WT/DS549/1  
G/L/1244  
IP/D/39  
 
6 June 2018  
(18-3459) Page: 1/4 
  Original: English  
 
CHINA - CERTAIN MEASURES ON THE TRANSFER OF TECH NOLOGY  
REQUEST FOR CONSULTA TIONS BY THE EUROPEAN UNION  
The following communication, dated 1 June 2018 , from the delegation of the European Union  to 
the delegation of China , is circulated to the Dispute Settlement Body in accordance with Article  4.4 
of the DSU.  
 
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My authorities have instructed me to request consultations with the Government of the People's 
Republic of China ("China"), pursuant to Articles 1 and 4 of the Unders tanding on Rules and 
Procedures Governing the Settlement of Disputes  ("DSU"), Article XXII of the General Agreement 
on Tariffs and Trade 1994 ("GATT 1994") and Article 64 of the Agreement on Trade -Related 
Aspects of Intellectual Property Rights ("TRIPS Agr eement") (to the extent that Article 64 of the 
TRIPS Agreement corresponds to Article XXII of the GATT 1994 ), with respect to certain Chinese 
measures pertaining to the transfer of foreign technology into China. These measures adversely 
affect the protecti on of the intellectual property rights of foreign companies transferring technology 
to China.  
Through its domestic legislation, China imposes a different set of rules on the import of 
technology, including industrial property rights, other intellectual pro perty rights and undisclosed 
information ("intellectual property rights"), than the rules which are applicable to technology 
transfers occurring between Chinese companies. The Chinese measures at issue appear to: (i) 
discriminate against foreign holders of  intellectual property rights, and (ii) restrict the foreign right 
holders' ability to protect certain intellectual property rights in China, contrary to China's WTO 
obligations.  
China imposes restrictions on the rights of foreign intellectual property rig ht holders to freely 
negotiate market -based contractual terms in licensing and other technology -related contracts 
concerning the transfer of technology to China. Notably, China imposes mandatory contract terms 
for contracts concerning the import of technol ogy into China that discriminate against and are less 
favourable for foreign intellectual property rights holders. In addition to being discriminatory, 
these mandatory contract terms also appear to restrict intellectual property right holders who 
import te chnology into China in their ability of protecting their intellectual property rights in China.  
Furthermore, in the context of joint ventures established with Chinese partners, China imposes 
mandatory contract terms that discriminate against and are less f avourable for foreign intellectual 
property right holders, as well as restricting their ability to protect their intellectual property rights 
in China.  
The legal instruments through which China imposes and administers these measures, include the 
following,  operating separately or collectively:  
 Foreign Trade Law of the People’s Republic of China (adopted at the Eighth Session of the 
Standing Committee of the Seventh National People’s Congress on May 12, 1994, effective 
July 1, 1994, in Executive Order No. 22 , amended by the Eighth Session of the Standing 
Committee of the Tenth National People’s Congress on April 6, 2004, effective July 1, 
2004, in Executive Order No. 15, further amended November 7, 2016, in Executive Order 
No. 57);  WT/DS549/1 • G/L/1244 • IP/D/39  
 
