LL.M Thesis European Union Law
The inconsistencies in internal-external competence relations in
the post-Daiichi Sankyo EU legal order
An evaluation of the EU’s patent protection regime in the light of a prospective
EU-China agreement
Márton Iván Antal
11193646
Marton.antal@student.uva.nl +36303516656
Supervisor: dr. Steven Blockmans Second reader: dr. Eva Kassoti
By moving the provisions relating to the TRIPs agreement and effectively the entirety of intellectual property rights protection under the EU’s exclusive competence externally, the Lisbon Treaty and subsequent CJEU case-law have unintentionally caused inconsistencies regarding the harmony of internal and external competences in the field of intellectual property protection. This became inherently present in the current EU legal order, however, it becomes even more pronounced and problematic if the EU chooses to conclude an international agreement that includes provisions regarding TRIPs rights.
Focussing on a key case of Daiichi Sankyo and the phraseology of the Lisbon Treaty, this paper analyses the current framework and legal order relating to the competence division in the field of intellectual property rights protection. Further, it contrasts the system of the EU with that of China, whose intellectual property right protection is vastly different, which becomes a problem in case a trade agreement were to be concluded between the two. Highlighted are the reasons why such inconsistencies are problematic to global trade and the fact that the EU is a capable and likely candidate in navigating China towards adequate IP protection.
Through such legal analysis it can be concluded that the way IP protection is positioned in the EU legal order, the external exclusive competence is prioritised over the internal sphere, impairing the parallelism principle inherent in the EU legal framework. Additionally, in case of a potential EU-China trade agreement, it is possible that the rights of individuals to a fair trial could not be respected with regards to disputes arising from patent enforcement.
Table of Contents
Introduction ...3
Methodology used and conclusions reached ...4
Chapter 1: The Daiichi Sankyo ruling and the legal complications of the current regime of IP protection in the EU ...7
Section I: ‘Commercial aspects of IP’ after Daiichi Sankyo ...8
Lisbon and the CCP ...8
The Daiichi Sankyo judgement ...9
The problem with the Court’s dynamic approach ...11
Section II: Parallelism and the friction between internal and external competences...12
Chapter 2: Highlighting the shortcomings of the Chinese patent protection system in both national and international fora, and contrasting it with that of the European Union ...15
Section I: The inadequacy of China’s IPR protection from an EU standpoint ...16
Systemic deficiencies in China’s patent enforcement ...17
Section II: The EU and China under the WTO umbrella ...19
Section III: EU pressure in mitigating China’s IP protection shortcomings ...21
Chapter 3: Legal issues with the new CCP regime, focusing on the state of IPR in the EU in the context of a potential future trade agreement with China ...24
Section I: IP aspects of an EU-China trade agreement under the CCP ...25
Section II: Stretching the cord between internal and external relations ...28
Concluding remarks...31
Introduction
In his book on EU international relations law, Panos Koutrakos referred to the Common Commercial Policy (CCP) as the nucleus of the European Union’s external action.1 This notion
has some weight should one consider that the EU is one of the largest and most developed economies and the single largest market in the world.2 Through political, economic, and legal
development in the EU and in the wider world, the CCP has indeed become one of the most prominent fields of EU policy and subsequently of the EU’s legal order, which inevitably brought about the attention of legal academia. It is useful to first consider that as a sui generis economic union of Member States vastly different to similarly-sized economies, such as China or the US, external policy is rather complicated in its relation to the Union’s internal market and policies. This has effects on the ways treaty amendments and Court decisions related to the CCP have less expected yet considerable consequences on the internal market. In fact, it has long been essential to research and point out such inconsistencies, in order to be able to maintain a European Union legal order, whereby external and internal policies harmonise and coexist with one another, supported by a legal system that weeds out such inconsistencies instead of creating more. The field of intellectual property (IP) has begun to gain more importance in such discussions due to its increasing influence in global trade and in the economy. With the Lisbon Treaty coming into force in 2009, whereby the competence relating to ‘commercial aspects of intellectual property rights’ had been moved under Article 207 and subsequently under EU exclusive external competence under the CCP, the question has naturally arisen whether the aforementioned harmonious coexistence of the internal and external competences is indeed preserved.
Such questions are further elevated in their importance after one realises that the entry into the EU legal order of international sets of principles and their media, often associated with the WTO order, regularly cause compliance issues that further exacerbate the internal inconsistencies in the EU framework. Upon consulting the EU’s ambitious agenda on future trade agreements with a diverse set of the world’s countries, it becomes visible that it would be useful to examine the current legal set of circumstances in the field in order to get rid of the
1 Panos Koutrakos, EU International Relations Law (Hart Publishing 2015). p 17.
2 ‘EU position in world trade’ (European Commission, 2019)
current inconsistencies, especially regarding those that would come about should such an agreement be implemented. This paper will attempt to scrutinise these elements and put it into the context of a possible EU-China trade agreement, whose effects could be detrimental not only to the EU’s intellectual property protection but also to the well-functioning of the EU legal order regarding the balance between the internal and external spheres. It will be argued that the current state of Chinese intellectual property protection is far from adequate from the viewpoint of the EU and the Western world, and could on top of that become dangerous to the global economy, should it not come to be influenced by foreign actors. It will be deduced that a potential agreement between the EU and China including patent and IPR related matters would be beneficial not only to these two regions but for the international sphere as well. However, it will be concluded that the developments brought about by the Lisbon amendments and subsequent CJEU case law created a situation, in which the realisation of such an EU-China agreement containing elements related to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), would exacerbate certain internal problems of the EU legal order.
Methodology used and conclusions reached
In order to be able to properly evaluate such a topic, I will first undertake an assessment of the current legal regime as far as the protection of intellectual property is concerned in the European Union legal order. Due to the substantial change brought about by the Lisbon treaty regarding the placement of intellectual property amongst exclusive and shared competences, it is necessary to take account of the current wording of the treaties and the subsequent Court interpretation in the Daiichi Sankyo case. This particular case is of utmost importance, since not only did it influence the balance between internal and external competences inside the EU legal order, but through its reference to the TRIPs Agreement it reiterated some of the most burning questions regarding the relations between the EU legal order on the one hand and WTO law on the other. The Court’s methodology in interpreting commercial aspects of intellectual property rights ambiguously worded by the drafters of the Lisbon Treaty is going to be a recurring topic of this paper. However, it will be thoroughly examined in the first chapter, further scrutinising the conclusions legal academia has drawn from the Court’s ruling,
embarking from the notable ideas of Ankersmit3, Van Damme,4 Tanghe,5 or Wilinska-Zelek
amongst others.6 The way the current system appears to be inconsistent with the parallelism
doctrine7 will be discussed extensively and will come back in the closing chapter of this paper.
