency obligations outlined in TRIPS Art. 63, and (b) China’s practice of ASIs is inconsistent with the TRIPS Agreement, as the TRIPS Agreement requires that China “gives effect” to the obligations set forth therein (Art 1.1).  This “gives effect” obligation includes not interfering in enforcing IP rights of other TRIPS members through the issuance by Chinese courts of  ASIs directed to proceedings outside of China.

The United States had faced similar burdens to providing its case in an  IP case transparency challenge it made of China in the build-up to the WTO case it filed (DS362, 2007), involving the Protection and Enforcement of Intellectual Property Rights.“  The EU reserved its third-party rights in DS362, much as the US has reserved its rights in DS611. Both cases began with  Article 63 requests that China make certain cases available to WTO members.  The DS362 panel decision ended in a mixed result where the lack of case-based evidence weakened US claims that China’s criminal IP procedures and its copyright law violated TRIPS obligations. I believe that the failure to appeal DS362 was a mistake.  Some academics, like Prof. Peter Yu, believed the decision to file the case was also ill-advised.  Shortly after the decision in DS362, the United States abandoned the WTO as a forum for enforcing IP rights until the arrival of the Trump administration.  Instead of relying upon the TRIPS Agreement, the United States advanced other bilateral and multilateral agreements, such as the proposed Anti-counterfeiting Trade Agreement.  The US ultimately was handicapped in its pursuit of improved IP enforcement due to China’s unwillingness to produce these cases and the WTO panel’s unwillingness to demand production of the cases. 

DS362 is a significant precedent to DS611, but it does not lead to any conclusive resolution of this long-standing China’s judicial transparency.  Its legacy is most evident in the composition of the DS611 panel.  Two of the three panel members in DS611 had experience in DS362.  Mr. Adrian Macey served on the panel of both cases.  Mr. Matthew Kennedy was a counsellor to the panel that decided on DS362. 

DS611 and the Biden Administration

Despite his advocacy of unilateral action and rhetorical opposition to the WTO, President Trump filed 15 cases at the WTO.  One of those cases directly involved the commercialization of intellectual property.  Since the Biden administration came to power, the United States has stopped filing WTO cases.   Yet, there are a number of cases that the United States might have considered filing but did not. The WTO remains an essential place for airing disputes among other countries, and as Mr. Simon Lester at the CATO Institute points out, “the WTO is the best place to go for trade enforcement against China (broad obligations, formal adjudication mechanism).”   

The third-party submission of the US in DS611 (August 31, 2023) is not available on the WTO website, but it is available by searching the USTR website (regrettably, the Chinese submission to the WTO panel is also not yet on the WTO website). Given the long-standing US interests in judicial transparency in China and the similarity of the issues and people in  DS611 with DS362, one might think that the US would actively support the EU position.  It is, at the least, a chance to resolve some of the issues of DS362 in light of China’s maturing IP system in a more focused and limited manner.  This, however, is not the case.  USTR’s tacit alliance with China in DS611 might best be understood considering its desire to weaken the WTO as an institution.  Hypothetically, this could be done, for example, by expanding the scope of claims that a WTO panel might not deem justiciable.  This is, in fact, one of USTR’s primary arguments.  Additionally, USTR might wish to focus on the WTO rules rather than China’s often difficult-to-comprehend legal environment. USTR, in fact, scrupulously ignores Chinese legal developments and adds no further analysis of Chinese legal developments than may have already been presented. This approach also has the added, perhaps unintended, impact of normalizing China’s current behavior due to the absence of additional research or critical analysis.

Concerning denying justiciability, USTR notes that “if either set of the challenged measures is outside the terms of reference – either because the measure has not been identified in the complaining party’s panel request and did not form part of the matter the DSB has established the Panel to examine, or because the alleged measure is not an issue that may be challenged under the DSU [Dispute Settlement Understanding] – then that challenged measure and aspect of the matter is not properly before this Panel and may not be subject to findings by the Panel.”  Regarding the EU’s argument that China has an “unwritten ‘policy’” in SEP litigation to issue ASIs, USTR quotes China’s own arguments: “China asserts that the EU’s claims of China having such a policy are ‘completely fictitious.’ China also alleges that the EU’s allegations are ‘riddled with fundamental misconceptions about China’s courts and their authority.’” (para. 10).  Instead of repeating Chinese arguments, USTR again might have looked to other changes in Chinese SEP litigation policy, which were written down either in cases or in normative policy language, including China’s overarching interest in setting global FRAND rates, the extension of jurisdiction to foreigners based on situs of negotiations (Oppo v. Sharp) to add to the discussion regarding unwritten policies in this area.  These policies are hardly “fictitious.” Alternatively, the authors of this brief could look to the 2021 National Trade Estimates Report where the Biden administration criticized the selective transparency of China’s case publication system.

