A comprehensive look at Brexit’s impact on intellectual property rights in the UK

Posted: 24/05/2017


The formal process for the UK’s departure from the EU began on 29 March 2017 when the UK Government notified the European Council under Article 50 of the Lisbon Treaty of its intention to leave the EU. This started a two year period in which to negotiate a withdrawal agreement (this period can be extended if all 28 member states agree). If no agreement is reached within that period the UK will leave the EU on 29 March 2019 (or the end of any agreed extension period). If a withdrawal agreement is reached, the date on which the UK will leave the EU will be the date when that agreement takes effect, which is any date that the parties may choose, so could well be after March 2019.

The withdrawal agreement is different from the agreement setting out the future relationship between the UK and EU, which is expected to be some form of free trade agreement. Any agreement setting out the future relationship between UK and EU is likely to take longer than two years to conclude, and it is not even clear yet whether negotiations for the future agreement can start now or must wait until the UK has left the EU or until some other precondition is fulfilled.

In either event, unless in the withdrawal agreement it is agreed to delay exit until the future agreement has been concluded (which may be politically unattractive), there is likely be a period of limbo between the date of exit and the date of any future agreement. During this period there may be some form of transitional agreement, but if not, the relationship between the EU and the UK will be governed by World Trade Organisation terms (the so-called hard Brexit).

Whatever agreements are reached between the UK and the EU, the UK Government is in the meantime making its own legislative preparations for withdrawal; and to this end, it has announced that it will enact a Great Repeal Act. The Great Repeal Act will repeal the European Communities Act 1972, which is the conduit through which EU laws become part of UK law. But, more importantly, this new Act will introduce into UK law (or more correctly the separate laws of England and Wales, Scotland and Northern Ireland) the entire existing body of EU law that is not already implemented into domestic law (known as the acquis communautaire). Thus, in theory, at the moment when Brexit takes effect there should be no change in the laws that apply in the UK.

However, in practice the situation is more complicated: many EU laws depend on an EU institutional framework or require EU membership to have full effect within a country, neither of which will apply in the UK after withdrawal. As can be seen below, the impact of Brexit on unitary intellectual property rights, such as the EU Trade Mark, is a case in point.

For the purposes of evaluating the impact of Brexit on intellectual property rights in the UK, it is helpful to divide them into three categories:

  • EU-granted rights having unitary effect across all 28 EU member states, eg the EU Trade Mark, the Registered Community Design (RCD), the Unregistered Community Design (UCD) and the forthcoming European Patent with Unitary Effect;
  • National rights the scope of which has been harmonised across the EU, eg national trade marks, most of copyright, database rights, supplementary protection certificates, national registered designs and, from 2018, trade secrets; and
  • National rights that are not the subject of EU harmonisation, eg patents, some copyright and UK unregistered design rights.

Brexit will impact each of these categories of IP rights in different ways. Below we review the effect of Brexit on the first two categories, the third category of rights remaining largely unaffected.

We also highlight the impact of Brexit on applications for a European Patent (to be distinguished from the Unitary Patent) under the European Patent Convention. Because the European Patent Convention is independent of the EU and because the application for a European Patent ultimately results in a bundle of national patents that are not the subject to EU harmonization, we do not expect that the application procedure will be affected by Brexit.

Unitary intellectual property rights

At present, there are only three IP rights with unitary effect across the EU, the EU Trade Mark (previously known as the Community Trade Mark), the Registered Community Design (RCD) and the Unregistered Community Design (UCD). All three are governed by the terms of their own EU Regulations, and the two registered rights are granted by and registered with the EU Intellectual Property Office (EU IPO, previously known as OHIM) in Alicante, Spain.

In addition, a package of EU Regulations and the Agreement on a Unified Patent Court entered into by 25 EU member states (all except Poland, Croatia and Spain) together make provision for another unitary right, the “European Patent with Unitary Effect” or “Unitary Patent”.

Each unitary right is a single property right applying across all member states (or, in the case of the Unitary Patent, across those of the 25 signatory countries that will have ratified the UPC Agreement).

Under current EU laws none of these rights can cover a territory that is not an EU member state, and so after Brexit they will all cease to apply in the UK.

EU trade marks and community designs
From the date of withdrawal, existing EU Trade Marks (EUTMs) and registered and unregistered Community designs will cease to apply in the UK. This means they will cease to provide protection within the UK, and so will no longer be infringed by acts carried out in the UK after the date of withdrawal.
New and pending applications for EUTMs and registered Community designs (RCDs) will not apply in the UK when granted. Designs first made public in the UK after the date of withdrawal will no longer qualify the design for protection as an unregistered Community design.

