The enduring importance of territoriality in patent rights – Lessons from the WTO Arbitrators in China - Enforcement of Intellectual Property Rights

by Daniel J Gervais

Courts in Brazil, Colombia, China, Germany, India, and the United Kingdom have increasingly asserted authority to set or indirectly impose global FRAND (Fair, Reasonable, and Non-Discriminatory) royalty rates for standard-essential patents (SEPs). While these actions are motivated by goals such as efficiency and reducing duplicative litigation, they raise a fundamental issue: patents are domestic rights, not global ones, and are governed by the laws and policies of the jurisdictions that grant them. A recent WTO arbitration award, China — Enforcement of Intellectual Property Rights (WT/DS611/ARB25), underscores why this territorial principle remains critical.

The case was first heard by a regular WTO panel, which issued a report on April 24, 2025. At the request of the parties involved, the panel did not formally publish its report. However, as explained below, an arbitration request was filed, and the panel's report is included as part of the notice of arbitration. Due to obstruction by the United States, there is no functioning Appellate Body at the WTO. However, a number of WTO members have agreed to use an arbitration mechanism as an appellate jurisdiction until the political disagreement over the Appellate Body is resolved. This arbitration mechanism applies to both China and the EU.

The dispute examined whether anti-suit injunctions (ASIs) issued by Chinese courts—measures preventing SEP holders from enforcing their rights abroad while proceedings continue in China—violates the TRIPS Agreement. Though the panel report was not formally published, its findings were incorporated into the arbitration notice (doc WT/DS611/11).

The arbitrators agreed with the EU that China’s ASI policy for SEP dispute was inconsistent with art 28.1 of the TRIPS agreement as an ASI issued at the request of an implementer could establish “a course of action that frustrates the exercise of the exclusive right of a patent owner to prevent the use of the subject of its patent without its consent, as conferred on it by another WTO Member under Article 28.1 of the TRIPS Agreement.” [4.107] The arbitrators also found that the ASI policy could limit the right of patent holders to conclude licensing contracts under article 28.2 [4.161-4.163] As this was not an issue in the dispute, the arbitrators did not address in detail the impact that ASIs issued at the request of a SEP holder may have on the implementer's rights, including the right to challenge the patent's validity and infringement under various national laws (differences among which, as explained below, result from what the arbitrators described as the raison d'être of TRIPS) and key procedural rights.

The WTO’s confirmation of territoriality

The arbitrators made several key findings regarding the territoriality of intellectual property rights [4.61]:

[I]t is clear from the context of the first sentence of Article 1.1 that the TRIPS Agreement seeks to establish ‘national systems’ for the effective and adequate protection of IP in each and every Member, and that these ‘national systems’ may interact where necessary to address trade-related aspects of IP rights. The raison d'être of the TRIPS Agreement is to have minimum standards for the protection and enforcement of IP rights given effect through national systems in the territory of each WTO Member. 

This language -- the term raison d'être is particularly striking -- reinforces that territoriality transposed national systems implementing minimum standards is a foundational element of TRIPS, consistent with the Paris and Berne Conventions.

The arbitrators also concluded [4.121]:

[T]he proper interpretation of the term ‘give effect’ in Article 1.1, first sentence, requires WTO Members to make operative the provisions of the TRIPS Agreement in their own national systems and to do so without frustrating the functioning of the systems of IP rights protected pursuant to the implementation of the TRIPS Agreement by other WTO Members in their territories. This includes the exercise of the rights of patent owners bestowed upon them by virtue of the implementation of Article 28.2 by Members in their territories. 

SEPs and their unique enforcement issues

The arbitrators recognized that SEPs differ from ordinary patents because they cover technologies essential for implementing widely adopted standards like 5G or Wi-Fi. Patent holders that voluntarily contribute their technology to a standard typically commit to licensing them on FRAND terms. This commitment has been described as shifting the issue away from exclusionary relief to determining fair rates with willing licensees. As the arbitrators observed [4.145]:

[I]n the particular context of SEPs, a SEP holder’s ‘right … to conclude licensing contracts’ is conditional. The SEP holder has effectively waived its right not to conclude licensing contracts, conditioned on obtaining FRAND rates for such contracts. This necessarily requires users to enter into good faith negotiations as to what those FRAND rates will be. 

