Brexit & Intellectual Property

On 23 June 2016, the majority of voters in the UK referendum voted in favour of the UK withdrawing from the European Union, the so-called Brexit. The possibility for such a withdrawal is provided for in Art. 50 of the Treaty on the Functioning of the European Union (TFEU). The withdrawal procedure will begin with the UK notifying the European Council of its intention to withdraw from the EU. This notification will mark the beginning of a two-year period for negotiations resulting in the effective withdrawal of the UK from the Union. Brexit will have consequences in practically every field of law, including Intellectual Property. In the current state of affairs, details are entirely unclear and it is hardly possible to make reliable predictions about the future developments. However, we have summarised the essential cornerstones for the various IP rights to provide right holders with some initial guidance regarding the IP implications of Brexit and to indicate where IP owners might already have to take action now.

EU Trademarks

If the UK withdraws from the European Union, the EU Trademark Regulation will no longer apply to the UK. The protection conferred by an EU Trademark in the UK would thus end once Brexit becomes effective.

Moreover, this scenario seems unlikely because the European Union and the UK can be expected to enter into a withdrawal agreement containing provisions to avoid a sudden loss of existing rights in the UK without providing for a replacement. Conceivably, there could be provisions whereby the protection conferred by an existing EU Trademark in the UK would in fact lapse, but at the same time – automatically or upon request – a corresponding national UK trademark would be registered with the same priority as the EU Trademark. Proprietors of EU Trademarks should closely monitor the further developments.

In addition, Brexit may affect the "genuine use" of an EU Trademark as meant by Art. 15 of the EU Trademark Regulation if the proprietor is currently using the EU Trademark only in the UK. The reason is that, regardless of any transitional provisions, any use of the respective sign within the UK will no longer be considered as a use of the EU Trademark. For all future purposes, the recommendation must be to consider applying for a national UK trademark in addition to any EU Trademark application.

Community Design

Like EU Trademarks, Community Designs are based on EU legislation, i.e. the Community Design Regulation. Therefore, the same basic principle applies in that the protection conferred by a registered Community Design in the UK will lapse upon BREXIT. However, as for EU Trademarks, it is conceivable that there will be transitional provisions, for example to the effect that, when the Community Design loses its effect in the UK, an identical national design with the same priority will be registered by the UK IPO. 

However, this solution is not available for unregistered Community Designs for lack of registration. Unregistered Community Designs have a term of protection of three years and are particularly important for frequently modified designs in the clothing industry. Post BREXIT, the existing EU protection for such unregistered designs could therefore fall away. The respective design might still be protected pursuant to the existing national provisions of the UK Copyright, Designs and Patents Act 1998 (CDPA). However, the UK design legislation differs from the provisions of the Community Design Regulation with respect to both the requirements and the scope of protection of unregistered designs. For example, under the CDPA, design protection is only available for shapes and configurations but, different from the Community Design Regulation, not for surface decorations.

Businesses looking for effective future design protection in the UK should analyse the national options under the CDPA in addition to those currently still available under the Community Design Regulation.

European Patents

The withdrawal of the UK from the European Union would not have any immediate consequences for the protection conferred by European Patents (EPs) because the membership in the EU is not a prerequisite for the membership in the European Patent Organisation. In addition, the UK itself is a direct signatory of the European Patent Convention (EPC). European Patents granted with effect for the UK will hence not be impaired by BREXIT, and their effect in the UK will continue to be governed by national law. 

The Unitary Patent and the Unified Patent Court

A much-noticed European project in the field of patent law is the proposed Unitary Patent System consisting of a European Patent with unitary effect (Unitary Patent) and a supranational Unified Patent Court (UPC). According to the current time schedule, Germany, France and the UK are envisaged to ratify the Unitary Patent Court Agreement (UPCA) by late 2016/early 2017. The ratification by those three countries is a mandatory requirement for the UPCA to enter into effect, for the UPC to open its gates and the possibility to apply for unitary patent protection.

However, in view of the BREXIT referendum, it is questionable whether this time schedule is still realistic. For one thing, it is doubtful for political reasons that the UK Parliament will now ratify a law that aims at an enhanced cooperation and greater integration of the EU member states. Furthermore, under the current agreements, EU membership is a prerequisite for the participation in the Unitary Patent System. Therefore, even if the UPCA were to enter into effect with the participation of the UK and the UPC were to commence its work, enabling the continued participation of the UK in the Unitary Patent System following BREXIT would require substantial amendments to the UPCA as well as additional provisions in the withdrawal agreement between the EU and the UK. All this would need to be sorted out within a relatively short period of time. A continued involvement of the UK in the Unitary Patent System would also raise complex questions under EU law with regard to the possibility of a non-EU member state participating in the UPC (cf. Opinion 1/09 of the CJEU (Full Court) dated 8 March 2011). Therefore, commencing with the Unitary Patent System in accordance with the current time schedule would imply that a number of complex issues would need to be added to the already long list of issues to be solved before the UK leaves the EU. It remains to be seen whether the member states will accept such additional complications to the BREXIT negotiations and the further time and costs involved. 

