Brexit - what next for intellectual property?

24 June 2016


The UK has voted to leave the EU. What next?

Summary

Current EU (and incoming) legislation will continue to apply until the UK leaves, and to the extent that EU law has been written into UK national law already it will remain in force indefinitely. There is no change to the law in the UK today.

There is considerable uncertainty as to whether the UK will emerge from Brexit as a member of the European Economic Area (EEA).

Brexit does not impact the existing system for the grant and enforcement of European patents covering the UK, which will continue, because it is established by agreements made outside the remit of the EU and EEA. However, outside the EU, it is widely considered that it will only be possible for the UK to remain a part of the new Unified Patent Court (UPC) and Unitary Patent (UP) system if international agreement is reached. Delay to the commencement of the UPC and UP system is expected.

Outside the EEA, legislation will also be needed to secure the availability of supplementary protection certificates after the UK exits the EU.

A Brexit that sets the UK adrift from the EEA will mean also that the UK needs to unpick significant legal structures in some areas of intellectual property, and to legislate new paths. In particular, the current unitary (EU-wide) regimes for trademark and design protection will have to be undone somehow. Should a unitary right be split into two parts, covering the UK and the remaining EU? Or should an existing EU right give its holder a right of seniority in an application for a UK right? The UK needs strategy on this, and soon.

In relation to designs, businesses that have been relying on unregistered Community protection should consider, as a matter of priority, obtaining registered protection. If you have disclosed the design, the clock is already ticking to get a registration on the books before you are prevented from doing so.

Other aspects of the legal framework, which complement the intellectual property landscape in the UK, will require work also, including, for example, the international arrangements regarding jurisdiction and service and the UK legislation regarding customs authorities' powers.

EEA membership may provide an opportunity to negotiate a stay of execution for the unitary trademark and design rights, and just possibly even a way to stay in the UPC. However, the terms of any EEA membership would be a matter for negotiation, the results of which today can only be speculation.

The uncertain relationship between the UK and the EU post Brexit

In the field of intellectual property, there will need to be legislation to fill gaps emerging in the wake of Brexit. How big the gaps are, and where they are, depends upon the nature of the post-Brexit relationship between the UK and the EU. Whether the UK negotiates a place within the EEA lies at the heart of these uncertainties.

This article therefore considers the consequences of EEA membership versus no EEA membership for intellectual property rights and protection in the UK, identifying where key legislation will be needed in each scenario. Obviously, the timing of the consequences is very much open to debate.

Consequences of the UK being set adrift

If the UK leaves the EU and is not a part of the EEA, UK businesses operating in the EU/EEA would still need to comply with EU/EEA law. However, the UK courts would no longer be bound by EU/EEA legislation or the rulings of the Court of Justice, with the following consequences:

  1. Trademarks

    The UK will no longer be part of the unitary trademark system under the EU Trade Mark Regulation 207/2009 (EUTM); the regime will have to be undone somehow.

    This raises numerous questions. Should a unitary right be split into two parts, covering the UK and the remaining EU? Or should an existing EU right give its holder a right of seniority in an application for a UK right? Several models are under consideration. It is expected that existing (pre-Brexit) EUTMs will continue to be considered enforceable in the UK upon exit from the EU, but confirmation that this is the case would offer certainty for rights holders, who might not have parallel UK protection. The 'unitary' nature of the right would likely be limited to the remaining EU, with questions of validity and infringement regarding its UK 'part' falling within the exclusive remit of the English courts. Transitional legislation will be needed in the UK to manage this in a way that reduces uncertainty for business.

    UK businesses/right holders will still be able to seek EUTMs, and enforce them in the remaining EU, but will be unable to rely on existing rights under UK law in order to found seniority for an application. Similarly, UK rights will no longer enable the owner to oppose a third party's registration of a mark as an EUTM or to seek its revocation. These changes are significant, and will impact UK businesses' ability to broaden the geographical scope of protection for their brand.

