Brexit: Implications for Intellectual Property

12th December 2018

Trade marks

Following Brexit, the UK will no longer be an EU member state and consequently the unitary European Union trade mark (EUTM) and Registered Community Design (RCD) 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 and designs will no longer provide protection in the UK post-Brexit.

The UK Intellectual Property Office (UKIPO) is still looking to reach an agreement on IP cooperation that will mutually benefit UK and EU rights holders. If a deal is reached, it has been provisionally agreed that some form of transitional period lasting until 31 December 2020 will be implemented post Brexit, to maintain rights as far as possible.

On 24 September 2018, the UK government released notices setting out the likely outcomes for businesses in the event of a ‘no deal’ Brexit. In terms of trade marks, in the event of a ‘no deal’ scenario, the government has announced that it will ensure that at the date of Brexit;

  • all existing registered EUTMs and RCDs will continue to be protected and enforceable in the UK by providing an equivalent trade mark or design registration in the UK
  • all owners of pending EUTM and RCD applications will have a period of 9 months from the date of Brexit, to apply in the UK to obtain the same protections, retaining the date of the EU application for priority purposes
  • these equivalent rights will involve “minimal administrative burden” for the owner and will exist as if they had been applied for and registered under UK law which will mean that the new equivalent UK rights:

- will need to be renewed in the UK

- can be assigned and licensed independently from the EU right

- can form the basis for proceedings before the UK IPO and the UK courts

However, the owner will have to meet the cost of refiling the equivalent UK application in addition to the costs for the EUTM.

The government is also working with the World Intellectual Property Organisation (WIPO) to obtain continued protection for registered trade marks and designs filed through the Madrid system and designating the EU. In summary:

  • EUTMs and RCDs will continue to protect the remaining 27 member states at the time of Brexit
  • protection of existing registered EUTMs and RCDs in the UK will be obtained through equivalent UK rights
  • owners of pending EUTM and RCD applications will have nine months in which to refile an equivalent UK right at the point of Brexit, retaining the priority date of the EU application but there will be some costs
  • right holders will be notified that a new UK right has been granted and owners of EU rights will be able to opt out
  • provision will be made regarding the status of legal disputes involving EU trade marks or RCDs which are ongoing before the UK courts, although the nature of the provision is not yet known

Unregistered Design Rights

UK unregistered designs rights (UDRs) last for 15 years from the date of creation, or 10 years from the date of first sale (whichever is earliest), and Community unregistered design rights (CUDRs) last for 3 years from the date of first sale or marketing.

In the event of a ‘no deal’ Brexit, the government has confirmed:

  • CUDRs which exist at the time of Brexit, will continue to be protected and enforceable in the UK for the remaining period of that three year protection
  • a new unregistered design right is to be created in the UK which will mirror the characteristics of a CUDR which is to be known as ‘the supplementary unregistered design right’

In summary:

  • existing CUDRs will continue to be valid in the remaining 27 member states
  • protection of existing CUDRs in the UK will be provided for with no action required by the right holder
  • provision will be made regarding the status of legal disputes involving CUDRs which are ongoing before UK courts, although the nature of the provision is currently uncertain
  • the protection of existing UDRs in the UK will continue through a new equivalent right which arises automatically and with no action required by the right holder. For eligible designs disclosed after exit, the supplementary unregistered design right will arise automatically

Copyright

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 (e.g. the Berne Convention and the TRIPS Agreement). 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), except in circumstances when the rights derived from that legislation is contingent on continued EU membership (e.g. sui generis database rights - see below for further details). 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.

Additionally, in a no-deal Brexit scenario, the Government has recently released an advice note that sets out that, amongst other things, the UK will lose the benefit of a number of EU laws concerning copyright and related rights, including:

  • the Portability Regulation (Regulation (EU) 2017/1128) and the Marrakesh Regulation (Regulation (EU) 2017/1563) will cease to have effect in the UK
  • sui generis database rights are available only to nationals, residents, and businesses of member states and therefore UK nationals, residents, and businesses will lose sui generis database rights

The European Commission has announced that UK-based owners of .eu domain names may have their domain name registrations revoked on Brexit.

Licensing considerations

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 refers to 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.