In order to give continued protection for EUTMs and Community designs in the UK after withdrawal, the UK Government is likely to introduce specific legislation either to convert existing unitary rights to UK national rights or to provide that existing unitary rights continue to have effect in the UK as if they were UK national rights. To date no proposals have been published in this area, but whatever route is adopted a number of issues are expected to arise and a number of consequences will follow:

  • There may be deadlines for conversion and there may be a charge for making the conversion.
  • There is a question whether applicants for conversion will be able to rely on the priority date afforded by an existing unitary right or application.
  • The new UK rights once granted are unlikely to enable the owner to oppose third party applications for similar EUTMs or RCDs.
  • UK businesses with EUTMs may find their EUTMs are vulnerable if the business does not use the mark within any of the remaining EU member states.UK businesses which do not have a commercial or industrial establishment (eg an office or factory) in an EU country will need to appoint an EU representative to communicate on their behalf with the EU IPO regarding their EUTMs and RCDs.

Businesses can continue to apply for new EUTMs and RCDs until the UK leaves the EU. This would be appropriate for businesses that intend to use the mark or design in the other 27 member states. If the business only intends to use the mark or design in the UK, a UK national registration would be more appropriate, and would avoid the need to convert it in the UK later. It would be advisable to ensure EUTMs are in fact used in both the UK and another EU country, to avoid possible claims of non-use in future. It also makes sense for applicants for new marks or designs which are to be used in the UK and the rest of the EU to apply for a separate UK mark or design now as well as an EUTM or RCD, in order to avoid the need to rely on whatever conversion or other procedure is introduced on Brexit and to avoid the risk of delays or problems in introducing such procedure.

Following Brexit, the UK will remain a member of the World Intellectual Property Organization (WIPO) which handles international trade mark registrations. WIPO is a United Nations agency and the UK’s WIPO membership will be unaffected by Brexit. Consequently, filing an application through WIPO may be the most appropriate option if a business will use its mark in the UK and/or EU and in countries such as Japan, China and the USA.

The Unitary Patent and Unified Patent Court
After a long history of failing to reach agreement, dating back to the Community Patent Convention of 1975, 25 out of 28 EU member States have now agreed on both a Unitary Patent (UP) and a Unified Patent Court (UPC), and the first UPs may be granted as early as December 2017.

UPs are European Patents (ie patents granted by the European Patent Office in Munich under the European Patent Convention) which when granted will be given unitary effect in those EU countries that have ratified the UPC Agreement at the time the patent is granted (instead of having to be validated in each such country separately and taking effect as the equivalent of a national patent).

The UPC is a court established by the 25 signatories to the Agreement on the Unified Patent Court to rule on all matters relating to infringement and validity of UPs and (unless the patent owner opts out) European patents validated in countries that have ratified the Agreement. Its central division will be based in Paris, with specialist sections in London and Munich hearing cases on “human necessities, chemistry and metallurgy” and “mechanical engineering, lighting, heating, weapons and blasting” respectively.

The Court of Appeal will be based in Luxembourg, and local and regional courts may also be established in member states. The UPC courts must apply EU law and respect its primacy and have the right to refer questions of interpretation of EU law to the Court of Justice of the European Union (CJEU) under Article 267 of the TFEU. Decisions of the CJEU are binding on the UPC.

The UPC and UP will take effect three months after the UPC Agreement has been ratified by thirteen countries including all three of France, Germany and the UK. France has already ratified it along with a further 11 countries. In November 2016 the UK Government announced that, despite the Brexit vote and the future triggering of Article 50, it still intends to ratify the UPC Agreement this year; Germany has now passed all the laws that are needed to bring the UPC into effect in Germany and is expected to deposit its instrument of ratification in the coming months. Therefore, it is possible that the UPC will become operational as early as December 2017, but perhaps not until the early months of 2018.

What then will be the effect of Brexit on the UP and UPC in the UK and its section of the central division in London?
As currently drafted, the UP can only take effect in EU member states and the UPC cannot be based in a non-EU member state. Therefore, unless further agreement is reached, upon withdrawal, UPs will cease to have effect in the UK and the UK’s section of the UPC will have to move away from London.

There has been much debate on the question of whether legally the UK could continue to participate in the UP and UPC, and the weight of opinion is that it could if the political will is there. The UPC Agreement is an international agreement made under Article 142 of the European Patent Convention, which includes many non-EU members. The UK will remain a member of the EPC after Brexit. Continued participation in the UPC and UP would require a new international agreement between the UK and the participating EU member states, and would require the UK to submit to EU law in its entirety, and the supervisory jurisdiction of the CJEU, in relation to proceedings before the UPC. The UK would also have to sign up to an appropriate jurisdiction and enforcement regime, such as the Lugano Convention.

