The potential impact of Brexit on intellectual property within the UK
9 August 2016
Following the Brexit referendum on 23 June 2016, we consider the key legal issues for intellectual property rights resulting from the British public’s vote in favour of leaving the EU. Intellectual property rights in the UK are intertwined with EU legislation and case law. Although immediate substantial legal change is unlikely, the vote to leave the EU will undeniably have a major impact on this area of law. We would expect the UK government to seek to ensure that Brexit does not jeopardise intellectual property protection in the UK, but businesses should begin contingency planning to ensure that protection afforded by their intellectual property portfolios remains robust while the UK’s future relationship with the EU takes shape. We have set out below some of the key issues to consider.
Following Brexit, the UK will no longer be an EU member state and consequently the unitary European Union trade mark (EUTM) will no longer cover the UK, subject to any agreements to the contrary. As such, if no action is taken by the UK Government, EUTMs will no longer provide protection in the UK post-Brexit.
The UK Intellectual Property Office (UKIPO) is listening to the concerns of IP owners, IP practitioners and industry bodies and it is considering the arrangements which could be put in place as either part of a bilateral agreement during the Brexit negotiations or unilaterally by the UK Government.
Although these arrangements are not yet known, there a number of possible models which could be adopted and it is unlikely that the UK will allow a situation to arise where EUTM rights owners lose protection in the UK without there being a mechanism to safeguard their rights in the UK.
The possible models include a bilateral agreement between the UK and the EU where EUTMs will continue to have effect in the UK and unilateral arrangements by the UK (such as EUTMs automatically being mirrored as UK trade marks or rights owners opting-in to apply for recognition of their existing EUTMs as national UK trade marks). Depending on the model adopted, there may be cost implications for the owners of EUTMs and a transitional window if owners are required to take any steps to obtain corresponding UK national rights.
Businesses should now consider reviewing trade mark portfolios to identify any brands which only have EU wide protection and no separate UK protection. The safest approach would be to file new applications for EUTMs with a corresponding UK mark. However, this will incur costs and, as set out above, we consider it unlikely that no arrangement will be put in place.
It should also be borne in mind that, where use of a EUTM has predominantly been in the UK rather than in the rest of the EU, following Brexit the EUTM may be at risk for revocation for non-use because use in the UK would not be recognised as use in the EU. Although, as the period of non-use must be 5 years, this specific issue is unlikely to arise in the short term.
Similar issues arise in relation to registered community designs (RCDs). New and existing RCDs will no longer have protection in the UK following Brexit, subject to any agreements to the contrary (the possible models for which are broadly the same as those discussed above for EUTMs).
However unlike EUTMs, a separate issue arises in that a design cannot be registered unless it is ‘new’ at the time of its UK application. If a design covered by a RCD has been available to the public in the European Economic Area (EEA) for over a year, a UK application for that design would not be possible based on the current requirements as the design would no longer be considered new.
Businesses should consider supplementing new applications for RCDs with UK applications for registered designs, to obtain the same geographical coverage of both the UK and member states remaining in the EU for their design. UK applications can be made also in respect of designs that have been made available to the public for less than one year previously which includes the publication of RCDs. In respect of RCDs which have been applied for less than 6 months previously, the priority date would be maintained for the application of the UK registered design.
UK unregistered designs rights (UDRs) last for 10 years from the date of first sale, and Community unregistered design rights last for 3 years from the date of first sale or marketing (CUDRs). However UDRs do not contain surface decoration within their scope of protection. Post Brexit, there will therefore be a gap in protection for UK designers that have relied on CUDRs to protect the surface decoration in their designs, unless legislation is introduced to broaden the scope of UDRs to mirror protection provided by CUDRs
Copyright is likely to be the least affected area of intellectual property law because it is a territorial right and there is no registration regime in the UK or throughout the EU. Many copyright principles are enshrined in treaties that go far beyond the EU. Where EU directives have been implemented, the principles have been adopted through UK legislation which we would expect to remain unchanged (unless repealed or amended by Parliament). Whilst some legislation implementing EU Directives was enacted under the authority of section 2(2) of the European Communities Act (ECA), we would not expect the UK government to repeal the ECA and to allow the secondary legislation to fall away without making alternative arrangements.
The UK will not be bound to implement future directives and it will not be bound by post-Brexit decisions of the Court of Justice of the European Union (CJEU) (not possibly, by pre-Brexit decisions of the CJEU, depending on the new arrangements put in place)
A common criticism of copyright regulation within the creative sector and other content-rich organisations is the time and cost required to launch initiatives across EU and beyond because of the lack of harmonisation of copyright law. Advice is often needed in a number of jurisdictions and any number of copyright licences may be required. The EU has sought to address this gradually; there are new copyright reforms afoot at present. Brexit means that the UK is no longer bound to implement future directives or follow decisions of the CJEU. Thus, increased divergence is likely, rather than the harmonisation craved by many in the creative sector.