To put this debate surrounding the conflict regarding the EU’s internal and external spheres into a more applied setting it is especially fruitful to refer to a comparison with a nation, whose IP protection regime is highly different from that of the EU. The Peoples’ Republic of China has long been reluctant to abide by the rules most global powers do, considering the protection of intellectual property rights. It is therefore a fitting candidate in our evaluation of the shortcomings of the EU’s fragmented system in place. Current political and economic circumstances make such a comparison especially timely and necessary. By looking at the lack of willingness on the part of the Peoples’ Republic of China to conform to the Western standards, it becomes apparent that outside influence is necessary in order to stop the acceleration of the exacerbating of China’s IP protection. Scholars have started theorising about the way the EU could influence how China approaches the topic and therefore its position in the global economy. As intellectual property rights are growing in importance on a global scale, and considering that the EU has already started its normative transference in the field, it is useful to consider the circumstances of a potential EU-China trade agreement as the EU’s ultimate influencing tool.
Lastly, it is beneficial in order to be able to draw conclusions in the matter at hand to refer to some definite aspects of a trade agreement between the EU and China. The ways the Daiichi Sankyo case had shaped the framework, in which an international agreement can be concluded is rather significant. It is particularly interesting to observe the ways the effects of the Lisbon amendment relate to the delicate balance between the EU and international legal orders. It will be argued that by moving the entirety of the TRIPs Agreement under the CCP and exclusive competence, the Court has damaged individuals’ right to pursue their right to a fair trial protected under the Charter. This is connected to the effects the Lisbon amendment
3 Laurens Ankersmit, ‘The Scope of the Common Commercial Policy after Lisbon:The Daiichi Sankyo and
Conditional Access Services Grand Chamber Judgments’ (2014) 41 Legal Issues of Economic Integration 193
4 Isabelle Van Damme, ‘Case C-414/11 Daiichi: The Impact of the LisbonTreaty on the Competence of the
European Unionover the TRIPS Agreement’ (2015) 4 Cambridge Journal of International and Comparative Law 73>.
5 Yole Tanghe, ‘The Borders of EU Competences with Regard to the International Regulation of Intellectual
Property Rights: Constructing a Dam to Resist a River Bursting Its Banks’ (2016) 32 Utrecht Journal of International and European Law 27
6 Anna Wilińska-Zelek and Miłosz Malaga, ‘Kompetencje Unii Europejskiej a Prawa Własności Intelektualnej.
Wewnętrznie Dzielone, Zewnętrznie Wyłączne?’ [2017] Środkowoeuropejskie Studia Polityczne 27
7 Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European
and the Daiichi Sankyo case had on the direct and indirect effects of international agreements regarding TRIPs rights. Furthermore, it will be argued that a prospective agreement with China could be dangerous towards the balance between the internal and external competences in the EU legal order. Due to the characteristics of patent protection law and most prominently to the surprisingly low level of internal harmonisation and ensuing fragmentation in the internal legal order, it is a field particularly exposed to legal inconsistencies between the internal and external frameworks. It will be argued that due to the way intellectual property protection would be implemented in an EU-China trade agreement, the parallelism enshrined in the Treaties could very well be impaired.
Chapter 1: The Daiichi Sankyo ruling and the legal complications of the
current regime of IP protection in the EU
Since its inception, the European Union has been operating on an unstable basis of competence relations between the Member States and the EU institutions. Since the EU’s legislative arm does not possess the quasi-omnipotence of its national counterparts,8 it has to rely on concrete
conferred competences in the meaning of Article 5 TEU. The drafters of the Treaties outlined a positive list on the areas, where the EU shall have competence, whether shared, exclusive, or coordinative.9 However, even the most conscientious drafter will miss certain border areas,
where the question arises: who shall have competence in an EU-Member State matter? This is why the Court has jurisdiction to act as an independent evaluator on questionable matters concerning competence. Although at this point the issue of ‘Kompetenzkompetenz’ comes into play,10 which brought about fruitful scholarly discussion, this paper will not focus on this area.
Instead, this present chapter will look at the way intellectual property rights are regulated in the EU, focussing on the competence relations in the EU legal order. More importantly, how the Lisbon Treaty and subsequent Court of Justice jurisprudence designed a legal order that became somewhat controversial in the eyes of legal academia.11 The position of intellectual
property rights post-Lisbon is particularly interesting concerning the divide between, on the one hand, the EU’s internal powers under Articles 114 and 118 TFEU, and its external competences under the Common Commercial Policy. IP regulation has long been located on the borderline of these two spaces, creating issues stemming from competence spill-overs and from the field’s close proximity to international WTO law. Furthermore, the Court’s jurisprudence has advanced the discussion on judicial activism with rulings, such as Daiichi Sankyo, whereby questions have arisen on the EU’s authority in a territory, where legal questions become political and vice versa.
8 Robert Schütze, European Constitutional Law (CUP, 2015) 153 9 Articles 4, 3 and 6 TFEU, respectively
10 For more on the topic see e.g. Dieter Grimm, ‘Does Europe Need a Constitution?’ [1995] European Law
Journal, 290
11 See e.g. Holger P Hestermeyer, ‘The Notion of “Trade-Related” Aspects of Intellectual Property Rights: From
World Trade to EU Law- and Back Again’ (2013) 44 IIC International Review of Intellectual Property and Competition Law 925; Tanghe (n 5); Wilińska-Zelek and Malaga (n 6)
Section I: ‘Commercial aspects of IP’ after Daiichi Sankyo
To be able to effectively position IP in the larger EU legal order and consider the circumstances most prominently from a competence standpoint, it is useful to first consider its place with regard both to its external and to its internal dimension. It is also crucial to pay attention to the way the revised wording in the Lisbon Treaty can be paralleled with that of international law. The Court’s attempt to decipher the drafter’s intent with regard to positioning IP law in the legal order is well-documented in Daiichi Sankyo and is worth a discussion especially with regard to its impact on the relationship between EU and WTO law.
A: Lisbon Treaty and the CCP
Up until the Lisbon Treaty, the connection between IP regulation in the EU and exclusivity stemming from the CCP had been all but obvious. The Court has ruled in Opinion 1/94 that “intellectual property rights do not relate specifically to international trade,”12 thus severing
the link between IP and CCP. This means that in the decades leading up to Lisbon, IP regulation stayed a mixed competence. Furthermore, the Court has described in Merck Genericos that the Member States are free to regulate with regards to IPR as long as there had been no previous EU legislation in the field,13 invoking the pre-emption principle present in other fields of EU
law. The Court has kept its stance on the matter up until Treaty change in the field, which has happened in the Lisbon Treaties.14
Article 207 of the Treaty on the Functioning of the EU describes the fields, which are to be included in the Union’s Common Commercial Policy and are thus under the EU’s exclusive competences in accordance with Article 3 TFEU described above. The drafters included the ‘commercial aspects of intellectual property’ among these CCP areas. As Koutrakos has described, this particular nomenclature had three major implications.15 Firstly and perhaps
most obviously, it limited a possible all-encompassing view of IP. Secondly, it implied an obligation to evoke a link to international trade, in order to rely on it. Thirdly, and most importantly to our discussion, it paralleled Article 207 TFEU with the TRIPs. This is especially significant as the position of WTO law, and thus of the TRIPs agreement in the EU legal order has long been a question. One that will be observed more closely in further chapters. It is this
12 Opinion 1/94 WTO Agreements [1994] ECR I-5267, para 57
13 Case C-431/05 Merck Genericos-Produtos Farmaceuticos Merck & Co [2007] ECR I-7001, para 34 14 Van Damme (n 4) 76.
third element that grows in importance as regards IPRs position in the EU’s external legal order.