Even if there was the political will to agree to these things, it is possible that the CJEU could find the UK’s participation unlawful on the same basis that it had previously objected to the participation of non-EU member states in the original draft UPC Agreement (see Opinion 1/09 of July 2009 in which the CJEU ruled the original draft UPC Agreement incompatible with EU law). It is unclear whether under that Opinion the involvement of a non-EU member state is per se unlawful. It has been argued that provided that all parties accept the supervisory jurisdiction of the CJEU and the primacy of EU law, non-EU member states can still participate (see for example Opinion of Richard Gordon QC and Tom Pascoe of Brick Court Chambers of 12 September 2016, and paper by Prof Dr Winfried Tilmann of Hogan Lovells discussed in IPKat on 28 June 2016).

In conclusion, the UK probably could remain a party to the UPC and UPs could continue to cover the UK, but only if the UK is prepared to accept the primacy of EU law and the jurisdiction of the CJEU in relation to proceedings before the UPC.

The effect of Brexit on harmonised national IP rights

The position in relation to harmonized rights is more straightforward. These rights are mostly the subject of EU directives and so have been implemented into national laws of the EU member states (unlike regulations, which are directly applicable, directives are addressed to member states and require implementing legislation).

After Brexit, the IP rights already implemented in UK law will continue in their current form. These include the UK laws underpinning UK trade marks, UK registered designs, database rights and most of copyright. Copyright law is mostly harmonised at EU level but there are still some aspects that have not yet been subject to EU harmonising directives.

Trade secrets law is due to be harmonised under the Trade Secrets Directive (Directive 2016/943/EC) which must be implemented by 9 June 2018.

The main difference after Brexit will be that the UK implementing laws will no longer have to be interpreted consistently with the underlying directives as a matter of EU law (and the CJEU will no longer have jurisdiction to interpret them). The current practice of the UK courts, when applying UK implementing statutes, is to refer directly to the Articles of the EU Directive so as to avoid the possibility that the implementing legislation does not comply with EU law. What will the approach of the UK courts be after Brexit? It is likely that they will continue to interpret the implementing legislation in line with the directive since that was the legislative intent. This may also involve following decisions of the CJEU made after Brexit, however politically unpopular. However the UK legislature will be free to amend the implementing legislation over time in line with its own policy objectives, and so UK IP laws are likely to diverge from their EU counterparts in the future.

Another important difference will be in the area of exhaustion of rights. Currently, in areas where EU law is harmonised (therefore not currently in the field of patents), the EU (or more correctly the EEA) operates a “fortress Europe” approach, applying exhaustion within the EEA but denying international exhaustion. Thus for example, the rights in a national trade mark registered in a member state of the EEA are exhausted on the first sale of a product bearing the mark anywhere in the EEA by or with the consent of the trade mark owner. Parallel or grey market imports from outside the EEA infringe the trade mark rights unless the importer or subsequent trader can prove that the trade mark owner specifically consented to marketing of the particular imported product in the EEA. After Brexit, the UK will be treated as a third country for exhaustion purposes and sales in the UK will not exhaust rights in the EU or EEA. It will be up to the UK legislature whether or not to implement international exhaustion after Brexit, as it still does in the case of patents. As regards the Unitary Patent, if agreement is reached to continue the regime in the UK after Brexit, the UK will have to accept the principle of EU-wide but not international exhaustion of the rights conferred by such patents.

One further area of harmonised IP law that will be affected by Brexit is that of supplementary protection certificates (SPCs). These are extensions to European Patents (validated in EU member states) for medicinal products and plant protection products to reflect delays in first marketing of such products (and so of their effective patent life) resulting from the need for regulatory approval. These are a creation of EU law (governed by regulations rather than directives) and will cease to have effect in the UK upon withdrawal. As in the case of unitary rights, the UK Government is expected to put in place equivalent provisions to extend such European Patents validated in the UK and to replace existing SPCs in the UK, but as yet no proposals have been put forward in this area.

The effect of Brexit on the European Patent

Currently, an applicant is able to obtain a UK national patent by following the procedure in the European Patent Convention (EPC), which is a legal framework for the granting of European patents via a single harmonised procedure before the European Patent Office (EPO). An applicant is able to first file an application in one of the contracting states and then file a patent application in the EPO within 12 months of the initial filing date.

During the prosecution phase, the European patent application is examined in a single regional proceeding by the EPO. The applicant is able designate any of the contracting states, one of which is the UK, in which the applicant desires to obtain patent protection. Once granted by the EPO, a European patent comes into existence effectively as a group of national patents in each of the designated contracting states.

No changes are expected to the patent application procedure under the EPC as it is a framework that exists separately from the EU. There are currently 38 contracting states to the EPC, in contrast to the EU’s 28 member states. After Brexit, the UK would be in a similar position to countries such as Switzerland, which is not a member of the EU but is a contracting state to the EPC.

Conclusion

Much currently remains uncertain. As the Brexit negotiations get underway during the second half of 2017 it is hoped that many of the questions will be answered, but it is likely that much will remain unclear until close to the point of departure.

However, we recommend that going forward, any applicant seeking a unitary intellectual property right, such as an EUTM or an RCD, apply in parallel for the UK equivalent national intellectual property right.


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