This dynamic means SEP disputes often involve cross-border portfolios and can prompt courts to seek global solutions. However, the arbitrators stressed that such efforts must respect TRIPS’ territorial structure.

ASIs and their limits

The award also addressed ASIs, finding that their issuance by Chinese courts, though restricting SEP holders from seeking relief abroad, does not violate TRIPS per se [4.174]:

The issuance of an ASI may restrict SEP holders from requesting ‘judicial authorities’ in other Members to exercise their ‘authority’ in this regard, but this in no way has an effect on the ‘authority’ of the judicial authorities of the WTO Member where the patent is registered. 

This finding underscores that, even when courts issue ASIs, the core territorial integrity of domestic patent systems remains intact.

Where national courts push boundaries

Despite TRIPS’ territorial logic, several national courts have tested its limits. For example:

• Brazil and Colombia: Courts issue injunctions at SEP holders’ request, conditioning market access on payment of global FRAND rates.

• China: The Supreme People’s Court and lower courts have set global FRAND rates and issued ASIs, framing these measures as tools for efficiency and dispute resolution.

• Germany: German courts (and now, it seems, also the UPC) employ strict ‘willing licensee’ standards and potent national injunctions, pressuring implementers toward global settlements.

• India and the United Kingdom: The UK’s Unwired Planet v. Huawei decision has enabled courts to set global FRAND rates and use national injunctions to compel implementers to accept those terms. While these practices reflect the global commercial reality of SEPs, they risk eroding the territorial foundation reaffirmed by TRIPS by extending beyond the patents each court is empowered to adjudicate. The Delhi High Court has also set rates, although the legal basis for doing so is multifaceted and not necessarily identical.

Territoriality matters

It is useful to recall that territoriality is not a relic but a functional cornerstone of the international IP system. It:

• Preserves national sovereignty, enabling states to set patent standards, exceptions, and enforcement rules;

• Prevents jurisdictional overreach, ensuring one court does not decide the validity or infringement of foreign patents; and

• Supports predictability by avoiding the chaos of unilateral, court-imposed global licenses.

The path forward

Given SEP holders’ ‘irrevocable commitment to licence to all users on FRAND terms,’ [4.161] if the parties are negotiating in good faith (indicating that the implementer is interested in a license) but cannot reach an agreement (which, as the arbitrators note, often happens [4.162]), the matter may be said to become one of contract law and competition law rather than IP law proper, and thus would be subject to a court’s jurisdiction on that basis. Even then, however, the territoriality principle requires national courts of WTO Members not to prejudge the validity and infringement of a foreign patent if this issue is contested in a way that materially affects the outcome of the dispute. The application of rules of comity in that context is a matter well beyond this post.

Unfortunately, the arbitrators did not analyze in depth the territoriality of IP rights as a principle that underpins the international IP system, and a look at the parties’ appellate briefs would likely confirm that it was not argued as such. A more robust argumentation on territoriality would have enabled the arbitrators to conduct a more thorough analysis. While the award confirms that SEPs, despite their economic reach, remain national rights, it also illustrates why nonconsensual global FRAND rate-setting can be problematic within the context of international law. To reduce friction and increase efficiency, moving forward, courts should demonstrate judicial restraint and limit the territorial scope of domestic patent remedies.

The arbitrators’ findings establish a clear baseline: patent rights stop at the border. Any sustainable approach to SEP disputes must respect this logic, balancing global commercial needs with the territorial principles that have held the international IP system together for well over a century.

Source: https://ipkitten.blogspot.com/2025/07/guest-post-enduring-importance-of.html