Brexit: the implications for intellectual property
IP law in the UK is very largely integrated with EU law. There are EU-wide Design and Trade Mark rights, Regulations on Supplementary Protection Certificates and Directives harmonizing national laws on in areas such as Trade Marks, Designs, Databases, Copyright, Software and Biotechnology Inventions. Some Directives have been implemented by statute, others by secondary legislation under the European Communities Act 1972 (ECA). Transactions dealing with Intellectual Property are also often affected by EU law, particularly competition law and the Technology Transfer Block Exemption.
Now the referendum has happened, and Brexit is going to happen, there will be short term effects - for example, EU-wide rights will need to be replaced by national rights (probably requiring rights-holders to pay additional fees as the administrative costs are likely to be substantial). There will be no need to change harmonising statute law, but secondary legislation implementing EU Directives into UK national law will need to be preserved when the ECA is repealed.
In the longer term, IP rights-owners will need to deal with a major market where IP rights are free-standing and where the local law is likely to diverge over time from the law in the EU, as judgments from the EU courts will no longer bind the UK courts. This will reverse the movement to align IP law in Europe with a single market in which manufacturers have to deal with IP issues only once for the whole market. Once the negotiations have been completed regarding the UK’s continuing relationship with the EU, even if the UK remains part of a single market in the European Economic Area (EEA), manufacturers will have to accommodate a significant market where courts can decide that what can be sold is not the same as elsewhere in Europe. Of course, this is a problem that has existed in the recent past and will affect only a small number of companies, but it does (re)introduce a complication which manufacturers will need to take into account if their businesses involve selling the same products throughout Europe.
Companies which manage EU-wide registrations from the UK may have to change their practice, as UK lawyers and patent and trade mark attorneys will no longer have the right to handle applications and other proceedings in the EU Intellectual Property Office. The European Patent Office will be unaffected, as it is not an EU institution.
- Trade marks, designs, plant varieties etc
Following Britain leaving the EU, European Union Trade Marks, Registered and Unregistered Community Designs and Community Plant Variety Rights will cease to have effect in the UK, which will no longer be part of the EU and the Regulations under which they were granted and enforceable will no longer have force in the UK. The UK Government will need to legislate for substitute rights and appropriate transitional provisions. The same will apply to EU designations of origin and geographical indications.
The UK Intellectual Property Office (IPO) will need to take over the administration of the registrations which substitute in the UK for the former EU-wide rights. This might be on an opt-in basis, almost certainly on payment of a fee. The UK IPO will need to recruit the examiners and other staff to administer the greatly expanded workload.
UK lawyers, and patent and trade mark attorneys will cease to be entitled to act as professional representatives in the EU Intellectual Property Office (formerly OHIM) and Community Plant Varieties Office. The requirement that professional representatives are nationals of a Member State and have a place of business in the EU means that the IP departments of UK companies, which have hitherto dealt direct with the EU IPO, will need to restructure how they operate. They may need to relocate, replace staff or instruct external agents, in order to handle their continuing EU IPO workload. This will have significant financial and human resources implications.
Brexit will also affect the geographical scope of trade mark use. Owners of European Union Trade Marks who rely wholly or substantially on use in the UK to establish genuine use in the EU in the event of a revocation claim, may find their EU-wide registrations more vulnerable to revocation for non-use after Brexit. Conversely, when the UK portion of a European Union Trade Mark, which is used only outside the UK, is converted to a national registration, the national registration will similarly be vulnerable. It is not expected that the UK statute law which implements harmonised EU law in this area will be changed, although over time UK jurisprudence is likely to diverge from the EU jurisprudence, since the Court of Justice and the General Court decisions will no longer bind the UK courts.
- Patents and Supplementary Protection Certificates
Since the European Patent Convention is not an EU instrument, it will not be affected by Brexit and European Patents (UK) will continue to be granted by the European Patent Office and to take effect in the UK. It is expected that amendments introduced by secondary legislation under the ECA to implement EU Directives (notably the Biotech Directive) will be preserved when the ECA is repealed.
