The European Union has launched a legal challenge against China at the World Trade Organisation (WTO) for restricting EU companies from going to foreign courts to protect their patents.
The European Commission said on Friday.
Those that were affected are the telecommunications companies, such as Ericsson and Nokia, which hold rights to key mobile phone technologies such as 5G.
The European Commission said that China restricts the EU companies “from protecting these rights when their patents are used illegally or without appropriate compensation by, for example, Chinese mobile phone manufacturers.”
If patent holders go to courts outside China, they are often subject to substantial fines, pressuring them to settle licence fees below market rates, the European Commission said.
A violation of the order can be sanctioned with a €130,000 ($147,540) daily fine.
“This Chinese policy is extremely damaging to innovation and growth in Europe, effectively depriving European technology companies of the possibility to exercise and enforce the rights that give them a technological edge,“ the European Commission said.
The dispute settlement consultations with China are the first step in WTO proceedings.
If refused by Beijing or if they do not lead to a “satisfactory solution,’’ the EU could take the case to an arbitration panel, which could result on retaliatory measures such as punitive tariffs on Chinese imports.