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   Regulations of the People’ s Republic of China on the Administration of the Import and 
Export of Technologies (Order of the State Council No. 331, issued December 10, 2001, 
effective January 1, 2002, amended January 8, 2011, in Order of the State Council No. 
588);  
 Measures for the Administration of Registration of Technology Import and Export Contracts 
of the People's Republic of China, Decree of the Ministry of Commerce of the People's 
Republic of China [2009] No. 3, issued December 30, 2001, effective January 1, 2002 
(repealing the Measures for the Administration of Technology Import and Export Contracts 
Registration (Decree No. 17, 2001 of the Ministry of Foreign Trade and Economic 
Cooperation);  
 Working Measures for Outbound Transfer of Intellectual Property Rights (For Trial 
Implementation) , (State Council, Guo Ban Fa [2018] No. 19, issued March 18, 2018, 
effective March 29, 2018);  
 Law of the People’s Republic of China on Chinese -Foreign Equity Joint Ventures (adopted at 
the Second Session of the Fifth National People’s Congre ss on July 1, 1979, effective July 
8, 1979, in Order No. 7 of the Chairman of the Standing Committee, amended April 4, 
1990, in Executive Order No. 27, further amended March 15, 2001, in Executive Order No. 
48, and September 3, 2016, in Executive Order No.  51); 
 Regulations for the Implementation of the Law of the People’s Republic of China on 
Chinese -Foreign Equity Joint Ventures (State Council, Guo Fa [1983] No. 148, issued 
September 20, 1983, effective September 20, 1983, amended January 15, 1986, in Guo 
Fa [1986] No. 6, further amended December 21, 1987, in Guo Fa [1987] No. 110, July 22, 
2001, in Order of the State Council No. 311, January 8, 2011, in Order of the State Council 
No. 588, and February 19, 2014, in Order of the State Council No. 648);  
 Contr act Law of the People’s Republic of China (adopted at the Second Session of the Ninth 
National People’s Congress on March 15, 1999, effective October 1, 1999, in Executive 
Order No. 15);  
 Interpretation of the Supreme People's Court concerning Some Issues o n Application of 
Law for the Trial of Cases on Disputes over Technology Contract  (Judicial interpretation 
promulgated by Supreme People's Court on 16 December 2004 and effective as of 1 
January 2005);  
 Anti-Unfair Competition Law of the People's Republic of  China (Order of the President of 
the People's Republic of China No. 77, adopted on November 4, 2017, effective January 1, 
2018);  
 Anti-Monopoly Law  (Order of the President of the People's Republic of China No. 68 
adopted on August 30, 2007, effective Augus t 1, 2008);  
 Regulations of December 31, 2010, for the Industry and Commerce Administrations on the 
Prohibition of Abuse of Dominant Market Position  (issued by Order No. 54 of the State 
Administration of Industry and Commerce (SAIC), adopted on December 31,  2010, 
effective February 1, 2011);  
 Regulation on the Prohibition of Conduct Eliminating or Restricting Competition by Abusing 
Intellectual Property Rights  (Order No. 74 of April 7, 2015, of the State Administration for 
Industry and Commerce (SAIC), adopte d on April 7, 2015, effective August 1, 2015);  
 Notice of the State Council on Printing and Distributing the "China Manufacturing 2025" , 
(State Council, Guo Fa [2015] No.28, promulgated May 8, 2015, effective May 8, 2015);  
 Law of the People’s Republic of China on Progress of Science and Technology , (Order of the 
President of the People’s Republic of China, No. 82, amended and adopted at the 31st 
Meeting of the Standing Committee of the Tenth National People’s Congress of the People’s 
Republic of China on D ecember 29, 2007, effective July 1, 2008);  WT/DS549/1 • G/L/1244 • IP/D/39  
 