Protected Designations of Origin (PDO) and Protected Geographical Indications (PGI)
These forms of protection are currently based on EU Commission Decision, and take effect in the UK without further national implementation. As such, PDOs and PGIs will in principle no longer cover the UK following Brexit. Legslation providing equivalent protection will have to be enacted, so that the UK can continue to comply with its TRIPS obligations.
Sui generis database right
The sui generis database right is based on an EU Directive, and was implemented into UK law through the Copyright and Rights in Databases Regulations 1997 [SI 1997/3032]. This legislation will survive Brexit, unless formally repealed, but will require amendment depending on the nature of the UK’s relationship with the EU in future. For example, the qualifications for subsistence of the database right refer to the maker being in the EEA. So, whilst continued protection in the UK for a database made by a UK-based maker is likely, it is less clear whether the EU will extend protection to UK-made databases, and vice-versa.
Patents and Supplementary Protection Certificates
The impact on substantive patent law is likely to be less significant because the current regime has been established largely as a matter of national law and international treaty, rather than EU legal order. In particular, the European Patent Convention and role of the European Patent Office in receiving and examining classic European patent applications (which take effect upon grant as a bundle of national patents) will not be compromised by Brexit. Similarly, existing patents and pending patent applications (whether under the national route or EPO route) will be largely unaffected.
However, two specific areas are likely to be severely affected: the proposed Unitary Patent and Unified Patent Court; and the supplementary protection certificate regime.
The Unified Patent Court project has been thrown into turmoil. The Unified Patent Court Agreement (UPCA) was on course to enter into force later this year, with the UPC opening its doors for its first cases in Q2 or Q3 2017. However, Article 89 UPCA requires ratification by the UK (as well as France, Germany and 10 other Contracting States), before it can enter into force.
If the UK Government decides not to ratify the UPCA in light of the Brexit decision, can the UPC still proceed without the UK? In the short to medium term, there is likely to be some delay. Article 89 is likely to have to be amended. This will require a new Diplomatic Conference, and re-ratification of the revised UPCA by the 10 Contracting States which have already ratified (including by way of another referendum in Denmark). There is also a risk that the process to amend Article 89 will re-open other controversial issues which took many years to hammer out as part of the original package. However, much political capital across the EU has been expended in getting the UPC and unitary patent package to its current position, and there is great reluctance to see all that effort go to waste. There are however some significant implications of the UPC proceeding without the UK. First, the proposed London sub-branch of the Central Division (dealing with IPC classes A and C i.e. pharmaceuticals, biotechnology, chemicals) would have to be reallocated. Secondly, the UPC would be left with rules of procedure which, as a compromise between the common law legal system and the continental civil legal system, incorporate many aspects of common law procedure. English judges had been expected to play a significant role on the UPC bench in bedding in those aspects of the rules. The rules of procedure are arguably ill-suited to a Court in which English judges will play no part. Thirdly, in the absence of the UK, the UPC would likely be dominated by Germany. Some commentators have suggested that this will be a concern to industry, who are reluctant to see certain aspects of the German system expand to cover the territory of the 24 EU member states which remain as participants in the UPC system.
It is still possible that the UK Government could decide to ratify the UPCA. The UPCA is an international treaty, distinct from the EU legal order. Some commentators suggest that drawing a fine distinction in this way between EU law and international law would be politically unrealistic, and difficult to reconcile with the UK voting to maintain its own sovereignty in respect to its laws. However, it is undoubtedly true that the Brexit decision had nothing to do with proposed creation of the UPC (notwithstanding the transfer of sovereignty implicit in the system). Proceeding in this way would at least protect the UK from accusations of being a “dog in the manger”, spoiling the system for all the other contracting states. The question would then be whether the UK could continue to participate in the UPC once Brexit takes effect. Opinion 1/09 of the CJEU was generally understood as limiting participation in the UPC to EU member states. This suggests that would not be possible for the UK to remain as a participant in the UPC following Brexit. However, in recent weeks, voices have been raised suggesting that Opinion 1/91 has been misunderstood. Certainly, the UPC Administrative Committee has power to amend the provisions of the UPCA (once it has come into force), and could exercise this power to remove any obstacles in the provisions of the UPCA to the UK’s continued involvement.