B: The Daiichi Sankyo judgement
The Court was supposed to answer the last conceptual question still remaining after the Lisbon Treaty’s amendment of the relationship between IP and the CCP, namely what the drafters meant by ‘commercial aspects of intellectual property’. According to Tanghe, there are three possible ways to interpret this terminology. Firstly, there is a view that the way the CCP is set up should be a counterpart to the EU’s internal market operation under Article 114 TFEU, referring to the fact that external barriers to trade ensue in case there are diverging national measures in place. However, paralleling external and internal markets in the case of IP loses momentum should the very principles of internal market barriers be considered. This is due to the fact that one would have to match external barriers to those enshrined in Article 34 TFEU. Such similarity is legally unsound since Article 34 TFEU barriers are expressly justified in Article 36 TFEU when they concern matters similar to intellectual property.16 As
Wilinska-Zelek has rightly argued, however, Tanghe’s view is not perfect, as a measure in the internal market can be considered a barrier to trade under Article 34 TFEU, even though it may be justified later on with Article 36 TFEU.17 This means that such a parallel could be a rational
choice in evaluating measures as inconsistent with the EU’s rules in the external sphere notwithstanding the fact that it would be justified in the particular internal sphere. Although an approach that would be consistent with the ideals of the EU legal order, the author of this paper agrees with the point that this first view seems to be somewhat cursory.
The second interpretation implies the distinction drawn by the Court in its internal market jurisprudence relating to ‘moral’ and ‘economic’ aspects of IP.18 The CJEU established
that economic IP rights are those that enable the right holders to exploit the protected work. It could thus be claimed that ‘moral’ aspects of intellectual property rights are not covered by the CCP.19 Although another idea seemingly sound and consistent with the Court’s view, it is
necessary to refer to the fact that such moral and economic rights are inseparable and fundamentally intertwined in certain fields of intellectual property. One could argue that the
16 Tanghe (n 5) 32-33.
17 Wilińska-Zelek and Malaga (n 6) 36.
18 Joined cases C-92/92 and 326/92 Phil Collins v Imtrat Handelsgesellschaft mbH and Patricia Im- und Export
Verwaltungsgesellschaft mbH & Leif Emanuel Kraul v EMI Electrola GmbH [1993] ECR I-5145, paras 22-23, 25
moral value of a patent lays in its power to give the justified exclusivity to the right holder. It would be difficult to tell this apart from the economic privilege in a legal discussion. This idea also seems to be permeable from a theoretical standpoint.
Lastly, Tanghe introduces an approach that uses the rationale of the Common Commercial Policy, laid down in Article 206 TFEU: pursuing gradual liberalisation and abolishing trade restrictions.20 Such a theoretical and literal interpretation would not be
unfamiliar to the Court and, additionally, this last method can be effectively relied on in bringing WTO and CCP law closer together.21 The Court indeed utilised this approach in its
interpretation of commercial aspects of IP rights in the Daiichi Sankyo case.22
In Daiichi the Court was asked as a preliminary question, amongst other patent-related questions,23 to essentially determine the scope of the CCP by deciding whether the MS courts
or the CJEU has jurisdiction to interpret the relevant aspects of the TRIPs Agreement and to rule on its effects in the national legal order.24 To be able to come to a conclusion, the Court
needed to evaluate Article 207 TFEU, which essentially provides for the Common Commercial Policy, describing key areas where the EU has exclusive competence, mentioning ‘commercial aspects of intellectual property’ amongst others. The Court set out to use a method similar to Tanghe’s third one mentioned above. It argued that the provisions in Article 207 TFEU fundamentally differ from their older versions in previous Treaties, having there been no mention of intellectual property in its precursor, Article 133 of the Treaty establishing the European Community (EC). It was therefore possible to break away from the direction of Opinion 1/94 and Merck Genericos that both interpreted that lapsed and substantially different Article 133 EC.25 Moreover, the Court emphasised that not all aspects of IP law are
encompassed by the CCP, referring to the commercial aspects criterion.26 It is here that the
Court proceeds with an interpretation that has been described as ‘terse’ and relying on somewhat superficial justifications.27 First, the Court pointed at the overall rationale of WTO
and TRIPs law, arguing that there is an inherent link of TRIPs to international trade, which obviates a link to ‘commercial aspects of IP’.28 Second, the Court relied on pure phraseology,
20 Van Damme (n 4) 37. 21 Tanghe (n 5) 33-34. 22 Van Damme (n 4) 85.
23 Case C-414/11 Daiichi Sankyo Co. Ltd, Sanofi-Aventis Deutschland GmbH v DEMO Anonimos Viomikhaniki
kai Emporiki Etairia Farmakon EU:C:2013:520, para 32(2-3)
24 ibid para 32 (1). 25 ibid para 48. 26 ibid para 52.
27 See e.g. Tanghe (n 5) 30; Wilińska-Zelek and Malaga (n 6) 32; Van Damme (n 4) 80. 28 Daiichi Sankyo (n 23) para 54.
paralleling the preamble and name of the TRIPs Agreement to the language in Article 207 TFEU.29 Additionally, the Court dismissed the arguments that elements of TRIPs refer to
internal market regulation, relying on a form of a centre of gravity argument; stating that the overall rationale of the Agreement rests on external provisions.30 This ‘outwardly’ approach to
interpreting Article 207 TFEU was supported by the Commission having its rationale in bringing the EU common commercial policy closer to the field of operation of the WTO.31 The
Court could have alternatively used an inwardly approach similar to how AG Villalón has done, relying on a parallelist interpretation, concluding that the external scope of commercial aspects of intellectual property rights should depend on the extent, to which the EU has exercised its competence internally.32 This approach was concurrently supported by all the Member States
in order to keep the Court from establishing a state of affairs, where there is a possibility of the EU encroaching upon the shared competence internally.
By utilising a formal evaluation of the link between TRIPs and the CCP under Article 207 TFEU, the Court has opened up a discussion to somewhat political questions. This will be elaborated on in the next part of this section. Additionally, the Daiichi ruling brings about a variety of issues on the partition between internal and external competences in the EU, which will be discussed in the last section of this chapter.
C: The problem with the Court’s dynamic approach
One side of legal scholarship, spearheaded by Dimopoulous put forward the dynamic approach later utilised by the Court in Daiichi, arguing that in order to be able to stay in the driving seat in further WTO and TRIPS negotiations, it is essential to interpret EU law progressively in parallel with WTO change.33 However, as AG Villalón argued in his Opinion on the case,34 a
more conservative approach would have been more preferable if one considers the political implications of bringing EU and WTO law so close together. This is especially so if one takes the time to consider the spatial and temporal underpinnings of the TRIPs Agreement in particular. It is a historical fact that the placing of the TRIPs Agreement in WTO structure was the result of high-level diplomatic work and political lobbying, culminating in a compromise
29 ibid para 55.
30 Ankersmit (n 3) 200. 31 ibid 198.
32 Case C-414/11 Daiichi Sankyo Co. Ltd, Sanofi-Aventis Deutschland GmbH v DEMO Anonimos Viomikhaniki
kai Emporiki Etairia Farmakon, Opinion of AG Cruz Villalón, paras 66–80.