Legislation will be needed to preserve Supplementary Protection Certificates (SPCs) when the Regulation which governs them ceases to have effect in the UK. Since they are already granted and administered by the UK IPO, there is unlikely to be significant disruption. The Government will need to legislate for SPCs to be granted following Brexit. Although it would be possible simply to re-enact the Regulation as UK law, this may be an area for political debate, both as to the principle whether they should continue to be granted at all, and as whether the provisions should be redrafted to overcome the poor drafting of the Regulation, but this will lead to debate as to how ambiguities should be resolved (which will affect what SPCs could be granted, to whom and for what).
- UPC and Unitary Patent
The UPC and Unitary Patent are EU instruments. Non-EU countries cannot take part, and so after Brexit, the UK will not be able to engage with the UPC process.
The ramifications of the UK leaving the EU go further than this however: there is a serious risk that the UPC and Unitary Patent regimes will not come into effect at all. This is because it is a condition precedent for the UPC starting its business that the three largest patenting EU member states ratify the UPC Agreement - namely, the UK, Germany, and France. The UK has not done so, and now it is going to leave the EU, it is unlikely that the government will be able to justify politically the ratification of an EU instrument. The decision to leave the EU notwithstanding, the UK will remain a member state of the EU for (likely) two years after the Article 50 declaration is made whilst the UK and the EU negotiate the exit agreement. During this time, the UPC would still need the UK’s ratification to open. Unless the UPC Agreement can be amended to remove the requirement for UK ratification, the UPC will not be able to open until the UK has ceased to be a member state, and by that time - likely two years or more down the line - the political will for the UPC may have cooled. This has happened for political reasons in many Eastern European countries in recent months, and this decline in interest will only continue once a major patenting country, the UK, is no longer going to take part.
If the UPC does not open, the Unitary Patent will not come into effect either.
Before the referendum, changes were approved and implemented into the Patents Act 1977 in preparation for the UPC. These will either be left to ossify as an irrelevance, or removed soon.
- Customs detention, parallel imports and exhaustion
Customs detention of (allegedly) infringing goods at the point of importation is an important weapon in the hands of rights-owners, not only against counterfeiters, but also in standards-based industries such as electronics and telecoms. Following the UK’s departure from the EU, there will be a border between the UK and the EU where detention of goods can take place, certainly of goods passing from the UK to the EU, but also, if successor legislation brings customs detention into UK law, of all goods entering the UK. If the UK adopts an EU-style scheme, it will be potentially very significant, as it will be almost impossible to circumvent.
This added border may affect how the market for parallel imports will develop, which is particularly affected by the rules on the exhaustion of rights. The doctrine of exhaustion of rights applies to the whole EEA, so if the UK leaves the EU but re-joins first EFTA, and then the EEA, the position with regard to exhaustion and parallel imports will not change. However, if the UK does not re-join the EEA, then the existing rules on exhaustion of rights will cease to apply, in which case no goods covered by UK IP rights which entered the market overseas can be parallel imported into the UK unless the rights-owner consents. This could effectively close the UK market to parallel imports. Since parallel imports compete chiefly on price with products first placed on the market in the UK, one factor restraining price inflation would be removed. This may be an area for legislation, depending on how significant the Government perceives this factor to be.
- IP licensing
The impact of a Brexit on IP licensing, particularly by major businesses, will be comparatively small. This is because licences usually cover the whole or substantial parts of Europe, and need to comply with EU law (particularly competition law and the Rome choice of law rules) even if they are governed by the law of a non-EU Member State. This will only change if, in the longer term, the UK is treated by licensing businesses as an entity separate from the EU into which IP rights are licensed separately.
It would be prudent in licensing agreements to provide for the eventuality that licensed rights such as European Union Trade Marks or Registered or Unregistered Community Designs might be converted in part into national rights to which the licence will continue to apply.
- IP enforcement
The means and remedies provided for enforcing IP rights have been harmonized under the Enforcement Directive. Many of the remedies required by the Enforcement Directive were already available in UK law, and returning to the pre-Directive status quo will do little other than remove the remedy of publication of a judgment (it is questionable whether the Government would want to do this; the order for publication is already heavily circumscribed, and in cases where it is appropriate, it is desirable that it be available). The UK courts would however be spared the task of dealing with the issue that the Enforcement Directive appears to provide for damages and an account of profits as concurrent remedies.
For further information, please refer to Brexit: the legal implications.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.