As regards supplementary protection certificates (SPCs), these are of great importance to the life science and agro-chemical sectors. A supplementary protection certificate is a national intellectual property right (akin to a patent term extension), available in each EU member states under two EU Regulation (Regulation EU/469/2009 and Regulation EU/1610/92). As EU Regulations take direct effect in the national law orders of the EU member states, they have not been specifically implemented into UK law. As such, it will be necessary for the UK to enact a replacement regime providing equivalent protection. This could be an opportunity to improve some of the infelicities and uncertainties in the current SPC regime. However, widespread industry consultation and substantial effort is likely to be required to prepare new legislation, given the complex, technical and highly specialized issues involved. It is unclear whether the UK Government will be in a position to make available the legislative and civil service resources required, and bilateral or unilateral arrangements preserving the existing EU regime in the UK is possible, at least until a new regime can be put in place. In any event, we expect that the new rules will preserve existing UK SPCs in force, given their commercial value. Moreover, it is clear that the UK courts will no longer refer questions to the CJEU and will not have to follow post-Brexit CJEU decisions (nor, possibly, pre-Brexit decisions of the CJEU, depending on the transitional arrangements put in place). This is particularly important in this area of IP law, where CJEU decisions have frequently been subject to cogent criticism. A new mechanism for 6-month paediatric extensions to the term of an SPC will also be required, given that this is currently based on another EU Regulation (Article 36 of Regulation EU/1901/2006). Given the link between supplementary protection certificate and marketing authorizations for medicinal products (or plant protection products), much will also depend on the new and transitional regime for such marketing authorizations. For example, marketing authorizations granted by the European Medicines Agency (EMA) via the centralized procedure currently take effect throughout the EEA. Unless the UK follows the EEA model for its new relationship with the EU, EMA decisions will no longer take effect in the UK.
Businesses should also review existing licences and assignments which relate to IP rights as these may need to be varied post-Brexit. For example if the territorial scope of a licence references the EU, this needs to be assessed to see if it covers the UK post Brexit, and whether it would require amending. Additionally, consideration should be given as to whether a licence would require amending to refer to both EUTMs / RCDs and any new UK trade marks or UK Registered designs that a business obtains as a result of Brexit. Side letters amending trade mark and registered design licences should also be registered with the UKIPO.
Exhaustion of rights
Trade mark owners can prevent the importation and resale into the EEA of goods which were not put on the EEA market by the owner or with their consent. The same is true for holders of other IP rights, such as patents, designs and copyright. However once IP holders have placed their goods on the market in the EEA, or this has been done with the holder’s consent, their IP rights are ‘exhausted’ and they cannot prevent further dealings with the goods (unless there are legitimate reasons). This means that an IP holder cannot at present prevent the resale and importation of goods it has already placed onto the EEA market. This reflects the European Union principle of free movement of goods. However, if a Brexit model were adopted that meant the UK was no longer part of the EEA, UK IP rights could be used to restrict imports into the UK and EEA IP rights could be used by their holders to do the same in respect of the EEA market. Business models based on parallel trade into the UK from other EU member states would be undermined and may no longer be viable. The principle of exhaustion of rights has been implemented in UK law in various IP-related legislation. These provisions will require amendment or repeal.
Post Brexit, the UK will no longer have the benefit of the Brussels Recast Regulation dealing with enforcement and reciprocity of judgments across the EU, and allocation of jurisdiction over disputes. As a consequence, UK courts will not be able to take jurisdiction over infringement of foreign intellectual property rights and grant cross-border injunctive relief (whether interim or final).
However, the UK may seek to join the Lugano Convention which provides for similar mechanisms to that under the Brussels Recast Regulation, to preserve the enforcement options for IP rights holders.
Moreover, the status of the Chancery Division of the English High Court (including the Intellectual Property Enterprise Court) as a European Union Trade Mark Court and European Union Design court is likely to fall away, meaning the UK Courts would no longer have jurisdiction over the validity and infringement of unitary EU IP rights, and would not be able to grant pan-EU injunctions for infringement of unitary EU IP rights. IP owners would have to bring infringement proceedings separately in the UK and EU.
The effect of Brexit on any pan-EU injunctions already granted is also unknown. It is possible that such injunctions granted by foreign courts would cease to apply in the UK unless they were supplemented by a UK-specific injunction granted by a UK court. Similarly, pan-EU injunctions or cross-border injunctions granted by UK courts may cease to apply in the other EU member states.
From a practical perspective, the European regime that simplifies the service of legal proceedings will also in principal cease to apply as it is based on other EU case law regulations.
Currently there is no certainty about what form Brexit will take. However, it seems likely that trade marks and designs will be significantly affected. This should be borne in mind when reviewing portfolios and you may wish to seek specialist advice.
This article is intended as a high-level overview of some of the considerations rights-holders may wish to bear in mind. As the terms of the UK’s exit from the EU crystallise, and so in turn does the impact of Brexit on various IP regimes, we will provide more specific briefings. If you would be interested in receiving these briefings please subscribe here or contact your usual Eversheds contact.