33 Angelos Dimopoulos, ‘The Common Commercial Policy after Lisbon: Establishing Parallelism Between
Internal and External Economic Relations?’ (2008) 4 Croatian Yearbook of European Law and Policy 101, 109.
between the developed and developing countries. The ratification of this document and thereby the promotion of IP into the group of trade-related policies was the mere consequence of major economies defending their interest in IP.35 Thus, Tanghe argues that the placement of all
measures relating to TRIPs in the ambit of CCP exclusivity becomes an oversight on the part of the Court, one that has ramifications for both the Member States and the EU. Similarly, Wilinska-Zelek argues that for these reasons it would have been more consistent with the EU legal and political order to continue with the evaluation and placement of the individual TRIPs provisions on a case-by-case basis.36 Van Damme also insists that the Court’s process could
have been more refined in referring to the historical and political background of the Agreement.37 It is important in this discussion to also consider that the Court has previously
been more cautious in its reference to the TRIPs Agreement.38 If one refers to the political
background of the Agreement it becomes apparent that it would be rash to do away with such a careful approach on the basis of the wording of a somewhat ambiguous treaty amendment, such as the one present in Article 207 TFEU.
Section II: Parallelism and the friction between internal and external competences
In order to understand why the Court’s interpretation in the Daiichi case could be understood as incautious towards the larger EU legal context, it is essential to conceptualise the parallelism between internal and external competences within the Union legal order. Article 207(6) TFEU establishes explicit parallelism between external and internal competences, meaning the exercise of external powers cannot negate the limitations placed upon the exercise of internal powers. This principle of parallelism is considered tantamount in the EU’s external competence, even in implied competence matters.39 It is this field, in which the rationale of Daiichi could mean external competences encroach upon internal competences, which would thus go against the broad logic of Article 207 TFEU.40 However, the Court referred to the
internal market in its judgement in general terms, stating that internal EU acts need to conform
35 Tanghe (n 5) 35.
36 Wilińska-Zelek and Malaga (n 6) 38. 37 Van Damme (n 4) 85.
38 See e.g. Opinion 1/94 (n 12) where the Court regarded the GATT as part of the CCP but the GATS and TRIPs
agreements as outside of CCP competence.
39 Dimopoulos (n 33) 119.
40 Boryana Gotsova, ‘ The Gordian Knot of European Union Competence: Commercial Aspects of Intellectual
to external rules set down by TRIPs.41 This could mean that in case of commercial aspects of
IP law the Court believes that the external dimension has overriding importance above possible internal market aspects of IPR. In addition, AG Wahl’s Opinion in Opinion 3/15 raises the question of whether there are indeed non-commercial aspects to IP, since, as he argues “by their very nature IP rules are trade-related.”42 This puts forward the notion that should AG
Wahl’s point of view eventually be engrained in EU law, the Member States’ power stemming from the shared competence conferred upon them will be susceptible to the EU in all IP-related matters resulting from such precedence of external rules in the field.
Although the Daiichi judgement has significance in the question of Member State competence, the Court only discussed the choice between shared and exclusive competence in the case of the TRIPs Agreement as such.43 This might be because, as AG Villalón has realised,
the combination of the EU’s external exclusivity with internal market shared competence in the field of IPR ‘leads nowhere’ and invokes a paradoxical situation.44 In this connection it is
useful to consider Wilinska-Zolek’s reference to the Unitary patent example and the subsequent Unified Patent Agreement in illustrating this paradox. The former referred to a situation, in which the enhanced cooperation procedure was initiated in patent law matters, however, the EU has already had in place certain pieces of legislation, which would have meant that the Member States could not legislate in a way that would compromise the EU’s initiative. Nevertheless, by relying on TRIPs in their enhanced cooperation, the Member States invoked the EU’s exclusive competence, thus creating a legal paradox.45 The Unified Patent Agreement
in turn concerns the legal document reached through this enhanced cooperation and includes amongst others procedural and substantial points relating to elements in the TRIPs Agreement. It follows that the Agreement might have been concluded and negotiated amongst the Member States as an international agreement illegally as far as competence is concerned.46
Although these questions and paradoxes are not new by any means, resembling common consequences of the EU’s competence system, it is important to observe the importance of the Daiichi ruling. It is clear that the vast majority of IP rules can be considered to be commercial in nature and are thus under the EU’s exclusive competence according to the CCP. However, it becomes increasingly recognisable that due to the essential characteristics of IPR and the consequent relative ease, with which the EU can restrict national regulation of
41 Daiichi Sankyo (n 23) para 59.
42 Opinion 3/15 Marrakesh Treaty [2016], Opinion of AG Wahl ECLI:EU:C:2016:657, para 56. 43 Gotsova (n 40) 525.
44 Daiichi Sankyo, Opinion of AG Cruz Villalón, (n 32) para 60. 45 Wilińska-Zelek and Malaga (n 6) 41.
the field, the shared competence in the internal market will become more and more elusive over time.47 Further chapters in this paper will continue highlighting these issues and will point
out how they become accentuated in a highly contemporary context of EU-China relations.
Chapter 2: Highlighting the shortcomings of the Chinese patent protection
system in both national and international fora, and contrasting it with that
of the European Union
Due to the constraints of this paper and the difficulty regarding the differing organisation of the EU on the one hand and the People’s Republic of China (PRC) on the other necessitate that this analysis of the Chinese IP system will be focused on the protection of patents. It is useful to note first and foremost that the differences go beyond the obvious one between the two regions considering their economic schools, the EU long following a free market structure, while China staying in an eternal limbo between a fully-fledged market economy and a state-run structure. It is equally important to keep in mind the dissimilar political and cultural beliefs that underpin the economic designs of these two gigantic global forces.48
This chapter will be centred upon the notion that there is an underlying divergence in the way Europe as part of the Western world order, and China both handle IP law. China is an economy that is highly relevant in today’s global order, gaining political power in addition to its enormous economic potential. As a global power that has long relied on normative diffusion similar to what the People’s Republic of China is attempting through its BRI for instance, it is necessary for the European Union to attempt to influence China. This is of utmost importance in relation with intellectual property rights, which is a field that is so key in today’s global economy. This points out the tremendous dissimilarities between the ideologies of the two regions. By focusing on patent protection, an analysis of China’s system provides for useful conclusions to be drawn regarding the incompatibilities of the two regimes, which proves to be a predicament should we consider the place IP regulation has in the EU legal order as has been described in the previous chapter.
Section I will have as its subject the developments in Chinese IP law, focussing on patent laws and questioning the inherent incompatibilities between China’s ideology and the rationale of intellectual property itself. Section II will in turn emphasise the place China and the European Union hold in international fora, focusing on rules and obligations under the TRIPs regime and WTO law. Section III will then have further remarks and recommend a solution to pressure China into ameliorating its IP protection standards. The ways in which
48 Nga Man, ‘Intellectual Property Law and Competition Law in China – Analysis of the Current Framework
these challenges might pose larger legal issues in the EU’s external policy in the context of China’s BRI advances and further 2020s events, and with regards to the position CCP exclusivity plays in IP protection will be further investigated in chapter 3.