This is not the same USTR I worked for when I was the USPTO and assisted USTR in DS362.  At that time, we assiduously investigated every claim of Chinese law asserted by the Chinese side or any other third party.  Rather than violate what should be a Hippocratic oath of doing no harm to the rule of law, the least that USTR could have done is acknowledge that the data is incomplete.  As I noted in my recently published article  “China’s Practice of Anti-suit Injunctions in Standard-Essential Patent Litigation: Transplant or False Friend?”: “it is especially difficult to estimate the percentage of interim behavior preservation measures [for ASIs] that are published, as Chinese law does not require publication of non-final decisions…Non-publication or unofficial publication of cases can occur for many reasons and limits the ability to draw authoritative conclusions based on published data…Therefore, China’s rejection of complete transparency in ASIs may be seen as a strategic tool to maintain maximum regulatory flexibility in this evolving area.”  The US position also ignores the possibility that there were many more unpublished decisions or cases where judges may have decided not to grant an ASI, perhaps due to the international embarrassment of this WTO dispute, or that China has since decided to delay publication of cases that might have involved an ASI until other approaches are found, or that Chinese judicial data is subject to the possibility of a high level of selection bias.  Indeed, I had previously identified several cases that might have been ripe for an ASI, but which I presume that the Chinese courts decided to delay in granting, perhaps to pursue other remedies to maintain control over global rates and avoid an unwanted WTO case, or simply due to a hope that the case would settle.  See Coolpad v. Pantech (Shenzhen Int. Ct., Mar. 2022); Oppo v. IDC (Guangzhou IP Ct., Feb. 2022);  ZTE v. Tinno Mobile (Shenzhen Int. Ct., Sept 2021) (Chinese domestic SEP dispute); and Oppo v. Nokia (Chongqing No. 1 Int. Ct., July 12, 2021).  By comparison, the WTO panel in DS611 was requested in December 2022, consultations were requested in February 2022, and the original Article 63 request was filed by the EU on July 6, 2021, or about the same time as Oppo v. Nokia was filed.

If USTR had decided to dig deeper into the origins of ASIs, it would have also noted that the alleged basis for granting ASI is not well-grounded in Chinese law, and therefore, leaves open the possibility that the Chinese government or courts did, in fact, develop a written or unwritten policy.  As I noted in my recent article, Zhang Weiping, a scholar of China’s Civil Procedure Law (CPL), has pointed out that the operative article of the CPL to implement ASIs  was drafted with “the understanding that its significance did not include ASIs.”  Moreover, by its own terms, the relevant CPL provisions are primarily intended to “resolve domestic disputes.”   The CPL also gives no guidance concerning its potential extraterritorial application. “Chinese law,” Sophia Tang has noted, “does not explicitly permit the courts to issue anti-suit or anti-arbitration injunctions.”   The CPL provisions also do not explicitly consider the impact of an ASI on a foreign jurisdiction. Comity was subsequently introduced as a consideration in the landmark Huawei v. Conversant decision.  The Chinese courts implemented an ASI policy on a fragile reed of statutory support. 

All the foregoing changes in policy need to be viewed against the background of a Chinese judiciary rooted in civil law traditions, which do not permit them to make new laws.  Moreover, the courts are not independent of the government. They likely decided to issue ASIs after reaching a consensus with other branches of government, including the Party.  Several cases also report that they were decided after consultation with the court’s adjudication committee, which often considers politically sensitive cases (Nokia v. Oppo, Huawei v. Samsung, etc.).   The policy documents are outlined in my article, the various submissions made to the WTO by the EU and numerous other academic articles.  China’s claim that a Chinese ASI policy was “completely fictitious” deserved further analysis, not simple repetition by USTR.

The Australian Perspective

Australia reintroduces a bit of needed balance to discuss these two claims.  Australia has submitted an excellent  brief to the WTO (August 31, 2023): “Australia submits that the Panel should consider the collective weight of the European Union’s evidence in establishing the existence and content of the unwritten measure.”  It also noted that “if the Panel finds the evidence submitted by the European Union shows Chinese government endorsement and encouragement of the approach to issuing ASIs in SEP disputes, the Panel should consider whether this indicates an underlying policy to prohibit patent holders from asserting their IPRs in other jurisdictions. In Australia’s view, this applies particularly to the designation of some of the ASI decisions as ‘typical cases’ and their promotion by the SPC, the Intermediate People’s Courts, and the Guangdong Province Communist Party Political and Legal Committee, as well as with calls from the SPC and NPC’s Standing Committee to continue using and improving the ASI system. If the Panel is satisfied as to the existence of such an underlying policy, then Australia submits the Panel should consider this factor as an important element in the possible existence of an unwritten measure.” Unlike the US brief, Australia cites Chinese policy documents and appears to endorse a critical review of China’s political-legal system to better understand China’s transparency obligations.  As I noted in my article on ASIs, I believe other factors support the likelihood of a written or unwritten policy on granting ASIs, including:

