The EU has claimed that China breaches the TRIPS Agreement and other legal agreements covering IP, in a filing at the World Trade Organization (WTO) last week.
In a statement explaining the filing, the EU said European companies operating in China are forced to grant ownership or usage rights of their technology to domestic entities, and are “deprived of the ability to freely negotiate market-based terms in technology transfer agreements”.
The EU’s submission to the WTO said China’s disputed measures discriminate against foreign IP owners and restrict their ability to protect their rights in China, “contrary to China’s WTO obligations”.
Commissioner for Trade Cecilia Malmström said the EU cannot let any country force companies to surrender “hard-earned knowledge” at its border as “this is against international rules that we have all agreed upon in the WTO”.
The EU singled out specific provisions of the Regulations of the People’s Republic of China on the Administration of the Import and Export of Technologies, as well as the Regulations for the Implementation of the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures.
“These provisions violate WTO obligations to treat foreign companies on an equal footing with domestic ones and to protect IP like patents and undisclosed business information,” the statement said.
It comes as a trade war between China and the US has been reignited, despite the countries’ earlier calling for a ceasefire.
On May 29, the US announced a 25% tariff on $50 billion worth of goods imported from China containing “industrially significant technology”, in order to help protect IP. Just ten days earlier, the US and China had announced they would not impose tariffs on each other.
The US also announced that it will continue to pursue litigation at the WTO against China after, in March, it filed a complaint at the WTO accusing China of denying US companies “basic patent rights”.
In its announcement last week, the EU said that while its case is similar to the one brought by the US, the EU filing identifies further potential violations of WTO rules.
It added that “if consultations requested today do not reach a satisfactory solution within 60 days, the EU will be able to request that WTO sets up a panel to rule on the matter”.
China is the EU’s biggest source of imports and is its second largest export market after the US. On average, the countries trade more than €1 billion ($1.2 billion) every day.