Section I: The inadequacy of China’s IPR protection from an EU standpoint
Should one consider the contrast between the two regions, it is quintessential to first consult the background of China’s IP regime in order to grasp the present and foreseeable future of regulation and enforcement. The most prominent question China is facing in its endeavour to install a genuine IP protection regime is whether to pursue the indigenisation or the internationalisation of IP law.
The weight of this question lays in the way China’s consistency vis-à-vis the very notion of intellectual property is questioned on cultural, political, and economic levels. Firstly, Confucianism had long exerted its influence on Chinese culture, creating a way of thinking, in which individualism, creation, innovation, and personal property as such were removed from the peoples’ core values.49 This ideology brought about clan-mentality, which was perfectly
suited to the highly agricultural and poor country China had been for centuries. Thus, traditional Chinese culture was inherently inconsistent with Western individualism that effectively cultivated the taking seriously of intellectual property rights.50 The socialist
transformation of China in the 1950s rendered IPR useless in the absence of private property. Even throughout the 1970s and 1980s, China was mostly dependent on its agricultural sector, thus the genuine consideration of IP protection was not on the table until China had acceded to the World Trade Organisation in 2001 and was therefore obliged to comply with the standards set in the TRIPs agreement.51 It is therefore visible that China had relied on some level of
internationalisation of IP law, as the country was not blessed with very fertile soil politically and culturally. Teuben argues, however, that an approach like this is fundamentally flawed since, in order for the law to be successfully enforced in a certain field, it must be adjusted to the specific social environment it is trying to regulate.52 I will argue, however, that from a
Western standpoint, and contrasting it with the IP protection regime of the European Union,
49 Liguo Zhang and Niklas Bruun, ‘Legal Transplantation of Intellectual Property Rights in China: Resistance,
Adaptation and Reconciliation’ (2017) 48 IIC International Review of Intellectual Property and Competition Law 4, 13.
50 James A Brander, Victor Cui and Ilan Vertinsky, ‘China and Intellectual Property Rights: A Challenge to the
Rule of Law’ (2017) 48 Journal of International Business Studies 908, 915.
51 Zhang and Bruun (n 49) 14-15.
52 Gunther Teuben, ‘General Aspects’ in Gunther Teuben (ed), Juridification of Social Spheres : A Comparative
the Chinese indigenisation of intellectual property protection is flawed for the very reason it had been adjusted to the specific social environment it is supposed to regulate. Therefore, China should strive for the internationalisation of its IP law, as it is quintessential in creating a stable and sustainable global order regarding IP law.
Although systematically going through amendments and reforms, the level of protection granted by China’s IPR regime is still considered dubious from the standpoint of the US and the EU amongst others.53 The hierarchical top of the Chinese patent system is the State
Intellectual Property Office (SIPO), which has sole jurisdiction in granting patents in the country. The first problem from a Western point of view arises due to the fact that the patent enforcement system in the PRC is highly dependent on administrative actors. Given the Chinese Communist Party’s high level of exertion of influence onto the administrative bodies in the country, such practice quickly becomes controversial. Although these administrative bodies will only act should the particular details not warrant a more comprehensive evaluation, in which case judicial review is advised,54 it begins to be revealed to what extent the
administrative and the judicial branches are interconnected in patent enforcement and litigation.
A: Systemic deficiencies in China’s patent enforcement
Perhaps the most significant point of contention, however, rests in the lack of protection that is granted by the judicial authorities of the PRC. In a highly dispute-intensive sector, such as patent protection it is essential to consider the independence and objectivity of the adjudicator. This is further exacerbated by the system in place in China, which incentivises patents application.55 The exponential growth of new Chinese patent applications that the
system has caused also results in an overwhelming number of patents granted,56 which tests
the country’s adjudicators, showing off the systematic shortcomings of the organisation in
53 Rüdiger Wolfrum and Peter-Tobias Stoll, ‘Understanding on Rules and Procedures Governing the Settlement
of Disputes’ (2009) 1 WTO - Institutions and Dispute Settlement 268.
54 China IPR SME Helpdesk, ‘Guide to Patent Protection in China’ 1
<http://www.china- iprhelpdesk.eu/sites/all/docs/publications/China_IPR_Guide-Guide_to_Patent_Protection_in_China_EN-2013.pdf> 5.
55 Liang, M. (2012). Chinese patent quality: Running the numbers and possible remedies. The John Marshall
Review of Intellectual Property Law, 11, 478–522.
56 Wang-chan Wong, ‘Confronting China’s IP Counteroffensive’ (2016) Nov-Dec 20 Ivey Business Journal
place.57 This is because of the low level of oversight resulting leads to dense webs of
overlapping rights, so-called thickets that increase litigation and lower the level of protection enjoyed by legitimate IPRs.58 Additionally, the operation of the court system responsible for
protecting intellectual property rights is highly influenced by the hierarchical administrative system. The independence of the judicial authorities is questionable since their organisational setup closely resembles bureaucratic organisations similar to their corresponding administrative organs.59 Furthermore, the budgets of such judicial bodies are handled by the
corresponding local administrative body, which leads to a high level of fragmentation and corresponding varying levels of IPR protection between certain regions.60 Expectedly,
questions arose about the transparency and independence of the newly established appellate tribunal in the Chinese Supreme Court titled ‘SPC IP Court’.61 Setting aside the rather urgent
problems this system causes to fundamental rights, such as the right to effective remedy and to fair trial, valued highly in the European Union,62 the excessive dependency of the adjudicators
on the administrative branch causes further problems, since these courts’ jurisprudence plays a significant role in developing IP law.
It is visible from the way China approaches law-making and amendments in the sector that it is desirable for the state to leave the interpretation and norm-setting to the courts. Indeed, relatively fundamental elements for the sector, such as the description of what constitutes an employee invention,63 the establishment of the inventive steps necessary in order to
characterise something an invention,64 or deciding on the authority, who is responsible for
considering trademarks well-known65 have all come about through the jurisprudence of
Chinese courts. This comes from the very nature of intellectual property law, being an increasingly innovation-heavy sector. This means that effective regulation is increasingly difficult to achieve, thus dependence on adjudicators is not unheard of. In fact, this methodology is not dissimilar to that of the European Union, where conceptual convergence is
57 David Cyranoski, ‘China’s Patent Boom Brings Legal Wrangles: Court Decision Sets Precedent for
Protecting Intellectual Property’ (2012) 492 Nature 323
<https://link.gale.com/apps/doc/A359733091/AONE?u=amst&sid=AONE&xid=3969d6f8>.
58 Brander, Cui and Vertinsky (n 50) 916. 59 Zhang and Bruun (n 49) 33.
60 ibid
61 Office of the United State Trade Representative, ‘Special 301 Report’ (April 2019) 41.
62 These rights are enshrined in the Charter of Fundamental Rights of the European Union ( hereinafter Charter)
[2012] OJ C326/02, Article 47.