  • Chinese ASIs are part of long-term efforts by the Chinese government to increase the value of Chinese technology, decrease the value of foreign technology “monopolies,” and breakthrough technological bottlenecks.
  • Unlike common law countries, Chinese ASIs are exclusively extra-territorial in nature.
  • Chinese courts are not independent of the state or party.  In this sense, they are implementing national industrial policies rather than being tasked with balancing competing judicial interests.
  • Chinese ASIs are part of a national effort to increase the role of Chinese courts in establishing global judicial norms and to protect Chinese companies from extraterritorial risks.  Xi Jinping outlined this policy in a critical speech in the leading party journal Qiushi in 2021.
  • China’s ASI practices have also been promoted, researched, and endorsed by the highest levels of China’s judicial leadership and many individual courts.

Concerning the EU’s Article 1.1 argument, Australia urges that WTO members “must ensure their implementation of TRIPS provisions does not interfere with, or undermine, the ability of other Members to uphold their own TRIPS obligations. The provisions of the TRIPS Agreement cannot be fully operative when one Member undermines another Member’s ability to uphold its obligations, such as the availability of effective enforcement under Part III of the TRIPS Agreement. Any such interference fails to give effect to the provisions of the TRIPS Agreement” [Emphasis in original]. Perhaps the United States was thinking defensively concerning how a WTO ban on Chinese ASIs might have affected US courts granting ASIs in other IP litigation?  As pointed out above, I believe that US and Chinese ASIs are different in form and structure, including how they include comity considerations to minimize their impact on foreign courts and the transparency of their underlying policies.  ASIs may not be on trial here; hopefully, it is only ASI excesses.

Quo Vadis, United States?

This case regrettably does not benefit from the decision in  Oppo v. Nokia made in Chongqing in December 2023, where the Chinese court made a global rate setting to ensure its role as the dominant arbiter of international SEP disputes for its company.  The case raises complex issues involving the territoriality of patents, the licensing of globally standardized technology, and the role of the Chinese courts in setting rates for Chinese companies beyond its borders. My guess is that this decision may have been timed to deprive the WTO panel of this additional evidence regarding China’s judicial intentions and increase the likelihood that any decision by the panel is somewhat less relevant by being rendered after the close of arguments at the WTO in November. The continued coincidental timings of the WTO case and Oppo v. Nokia are not necessarily evidence of proof of influence from a foreign proceeding, despite these types of timing decisions having occurred in Chinese counterparts to numerous parallel overseas cases.  The EU has promptly filed another Article 63 transparency request for China to disclose the Oppo v Nokia decision and might rely upon it for additional support of its WTO case or for filing an additional case (this request was posted on LinkedIn by an EU official).   The long delays between filing Article 63 requests, requests for consultations, formation of a panel, writing a panel decision, and any necessary appeals provide ample time for China to consider other strategies to address how foreign courts decide patents in standards-essential patent (SEP) cases, without using the controversial ASI tool.

For US companies,  the message seems to be that USTR isn’t as interested as the EU or Australians in the trade aspects of ensuring transparency of case decisions in China and of publication of underlying policies, mainly if those efforts involve strengthening multilateral mechanisms. This about-turn on transparency is troubling.  US policy demanding that China become more transparent dates back well before China’s WTO accession, to at least as early as the 1994 Section 301 investigation on China’s IP practices, including the lack of transparency in its laws and regulations.  Today, if a US company needs to find out if a case should be published or if China needs to codify a judicial policy, it is best advised to seek support from across the Atlantic or Pacific oceans or perhaps from other agencies such as USPTO offices in China.  This is especially regrettable considering China’s decisions to cut back on its existing publication of cases.    If one is looking, however, for the use of unilateral actions, the US government is the place to lobby. 

As a final note, the US submission to the WTO filing seems to reflect my concerns in 2021 that the Biden Administration may be “inclined to believe that commercial rule of law issues are less important to trade policy or that there is no need to phrase Chinese commitments in legally binding language.”   Or perhaps the US position is a combination of concerns: a desire to weaken the WTO, a weakening interest in commercial rule of law, support for our own courts, and weakening support for IP. It appears to be a puzzling abandonment of our traditions, values, and commitment to our allies and trading partners, as well as a retreat from the goal of a rules-based trading order.  I hope these approaches will change in short order.

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