The European Union launched legal proceedings against China before the World Trade Organization (WTO) on Friday, over what it says is a violation of intellectual property laws. 

In a statement the EU said European companies coming to China were forced to grant ownership or usage rights of their technology to domestic Chinese entities and did not have the ability to freely negotiate market-based terms in technology transfer agreements.

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It added that these provisions violated WTO obligations to treat foreign companies the same as domestic ones, and to protect intellectual property such as patents and undisclosed business information.

The action comes on the same day that the EU launched a WTO dispute resolution process over US tariff hikes on steel and aluminum from the EU, Canada and Mexico.

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The EU's case against China targets specific provisions under Chinese regulations on the import and export of technologies and the regulation on Chinese-foreign equity joint ventures that the EU says discriminate against non-Chinese companies and treat them worse than domestic ones.

The EU said these circumstances did not comply with the basic rights that companies should have under the WTO rules and disciplines, particularly under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

'The whole system might collapse'

"We cannot let any country force our companies to surrender this hard-earned knowledge at its border," EU Commissioner for Trade Cecilia Malmstrom said. "This is against international rules that we have all agreed upon in the WTO."

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The US has also gone to the WTO and launched a case over what it says is intellectual property theft, but the EU said that although its case is similar, it identifies further potential violations of WTO rules.

"Technological innovation … keeps our companies competitive in the global market and supports hundreds of thousands of jobs across Europe," Malmstrom said. "If the main players don't stick to the rulebook, the whole system might collapse."

If the consultations requested Friday do not reach a solution that is satisfactory to the EU within 60 days, the EU will be able to request that WTO sets up a panel to rule on the matter.

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law/aw (dpa, AFP)