63 Case Taoyi v. Beijing Municipal Subway Foundation Engineering Company on Patent Ownership Dispute,
Supreme People’s Court Gazette [1992.1]
64 Case Hong Kong Meiyi Metal Products Factory v. Board of Patent Appeals of Patent Office on ‘‘Idler Clamp
Door’’ invention Patent Dispute Appeal, Supreme People’s Court Gazette [1992.2]
65 Case DuPont v. Beijing Guowang Information Co., Ltd. on Domain Name Infringement Dispute in Computer
achieved through the utilisation of the Court of Justice. Indeed, as Axhamm argues, conceptual convergence is not achievable in the IP sphere solely on the legislative level. Conversely, a sort of conceptual vagueness is required by the legislature.66 It is necessary to nevertheless add that
China’s regional courts have attempted to rely on the internationalisation of IP law by transposing foreign doctrines if it becomes apparent that Chinese law in itself is incapable to solve the relevant dispute.67 As an example, the doctrine of equivalence in patent infringement
cases had been sewn into China’s legal structure through such a technique.68
Section II: The EU and China under the WTO umbrella
In order to be able to truly grasp the gravity of the problem regarding China’s lack of ingrained determination to pursue a more genuine and well-functioning IP regime, it is necessary to refer to the international sphere both China and the EU exist in.
As far as intellectual property protection on an international scene is concerned, the European Union has been a prominent actor through its Member States and even on its own. The Paris Convention, the Strasbourg Convention, and the European Patent Convention are all international treaties initiated, signed, and put in force mostly by EU Member States. Additionally, the Member States, and since 1995 the EU itself are all full members of the WTO and are therefore signatories to the TRIPs Agreement.69 The way the Member States and the
EU have taken the front seat in not only the creation of these agreements, but also in the initiation of complaints in the WTO dispute settlement body since,70 shows a clear eagerness
to uphold and promote a high level of protection of intellectual property rights in the wider world. This parallel status between the EU and its Member States regarding a field, which is otherwise covered by the external competence of the CCP gave birth to a curious state of affairs regarding the legal effects of WTO law in the EU legal order, which will be further elaborated on in the next chapter. For now, it is important to consider the concurrent set of circumstances in China.
66 Johan Axhamn, ‘Striving for Coherence in EU Intellectual Property Law : A Question of Methodology’ in
Annette Kur Gunnar Karnell Per Jonas Nordell, Daniel Westman, Johan Axhamn, Stephan Carlsson (ed), Liber Amicorum Jan Rosén (eddy.se 2016) <http://su.diva-portal.org/smash/get/diva2:900994/FULLTEXT01.pdf> 45.
67 Zhang and Bruun (n 49) 29.
68 Beijing Municipal Intermediate Court Decision, Zhoulin v. Beijing Aomei Mechanic and Electronic Joint
Development Ltd, Beijing Huaao Electronic Medical Equipment Ltd. On Infringement of Patent [1993] Zhongjingzhichuzi No. 704
69 Steve Peers, ‘The Constitutional Implications of the EU Patent’ (2011) 7 European Constitutional Law
Review 229, 212.
70 ‘Disputes by members’ (World Trade Organisation)
As has been observed previously in this chapter, through its accession to the World Trade Organisation in 2001, the People’s Republic of China was obliged to accede to its Agreement on IP protection. The European Union had done similarly in 1995, thus both China and the EU are bound by the TRIPs Agreement; a document that puts down some minimum standards of protection in the sphere of intellectual property. Although, as has been stipulated in the first chapter of this paper, the agreement is not without critics regarding its foundations being in highly political factors, and regarding its excessive Eurocentrism, it is to date the only genuinely comprehensive multilateral agreement on intellectual property rights. Additionally, the TRIPs Agreement is of particular importance regarding China, since it is the foremost international treaty that China was ready to sign in the field. The agreement is therefore considered the most significant step in bringing China’s policies and rationales regarding intellectual property rights closer to that of global trade.71 Nevertheless, it would be
unreasonable to think that China would credulously comply with the TRIPs Agreement that advocates the aims and values of the European and US economies. As Wechsler claims, China’s immense political and commercial strength enables it to defy the limitations set by the TRIPs on its policy space. 72 The fact that China can undermine the US-EU Western IP regime
in the international area through its own insufficient compliance and proactive IP policies show both the limits of the TRIPs agreement and of the WTO dispute settlement mechanism. However, it is useful to remark on the development the accession has caused in China’s convergence with the Western notion and conception of intellectual property rights. The accession in 2001 urged the amendment of the Patent Act and other intellectual property doctrines, which all pushed the PRC’s law more in line with international standards, improving the standards and scope of protection enjoyed in the country.73 Zhang even argued that it was
the pressure stemming from a 2007 US complaint towards the lack of implementation of the TRIPs standards in the People’s Republic of China that caused the most recent amendment wave regarding the Chinese intellectual property regulation, including the Patent Law.74
71 Andrea Wechsler, ‘Intellectual Property Law in the People ’ s Republic of China : A Powerful Economic Tool
for Innovation and Development’ 3, 15.
72 ibid 17.
73 Zhang and Bruun (n 49) 10. 74 ibid
Section III: EU pressure in mitigating China’s IP protection shortcomings
In 2017, before the acceleration of amendment processes have gone underway in China, Brander, Cui and Vertinsky (hereafter Brander) have come up with a conclusion that rings even truer after the reform attempts of Chinese IP law have come to light. They put forward the interesting notion that contrary to what certain academics have somewhat idealistically deduced,75 China’s unpredictable IP enforcement –or lack thereof– is highly problematic notonly in reaching a desirable level of innovation and creativity but also in upholding a level of rule of law currently in place on an international level.76 As a solution to an ever-growing threat
of undercutting these levels by the Chinese, Brander refers to a potential solution. They argue that contrary to what more optimistic analyses might suggest, it is unavoidable for the Western world to apply some pressure on the People’s Republic of China in their efforts to reform their own IP regime. It became visible from the rather flawed attempts to amend their laws that China is more than comfortable with the way their laws are set out at the moment. It is necessary therefore that the EU sets out to pressure China to emphasise compliance with international treaties, such as the TRIPs Agreement. This stems from the notion that retaliation measures should become a reality to China if they fail to comply with their obligations to protect foreign IPRs.77 Similar to the thesis of Wechsler mentioned before, it seems obvious
that change will not be initiated in China if foreign countries continue to provide assurances to Chinese right holders even in the absence of Chinese provision of those same rights.
Even before its accession to the WTO system and its subsequent official entry into the international trade domain, China has embraced the usage of soft power in relations with its plans to exert dominance beyond its borders. Very similarly, the EU has promoted the utilisation of normative transference, which is consistent with the Union’s preoccupation with its values and norms that also have a rather prominent status in the EU legal order.78 Such
similar belief in normative power has led to a particularly interesting relationship between the EU and China. On one side China has enforced a defensive type of soft power, welcoming technical and progressive assistance in order to both profit from such assistance but also to be able to leverage said soft power approaches later on.79 The EU on the other hand is always
75 Mike W Peng and others, ‘An Institution-Based View of Global IPR History’ (2017) 48 Journal of
International Business Studies 893 <https://doi.org/10.1057/s41267-016-0061-9>.