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   Opinions on Encouraging Technology Importing and Innovation and Promoting Changes in 
Pattern of Trade Growth, July 14,  2006; 
 Several Opinions of October 9, 2014, of the State Council on Promotion of the 
Development of the Science and Technology Service Industry  (promulgated by Order No. 
49 of October 28, 2014, of the State Council of the People’s Republic of China);  
 Questions and Answers around Regulations on Administration of Technology Import and 
Export  of People’s Republic of China , Finance Law Department of the Legislative Affairs 
Office of the State Council, April 2002;  
 Unpublished measures through which China imposes and administers the above referred 
restrictions;  
 as well as any amendments, suppleme nts, extensions, replacement measures, renewal 
measures, related measures, or implementing measures.  
In particular:  
- The Regulations of the People’s Republic of China on the Administration of the Import and 
Export of Technologies ("TIER"), operating separ ately or together with other listed instruments, 
appear to be inconsistent with Article 3 (National Treatment) of the TRIPS Agreement, solely or 
in conjunction with Article 28.1(a) and (b), Article 28.2 and Article 39.1 and 39.2 of the TRIPS 
Agreement resp ectively, because China imposes restrictions on the rights of foreign intellectual 
property right holders, notably, on their right to freely negotiate and agree on market -based 
contractual terms in licensing and other technology -related contracts concernin g the import of 
technology to China. For example,  
 Foreign transferors of technology are subject to certain administrative burdens pursuant to 
Articles 18 through 21 TIER. Notably, all technology import contracts must be notified to 
and registered by the C hinese authorities and copies of the contracts must be provided. 
These formalities apply also if the contract is subsequently amended or terminated.  
 Article 24 TIER requires that licensors of imported technology indemnify licensees for all 
liabilities for infringement resulting from the use of the transferred technology.  
 Article 27 TIER requires that any improvements to imported technology belong to the party 
making the improvement.  
 Article 29 TIER appears to restrict the terms of import technology contra cts by prohibiting 
a number of clauses in import technology transfer contracts. In particular, Article 29(3) 
TIER provides that a technology import contract cannot contain clauses restricting the 
transferee from improving the technology supplied by the sup plying party, or restricting 
the receiving party from using the improved technology.  
Domestic intellectual property right holders are not subject to such restrictions in the context of 
domestic technology transactions. As a result, through the measures at  issue China appears to 
accord less favourable treatment to foreign intellectual property right holders compared to Chinese 
intellectual property right holders, contrary to Article 3 of the TRIPS Agreement. In addition, it 
appears to limit the exclusive ri ghts of non -Chinese patent holders, contrary to Article 28.1(a) and 
(b) of the TRIPS Agreement. It also appears to limit the rights of non -Chinese patent holders to 
assign or transfer by succession patents and to conclude licensing contracts, contrary to 
Article 28.2 of the TRIPS Agreement. Finally, as a result of these restrictions China also appears 
not to ensure effective protection for foreign intellectual property rights holders of undisclosed 
information contrary to its obligations under Article 39.1 and 39.2 of the TRIPS Agreement.  
- The Regulations for the Implementation of the Law of the People’s Republic of China on 
Chinese -Foreign Equity Joint Ventures  ("JV Regulation"), operating separately or together with 
other listed instruments, appear to be inconsistent with Article 3 (National Treatment) of the 
TRIPS Agreement, Article 28.1(a) and (b), Article 28.2, Article 33 and Article 39.1 and 39.2 of 
the TRIPS Agreement (each Article either solely or in conjunction with the others), because WT/DS549/1 • G/L/1244 • IP/D/39  
 
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  China impose s restrictions on the rights of foreign intellectual property right holders, notably, 
on their right to freely negotiate and agree on market -based contractual terms in licensing and 
other technology -related contracts concerning the import of technology to China. For example:  
 The first paragraph of Article 43 of the JV Regulation provides a general examination and 
approval requirement for any technology transfers agreements entered into by a joint 
venture.  
 Point (3) of the second paragraph to Article 43 of the JV Regulation provides that the 
duration of a technology transfer agreement is generally no longer than 10 years.  
 Point (4) of the second paragraph to Article 43 of the JV Regulation provides that the 
technology importing party retains the right to us e the transferred technology 
continuously, after the expiration of the technology transfer agreement.  
China thus appears to afford less favourable treatment to foreign intellectual property rights 
holders as compared to Chinese intellectual property right s holders, contrary to Article 3 of the 
TRIPS Agreement. With respect to foreign patent holders, China appears to violate Article 33 of the 
TRIPS Agreement, according to which the term of patent protection should be at least 20 years, 
and to limit the excl usive rights of foreign patent holders, contrary to Article 28.1(a) and (b) of the 
TRIPS Agreement. Furthermore, China appears to limit the rights of foreign patent holders to 
assign or transfer by succession patents and to conclude licensing contracts, co ntrary to 
Article  28.2 of the TRIPS Agreement.  Furthermore, as a result of these restrictions China also 
appears not to ensure effective protection for foreign intellectual property rights holders of 
undisclosed information contrary to its obligations unde r Article 39.1 and 39.2 of the TRIPS 
Agreement.  
- Finally, China appears to apply and administer its laws, regulations and other measures 
governing the transfer of technology into China with a view of inducing the transfer of foreign 
technology to China, which is contrary to China's obligations under Article X.3(a) of the GATT 
1994 and Paragraph 2(A)2 of the Protocol on the Accession of the People's Republic of China to 
the WTO, because it does not constitute impartial and reasonable application and 
admini stration of its laws, regulations and other measures.  
China's measures appear to adversely affect exports to China of technology, including intellectual 
property rights, by European Union undertakings and also appear to nullify or impair the benefits 
accruing to the European Union and its Member States direct ly or indirectly under the cited 
agreements.  
The European Union reserves its rights to raise additional measures and claims regarding the 
above matters during the course of these consultations and in any future request for panel 
proceedings.  
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