    In addition, the Trade Marks Directive will no longer apply to the UK. The Trade Marks Directive has shaped the UK's Trade Marks Act (1994), which provides the legislative structure for the UK grant and enforcement of registered trademark rights. In the course of time it can be expected that some divergence will emerge in the way that the courts in the UK and remaining EEA/EU countries interpret legislative provisions, and that differences will eventually emerge in legislative provisions themselves. However, in the context of widespread international agreement on many aspects of trademark law, UK law is unlikely to diverge considerably in the foreseeable future.

    As regards licensing and other agreements, please see below.

  2. Designs

    The UK will no longer be part of the unitary designs systems (Community Designs Regulation 6/2002), which provide for both registered and unregistered unitary EU-wide design rights.

    As with trademarks, strategy and legislation will be needed to extricate the UK from the European designs structure.

    In addition, the UK needs to consider whether to extend the national unregistered design right to encompass the scope of the Community unregistered design right in the UK. This is because UK unregistered design right and Community unregistered design right protect different aspects of a design, and for different lengths of time, and so the national right may not fill the gap for rights owners:

    UK unregistered design right is considered to offer different protection to that offered by the unregistered Community right. For some industries, such as product design, the UK unregistered right is preferable, as shape-only designs are broader. However, for others, such as the fashion industry, Community unregistered designs are preferable as they cover the surface decoration, materials, colours etc. In a recent review of UK unregistered design, the UK Government decided to retain the UK right, on the basis that it complemented the EU design right well. As we extricate ourselves from the EU, the Government will have to revisit that right in order to see whether the UK right needs to cover the additional features.

    Another factor is that UK businesses may no longer qualify for Community design protection as of right. Therefore if businesses have been relying on unregistered Community protection, they may need to consider obtaining registered rights where they may previously not have done so. This is something that should be considered straight away - if you have been relying on unregistered protection and have disclosed the design, the clock is ticking to get a registration on the books before you are prevented from doing so. Businesses that rely on unregistered rights should consider this as a matter of priority.

    The UK also has to consider the converse - should EU citizens and businesses qualify for UK unregistered design protection? Currently, businesses based in any qualifying country (which includes all EU member states) qualify for UK unregistered design protection.

    As regards licensing and other agreements, please see below.

    • The UK right protects the shape or configuration (whether internal or external) of the whole or part of an article. It lasts for 10 years after it was first sold or 15 years after it was created - whichever is earliest.
    • The Community right, like the registered UK and registered Community rights, protects the appearance of the whole or part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture or materials of the product or its ornamentation. It lasts for three years from the point the design is first disclosed or made available to the public in some manner.
  3. Patents

    Brexit does not impact the existing system for the grant and enforcement of European patents covering the UK, which will continue, because it is established by agreements made outside the remit of the EU and EEA. However, it is widely considered that outside the EU, the UK will only be able to remain involved in the new UPC and UP system if international agreement is reached.

    The UPC has been in development for several years, the culmination of decades of negotiations for a unified European court with jurisdiction to resolve patent disputes spanning much of the continent. The Unitary Patent is a single patent right of equivalent scope.

    The Unified Patents Court Agreement (UPCA) mandates that the UPC and UP will enter into force four months following the deposit of instruments of ratification by thirteen signatory states, including the three pariticipating Member States in which the highest number of European patents had effect in the preceding year. The UK is on of these three. To date, the UK has not ratified.

    If the UK were to ratify the UPCA, the UPC could be up and running as early as 2017. The UK could, perhaps, ratify the UPCA before any Brexit takes effect, in order to get the UPC operational. However, ratification entails a notable concession of jurisdiction to the new court, away from the courts of the UK, which of course leads to questions as to whether Parliament would choose to do this. There is also concern that, should the UK proceed in this way, upon the UK's exit from the EU, any divisions of the UPC situated in the UK would have to cease operating.

    Please click here for more on whether post-Brexit UK can remain involved in the UPC and UP system, in the wider context of the expected Article 50 exit negotiations.