76 Brander, Cui and Vertinsky (n 50) 909. 77 ibid 915.
78 Paul C Irwin Crookes, ‘EU Soft Power with China : Technical Assistance in the Field of Intellectual Property
Rights’ (2014) 19 Supp E.F.A. Rev. 2014, 77, 84.
willing to use normative diffusion, especially in a domain so significant as intellectual property protection. This affinity to cooperate manifested in the EU-China Project on the Protection of IPR 1 and 2 in 2004-2007 and 2007-2011 respectively.80 A rather considerable number of
indicators by independent evaluators, such as the OECD and the WIPO have shown that IP enforcement has become substantially more pronounced in the time period that encompassed these capacity building projects.81 82 However, contrary to what Crookes has concluded, the
connection between such cooperation and China’s growing interest in IP is not so clear. He argued that the exponential growth in patent applications and patent court litigation is a positive result stemming from the IPR projects.83 It is necessary, however, to contextualise these
findings and refer to the Chinese system in place that incentivises patent applications and their consequent enforcement in administrative and judicial organs.
Also, it is of particular relevance to remark on such normative transference of the EU from a more history-conscious standpoint. This elemental need to project its ideology regarding various fields is deep-rooted in the European mindset, manifesting in colonialism and similar horrors. It could be that it is merely today that IPR protection has amassed significant enough value economically that the West and thereby the EU decided to utilise the method of normative transference. A method, whose iterations have been condemned and reimagined time and time again. Such a view on this topic is rather fascinating, but requires plenty more research by means of a more normative technique. Such research has unfortunately not been feasible to include in the present paper due to length requirements. I, however, invite research regarding the question of the legitimacy of the West’s requirement towards China to change its stance towards intellectual property. Especially since such need necessitates the alteration of inherent ways of thinking of the Chinese people. After this caveat I will continue to elaborate on the topic from a more or less EU standpoint.
The way the EU and China have managed to cooperate and shed light on some of the shortcomings of China’s IP protection system through mere capacity-building projects shows that there is potential and need for further joint action in the field. However, soft power might not be enough in an ever-accelerating global economy, where IP will become a more significant factor than ever. It will be argued in chapter 3 of this paper that in order to effectively pressure China to strive for internationalisation of its IP law, one of the most far-reaching tools the EU
80 European Commission ‘European Commission Communication on Trade, growth and intellectual property’
COM(2014) 389 final [2014] 16
81 WIPO, World Intellectual Property Indicators, 5 (World Intellectual Property Organisation 2012) 82 OECD Factbook: Economic, Environmental and Social Statistics, 154 (Organisation for Economic
Cooperation and Development 2013). http://dx.doi.org/10.1787/factbook-2013-62-en.
has is the conclusion of a trade agreement. Due to the Lisbon amendment to the exclusive powers that are assigned to the EU through the Common Commercial Policy, a trade agreement though the CCP became a powerful tool with the capacity to act as a sword in such circumstances. However, legal inconsistencies arise from such an undertaking; the peculiarities of such an endeavour will be thus detailed next.
Chapter 3: Legal issues with the new CCP regime, focusing on the state
of IPR in the EU in the context of a potential future trade agreement
with China
It is commonplace to say that there is an inherent divide between China and Europe as far as economic, legal, and cultural thinking is concerned. In the previous chapter, it became visible that this can be seen in the two global powers’ legal structures concerning intellectual property rights. Focussing on patent protection, it was possible to observe that there is a real difficulty in likening the two systems. However, studying the way the two powers look at soft power and cooperation, it was possible to deduce that there is real potential in their working together in achieving China’s greater convergence with the international IP regime, which might very well be crucial in maintaining a well-functioning world order. In this chapter, it will be observed what issues this innate divide causes if one considers geopolitical relations and furthering trade connections.
As has been described in the previous chapter, there seems to be a possibility for the EU to work together with the PRC in matters related to intellectual property protection. It has also been observed that mere capacity-building projects are insufficient if one considers the global consequences of China’s advancements through the BRI and in light of the COVID-19 pandemic, which commentators already expect China will attempt to capitalise on regarding the exertion of influence.84 Suited to the EU’s willingness to employ normative diffusion and
to its inclination to utilise trade as the engine behind pushing for substantial change in third countries, it would be most useful for the EU to attempt a trade agreement with China in the near future. This has long been a prospect,85 which has subsequently created a topic of
fascination for academics. These following sections will, however, look at the difficulties of such an agreement in relation to the fragmented state of the EU’s patent protection regime.
Section I will observe the legal aspects of a potential trade agreement focusing on its inclusion of IP and patent protection. It will be argued that problem that the disconnection between the internal and external dimensions of IPR in the European Union causes could have
84 See e.g. Annabelle Timsit, ‘Europe is worried about Chinese corporate takeovers tied to Covid-19’ (Quartz,
2020) https://qz.com/1843832/europe-fears-chinese-corporate-takeovers-tied-to-covid-19/ accessed 17 June 2020.
85 European Commission ‘Global Europe–Competing in the World– A Contribution to the EU’s Growth and Jobs Strategy’ COM(2006) 567 final (Brussels, 4 October 2006) 11.
a detrimental effect on concluding such a trade agreement with a state, whose level of protection can be considered inadequate from the EU’s point of view. Section II will then juxtapose these findings with how the conclusion of such an agreement can be inconsistent with the doctrine of parallelism and could subsequently damage the EU legal order.
Section I: IP aspects of an EU-China trade agreement under the CCP
Due to the constraints of this paper, this section will only focus on patent protection, similar to the way chapter 2 of this paper limited itself to that particular field.
As it was visible in chapter 1 of this paper the Daiichi Sankyo case had created a test used to identify which aspects of trade can be regulated exclusively by the EU under the Common Commercial Policy. Through this test, the Court has finally announced that ‘commercial aspects of IP rights’ refer to the entirety of facets of intellectual property rights the TRIPs Agreement covers.86 Especially in the field of patent protection, this might be a
cause for concern, as the TRIPs Agreement is famously broad in its reference to patents, as an example, requiring patentability in no less than ‘all fields of technology’.87 Nevertheless, the
giant leap of the Daiichi Sankyo case with regards to the broad interpretation of IPR under the CCP means that patent law, as an inherent part of the TRIPs Agreement shall from now be regulated exclusively by the EU in its external dimension. Further, this EU exclusivity on the field entails that it is for the EU to uphold the high protection of IPRs and to protect the European market in its dealings with China. This results in the EU needing to implement references to IPR in a future EU-China trade agreement. Due to the difference in the level of protection between the two regions and more importantly to the position intellectual property plays in the present and future global economy, it is inevitable that such a primer trade agreement shall include such provisions. This brings about two main legal problems, assessed in turn in the next sections.