The draft UK-EU Withdrawal Agreement (Article 61) provides that IP rights which were exhausted prior to the end of the implementation period will continue to be exhausted both in the UK and EU following the end of the implementation period.

In the event of a no-deal Brexit, the UK has opted unilaterally to apply a rule of international exhaustion. In other words, the UK will treat as exhausted any UK IP rights which cover goods which have been lawfully placed on the market in the EEA. Business models based on parallel trade into the UK from other EU member states should therefore continue unaffected. The principle of exhaustion of rights has been implemented in UK law in various IP-related legislation and the UK Government has published a draft statutory instrument based on the EU (Withdrawal) Act 2018 which will implement the necessary amendments.

However, crucially, in the event of a no-deal Brexit, EU IP rights may not be exhausted by the lawful placing of goods on the UK market. Hence, EU IP rights holders may be able to rely on those rights to block imports from the UK into the EU. Business models based on parallel trade from the UK into the other EU member states may become unviable.

Enforcement

In the event of a no-deal Brexit, the EU Withdrawal Act 2018 will incorporate into UK law the provisions 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 may still take jurisdiction over infringement of foreign intellectual property rights and grant cross-border injunctive relief (whether interim or final). However, this is unlikely to be attractive to litigants, and may turn out to be a pyrrhic victory for the rights holder, as the other EU member states will not be required to defer to the jurisdiction of the UK courts, or to recognise or enforce its judgements.

In order to deal with this fundamental problem, 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. However, the UK cannot unilaterally accede to the Lugano Convention. The consent of the EU and the other non-EU EEA member states would be required. In the event of a hard Brexit, with the UK leaving the EU without making payment in respect of current and future liabilities, the consent of the EU cannot be assumed.

The UK is preparing to accede to the Hague Convention on choice of law agreements. It can do so unilaterally as a member state of the Hague Conference. The EU is a contracting party, and hence is obliged to recognise the jurisdiction of the UK courts pursuant to an exclusive jurisdiction clause and to provide reciprocal enforcement of judgments given pursuant to such clauses. This will provide some limited reciprocal enforcement, in particular in relation to disputes concerning IP licences, but is unlikely to assist in infringement actions.

As a result, in the event of a no-deal Brexit, many IP litigation strategies which have evolved over the last 40 years based on the provisions of the Brussels Regulation (and, earlier, the Brussels Convention), such as cross-border injunctions and torpedoes, will become obsolete, as regards the UK.

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.

In the event of a no-deal Brexit, the status of any pan-EU injunctions already granted is also likely to be undermined. The UK seems to be set to recognise and enforce such injunctions if granted by foreign courts, although these would cease to apply in the UK unless they were supplemented by a UK-specific injunction granted by a UK court. However, pan-EU injunctions or cross-border injunctions granted by UK courts are currently enforced under the Brussels Regulation, so are likely to cease to apply in the other EU member states.

The position will be more nuanced in the event of a negotiated Brexit. The draft UK-EU Withdrawal Agreement provides that: (i) the Rome 1 Regulation on choice of law clauses will apply in both the UK and the EU to any contract entered into before the end of the implementation period; (ii) the jurisdiction provisions in the Brussels Regulation will continue to apply in both the UK and EU to any proceedings started before the end of the implementation period; and (iii) judgments given in those proceedings will be recognised and enforced in both the UK and EU.

From a practical perspective, the European regime that simplifies the service of English legal proceedings outside the UK will also in principal cease to apply as it is based on other EU case law regulations.

.eu domain names

The European Commission has announced that UK-based owners of .eu domain names may have their domain name registrations revoked on Brexit. In its Notice, the European Commission has stated that UK-based business and individuals who reside in the UK will no longer be eligible to register .eu domain names after the UK leaves the EU on 29 March 2019.

Currently, the registration requirements for .eu domains stipulate that registrants must either have a place of business or home address within the EU. As such, there is a risk that the 300,000 UK-based registrants of .eu domain names will have their domains revoked at the point when the UK leaves the EU on 29 March 2019 in the absence of any agreement. Accordingly, any .eu registrants based in the UK should now consider transferring the domain names to EU-based subsidiary companies, if possible.

For more information please contact Kate Ellis.

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