    There is, therefore, a risk that Brexit will unravel the whole UPC and UP project.

    Brexit also raises questions in the context of the enforcement of standards essential patents (SEPs), in particular whether the CJEU's guidance as to how negotiations should have been conducted will still apply, in circumstances where a competition law defence is raised. Our expectation is that UK judges would be unlikely to depart materially from the European approach. In any event, where EU competition law is engaged by wider commercial activity, SEP owners will need to ensure that their portfolio strategy remains compliant with EU law.

  4. Supplementary Protection Certificates

    Supplementary Protection Certificates (SPCs) provide for extended patent protection in respect of medicinal products and plant protection products. SPCs are granted at the national level by the relevant patent office (for the UK, the UKIPO), pursuant to European legislation which has effect across the EEA. Interpretation of the legislation has led to difficulty, with the Court of Justice ("CJEU") contributing to the uncertainty with confusing and inconsistent decisions.

    Outside the EEA, the UK will need new national legislation to implement its own SPC or patent term extension scheme (probably by amending the UK Patents Act 1977) in order for such protection to continue to be available following Brexit. Initially, the existing EU regulations could be adopted with a view to preventing a legislative gap from emerging. However, in the longer term, the UK could develop the UK legislation in this area, to improve its clarity and, potentially, to widen its scope, for example to include medical devices.

  5. Copyright

    Outside the EEA, European legislation which impacts the interpretation of national legislation in the copyright sphere will cease to have effect in the UK. This includes the InfoSoc Directive 2001/29/EC and Directive 2006/115/EC on rental right and lending right.

    The UK legislature has already considered the need for implementing legislation in respect of these directives and made amendments accordingly to incorporate them into UK national law, for example by the inclusion of section 97A of the Copyright Designs and Patents Act 1988. Such UK national law will not be impacted by Brexit.

    In the course of time it can be expected that some divergence will emerge in the way that the courts in the UK and in the remaining EEA/EU countries interpret legislative provisions, and that differences will eventually emerge in legislative provisions themselves. However, in the context of existing widespread international agreement on many aspects of copyright law, UK law is unlikely to diverge considerably.

  6. Trade Secrets

    The Trade Secrets Directive 2016/943/EC was published in the Official Journal in June 2016 and will come into force on 5 July 2016. The law in the UK (including the procedural rules of the court) is considered already to be largely compliant with the minimum standards being set by the legislation, and consequently Brexit makes little difference to the law in the UK in this area.

  7. Exhaustion of intellectual property rights

    Outside the EEA, the geographical boundaries within which exhaustion of many intellectual property rights occurs are expected to reduce. Placing products on the market in the UK would not exhaust rights relating to remaining EU and EEA countries. Similarly, placing products on the market in the EU or EEA would not exhaust UK national rights. This would be expected to impact the level of "parallel" imports into, and exports out of, the UK.

  8. Jurisdiction, service and customs

    With the UK outside of the EEA, the international agreements framing jurisdiction and service issues as regards the UK and the EU and EEA countries would need updating.

    The UK's customs legislation would need considerable overhaul, in particular to enable UK customs authorities to continue to detain, seize and destroy goods suspected of infringing intellectual property rights as appropriate in view of the new boundaries of the UK's customs regime. The present regime largely exists by EU Regulation.

  9. Licensing and other agreements

    From a practical perspective, businesses should be aware of the need to ensure that terminology used in licences, settlement agreements, co-existence agreements and other transactional arrangements is now drafted in such a way that the extraction of the UK from the EU and unitary IP right systems can be accommodated without a need to re-open negotiation of the contractual terms. In the course of time existing arrangements which cover the EU as a defined territory, or which concern EU IP rights, will need to be reviewed in order to consider whether they will remain fit for purpose following Brexit.