A: Removing direct and indirect effect of trade agreements
Bringing the TRIPs agreement under the CCP brings an old conflict into the front, regarding the division and interrelation between the EU legal order on the one hand and
86 Ankersmit (n 3) 209.
87 Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement
Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M. 1197 [1994] (hereinafter TRIPS Agreement) Article 27.
international law on the other. The Court of Justice has a long line of jurisprudence in deciding the legal effects of international treaties and of international law in the EU legal order. In Haegeman, the Court has made the cardinal decision with regards to international agreements that have been concluded by the EU as being an ‘integral part of the EU legal order’ and ‘binding upon the institutions and on the Member States’.88 This has since been codified in
Article 216(2) and to some extent in Article 220 TFEU. Since the proposed agreement would be concluded under the legal basis set out in Article 3 and 207 TFEU, and through the procedure laid down in Article 218 TFEU, there is no doubt that the piece of legislation would constitute an international agreement concluded by the EU institutions, which is a criterion described by the Court in Kupferberg.89 Furthermore, in Kupferberg, the Court has taken
another step, creating a four-pronged cumulative test that refers to the direct applicability of the relevant international agreement. They are as follows: they have to be binding upon the EU, unconditional and sufficiently precise, and the nature and broad logic of the agreement cannot exclude direct effect.90 Out of those, the first one is the only one that would have to be
satisfied in the case of the EU-China agreement due to the Haegeman doctrine. The second one is questionable in the view of AG Villalón, who referred to the TRIPs Agreement as ‘not being unconditional and sufficiently precise’.91 This means that an explicit reference to TRIPs
provisions in the trade agreement can deprive it of having direct effect. The fourth criterion is however especially interesting in a discussion regarding the new-era EU international agreements. It states that the agreement shall have direct effect if the parties to the agreements have not explicitly stated otherwise.92 In fact, both the FTA with Singapore and the CETA have
such clauses, the former with more nuance,93 and the latter providing a blanket resolution.94
The rationale behind such clauses and the possibility of the third criterion not being satisfied can be brought back to the relationship between the EU legal order and certain international organs, such as the WTO, and the TRIPs by extension.95
The abovementioned doctrine described in Haegeman and in Article 216 TFEU refers to international agreements concluded by the EU itself. However, it has been ruled by the Court
88 Case 181/73 Haegeman [1974] ECR-1974 -00449, para 4. 89 Case 253/83 Kupferberg [1985] ECR-1985-00157, para 13. 90 ibid paras 22-23.
91 Daiichi Sankyo, Opinion of AG Cruz Villalón, (n 32) paras 89-90. 92 Kupferberg (n 89) para 17.
93 Council of the European Union ‘Free Trade Agreement between the European Union and the Republic of
Singapore’ 2018/0094 (NLE) [2018] (hereinafter EUSFTA) Article 17.15
94 Council of the European Union ‘Comprehensive Economic and Trade Agreement between Canada and the
European Union and its Member States’ OJ L 11, [2017] (hereinafter CETA) Article 30.6 (1)
95 Anna De Luca, ‘Direct Effect of EU’s Investment Agreements and the Energy Charter Treaty in the EU’
that the EU can also be bound by international agreements not concluded by it. Perhaps most primarily in Intentional Fruit Company, the Court ruled that the EU is bound by the WTO, mostly basing its justification on the doctrine of functional succession, relating to the fact that the EU has assumed the functions inherent in the field through its CCP.96 As for the legal
effects, it is a fact that due to the inherent systemic incompatibilities between the EU legal order and the WTO system, the WTO legal network cannot have direct effect in the Union legal order. Such incompatibilities include the reciprocal rights inherent in the WTO system, which would undermine the EU’s position on the global stage should it enable direct effect in its own jurisdiction.97
Nevertheless, it is useful to consider that until the Daiichi Sankyo ruling the Court has left a door open regarding the indirect effect or consistent interpretation of WTO law before the national courts.98 Supposedly due to legal certainty reasons, Advocate General Villalón in Daiichi Sankyo declined to remove this Merck Genericos doctrine from effect. The Court however decided to take away the possibility to rely on the indirect effect of WTO law by revoking the effect of Merck Genericos.99
By concluding an agreement with a third country, the EU, as it has done in the Singapore FTA,100 will in all likelihood explicitly refer to the TRIPs Agreement in describing
specific patent protection provisions. Additionally, it will most likely include a clause that deprives the agreement of having direct effect. Without direct effect of such a significant agreement and in the absence of a dispute settlement body, such as the ones included in investment chapters, there is a risk of depriving individuals of their right to be heard protected under Article 41 of the Charter.101 This is all the more dangerous if one considers the low level
of protection individuals enjoy under the Chinese judicial system.
It is possible to conclude that there is a risk that by placing all aspects regulated by the TRIPs Agreement under the CCP and exclusive EU competence through the Daiichi case-law, the Court has moved the ability of individuals to rely on rights conferred upon them by the TRIPs Agreement in the context of future trade agreements, whereas it has been a possibility in pre-Daiichi times via the Merck Genericos case-law.102
96 Joined cases 41 to 44-70 International Fruit Company [1971] ECR 1971-00411, para 14. 97 Case C-146/96 Portugal v Council (textile products) [1999] ECR I-08395, para 45. 98 Merck Genericos (n 13) para 34.
99 Ankersmit (n 3) 198.
100 EUSFTA (n 93) Article 10.29. 101 Charter (n 62)
Section II: Stretching the cord between internal and external relations
The second issue concerns the particularities of the anatomy of the EU legal order with regards to the parallelism principle codified in Article 207(6) TFEU, whose relevance has been elevated since the Daiichi case, as described in chapter 1 of this paper. This section will point out the issues a future agreement could cause regarding the way the EU’s external powers under the CCP overwhelm the internal system as far as EU patent law is concerned.
It is important to note first that compared to other aspects of intellectual property rights, such as copyright and design protection, patents have been somewhat controversially excluded from extensive internal harmonisation.103 This has to do with a long history of negotiations and
deadlocks regarding an EU Patent dating back to the 1970s, and with the coming into force of a multilateral European Patent Convention and the subsequent establishment of European Patents, both outside the EU legal order.104 The EPC has been dubbed as rather effective in
creating some uniform standards in the national laws of contracting parties, and therefore of the Member States of the EU. By imposing these limited standards, the EPC has reached some level of harmonisation amongst the EU Member States. It would be easy to overstate the impact and weight of the harmonising capacity of these standards, however. Although 26 EU Member States are signatories of the EPC and by extension part of the EPO, there is little that binds the countries’ national laws together since both enforcement and infringement is handled on the national level.105 The EPC agreement does not grant central enforceability, it merely creates a
bundle of nationally enforceable patents in its 38 Contracting States.
Today the most significant EU-wide process in the field is the enhanced cooperation launched in 2012 through a set of Regulations with the participation of all the Member States except Croatia, Italy, and Spain.106 After unsuccessful references to the Court of Justice
regarding the legality of the enhanced cooperation by Italy and Spain, Italy also joined so that only Croatia and Spain are still reluctant.107 The lack of clear progress in the field can be
attributed to the way Union-wide intellectual property protection is to be achieved. Although Article 118 TFEU grants the EU institutions the right to establish bodies and arrangements
103 Peers (n 69) 238.
104 Convention on the Grant of European Patents (European Patent Convention) as revised by the Act revising
Article 63 EPC of 17 December 1991 and the Act revising the EPC of 29 November 2000.
105 Vincenzo Di Cataldo, ‘From the European Patent to a Community Patent’ (2002) 19 8 Colum. J. Eur. L. 20. 106 Regulation of the Parliament and of the Council 1257/2012 implementing enhanced cooperation in the area
of the creation of unitary patent protection OJ L 361/1 [2012]; Council Regulation 1260/2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements OJ L 361/89 [2012].