Consequences of Brexit should the UK emerge as a member of the EEA

If the UK does remain a part of the EEA, post-Brexit UK courts will continue to interpret and apply EU legislation regarding intellectual property to the extent it applies to member countries of the EEA, or in respect of which the UK and EU agree to continued UK involvement in unitary regimes (which is far from certain).

Where questions of the interpretation of applicable EU/EEA legislation arise in the course of legal proceedings in the UK, the reference court will be the European Free Trade Association (EFTA) Court (rather than the Court of Justice). The EFTA Court has comparable judicial functions to the Court of Justice. It aims to ensure uniform interpretation in the application of EU law by the national courts of the EFTA states. Like the Court of Justice, it is located in Luxembourg. Its judges are appointed by the EFTA countries and all proceedings are conducted in English.

The EFTA court follows and applies the case law of the Court of Justice. By ruling on questions referred by EEA countries, it also contributes to the development of the wider body of European jurisprudence.

In the field of intellectual property law, some significant legislation is limited to EU member states; so remaining a part of the EEA would therefore still leave a legislative gap. In particular:

  1. Trademarks

    The Trade Marks Directive, which shapes the UK Trade Marks Act, applies to EEA countries. UK trademarks law can be expected to continue to develop in line with the law within the EU.

    The EUTM Regulation, which provides for the unitary EU trademark system, is currently not incorporated into the EEA Agreement. Whether the UK could or would remain within the EU trademark system is at present unclear. It would be a matter for negotiation and agreement between the UK and EU; EEA countries may have an interest in the outcome also.

  2. Designs

    The EU's designs legislation is not applicable to EEA states, so absent agreement to the contrary, it will cease to apply even if the UK remains a part of the EEA. The consequences of this are discussed above. Whether the UK could or would remain within the EU designs system is at present unclear. Again, it would be a matter for negotiation and agreement between the UK and EEA, with EEA countries potentially having an interest in the outcome also.

  3. Patents

    While the prospects of the UK remaining involved in the UPC and UP system might seem better where the UK is an EEA member than when set adrift, the legal position appears not to differ.

    Within the EEA, the UK courts will continue to apply the framework guidance provided by the CJEU in respect of the enforcement of SEPs.

  4. Licensing and other agreements

    There remains a need to ensure that terminology used in licences, settlement agreements, co-existence agreements and other transactional arrangements is able to accommodate UK exit from the EU with or without membership of the EEA, EUTM and unitary designs regimes. New agreements should be able to accommodate this and existing arrangements will need to be reviewed.

  5. Enforcement of rights

    Finally, it is worth noting that the Intellectual Property Rights Enforcement Directive (2004/48/EC) (IPED) is not currently in force in the EEA. However, the UK legislature has already made the legislative amendments considered necessary to give effect to the IPED.

    The UK courts have increasingly cited the IPED as justification for awarding some more imaginative types of remedy. The maturing remit of the IPED is in the process of being tested in a number of referrals that are currently progressing through the Court of Justice.

    Generally, however, the UK courts consider themselves to have wide jurisdiction and discretion regarding the grant of remedies. Accordingly, although post-Brexit the IPED will no longer be effective in the UK, this is unlikely to restrain the ability of the UK courts to grant the relief considered appropriate in any particular case.

Conclusion

How the UK needs to legislate in the field of IP in order to manage Brexit in an orderly way depends upon the nature of its post-Brexit relationship with its European neighbours.

If the UK does not remain a part of the EEA, it is clear that it will not remain a part of the unitary structures for protection and enforcement of trademarks and designs. There is considerable uncertainty as to whether, upon Brexit, the UK, will be able to remain a part of the new UPC system for pan-European patent enforcement. Consequently, there is uncertainty as to the shape of the new system and delay to its start is expected.

In any event, brand and design owners and licensees should be alert for the need to ensure that licences and other agreements regarding intellectual property are able to accommodate Brexit.

Remaining a part of the EEA may provide scope for negotiation for continuation of existing legislative structures relating to IP, but considerable negotiation is going to be needed and the outcome cannot be predicted at this stage.


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