If the UPCA does not come into effect in its current form with the involvement of the UK, this will not necessarily be the end of the Unitary Patent System. The remaining EU member states could continue the project after BREXIT without the UK. However, this would nevertheless require some amendments to the existing agreements. If this route were taken, Italy would replace the UK as the third mandatory ratifying country of the UPCA. The seat of the section of the central division for pharma and similar patents would then need to be moved from London to another location in an EU member state. Conceivable options would include Paris as the main seat of the central division, Munich as the seat of the third section of the central division and other important patent hubs such as Milan or The Hague. However, this issue could lead to prolonged negotiations between the member states. Besides that, whether or not there would actually be a sufficient political and commercial lobby for such a "small" solution without the UK is an entirely open question at this stage.

Supplementary Protection Certificates

Supplementary Protection Certificates (SPCs) for extending the patent protection for medicinal and plant protection products are granted by the national patent offices of the member states and are hence national rights. However, SPCs have a legal basis in two EU regulations (Regulation (EC) No. 469/2009 for medicinal products and Regulation (EC) No. 1610/96 for plant protection products), which contain, in particular, the requirements for granting and maintaining SPCs as well as their basic effects. These two regulations are directly applicable in each EU member state according to Art. 288 TFEU. The respective national SPC provisions supplement the two regulations only to the extent necessary for fully implementing the SPC regime provided for in the regulations. Apart from that, the national laws make express reference to the EU Regulations. This is also true for the UK.

In the event of BREXIT, the two European SPC Regulations would no longer apply in the UK, and the legal basis for granting new SPCs as well as key provisions concerning existing SPCs would fall away. However, existing SPCs in the UK would likely remain valid because they were granted by the UK IPO as national rights. In view of the enormous commercial importance of SPCs for the British pharma sector, it can also be expected that transitional provisions for existing SPCs with effect for the UK will be agreed in the course of the withdrawal negotiations and that the necessary provisions for future SPC applications in the UK will be set up either through national legislation or through agreements with the EU. Should the UK become a member of the European Economic Area (EEA) following its withdrawal from the European Union, there would also be a possibility of "extending" the two European SPC Regulations to the UK, similar to the current situation with the EEA member states Norway and Iceland. It remains to be seen which way the UK will go.

Know-how Protection

With regard to the protection of trade and business secrets, i.e. "know-how", there is currently no European legislation that is directly applicable in the member states. The protection of know-how is governed by the laws of the individual member states and differs significantly from member state to member state. However, on 5 July 2016, the EU Know-How Directive (Directive (EC) No. 2016/943) will enter into effect with the aim of harmonising the protection of know-how across the EU. The member states will be required to implement the provisions of the Directive into national law by 9 June 2018. Whether or not the UK will proceed with the implementation in view of a forthcoming BREXIT seems questionable. If the Directive is not implemented into national UK law, know-how in the UK will continue to be protected on the basis of existing national laws. It remains to be seen whether, in the long term, the protection of know-how in the UK will develop in parallel to EU legislation or whether it will take a different direction.

Copyright

Copyright protection is governed by national laws of the individual member states. There are no regulations or other directly applicable EU legislation which would become inapplicable in the UK upon BREXIT and, thus, leave copyright holders unprotected. In other words, a withdrawal of the UK from the European Union would not have any immediate effect on copyright protection. However, in the case of BREXIT, the UK would no longer participate in any future EU harmonisation of copyright laws, be it directly through directives or indirectly through judgments of the CJEU in response to referrals from the national courts of the member states. In the current state of affairs, it is entirely open, in the case of BREXIT, as to whether the protection of copyrights in the UK will generally develop in parallel to EU copyright protection or in a different direction.

Other Consequences of BREXIT for IP Protection

A number of EU regulations that provide for substantial simplifications, for example, regarding the service of court documents or the recognition and enforcement of judgments in other member states would no longer be effective in the UK upon BREXIT. This applies, for example, to the "Brussels Ia" (Regulation (EC) No. 1215/2012) and the "Service Regulation" (Regulation (EC) No. 1393/2007). Therefore, unless the EU and the UK were to enter into corresponding bilateral agreements, the enforcement of, e.g., German trademark or patent infringement judgments against defendants in the UK would become significantly more difficult.

The BREXIT issue is also relevant for (licence) agreements. For example, if a definition of the licensed territory in an existing licence agreement refers to the European Union, this may lead to problems in case of a post-BREXIT dispute over whether or not there is still a licence valid for the UK. Furthermore, contractual provisions relating to taxes, customs and regulatory requirements may need revision as a consequence of the UK not being an EU member state. Similarly, when drafting provisions about the governing law and the venue in case of a dispute, one should take into account the possibility that the existing procedural EU facilities for the recognition and enforcement of judgments may cease to apply as between the EU and the UK (see above).

Under the doctrine of exhaustion, a product that is protected by copyright laws, a trademark, a design right or a patent and that was put on the market in an EU or an EEA member state by, or with the consent of, the right holder can be freely distributed in all other member states. The exclusionary rights of the right holder become "exhausted" upon the first placement of the product on the market. However, this doctrine only applies as between EU and EEA member states. Consequently, in the case of BREXIT, it will not apply with regard to the UK, unless the UK joins the EEA or enters into a special agreement with the EU on the free movement of goods. This means that, upon BREXIT, an IP proprietor could place IP-protected goods on the market in the UK, but still prevent their import into the EU on the basis of any parallel IP rights (e.g. national or EU trademarks or patents) covering the EU or certain of its member states. Likewise, the IP proprietor could prevent the import of goods into the UK, even if those goods had previously been put on the market in the EU with the IP proprietor's consent.

Conclusion

A withdrawal of the UK from the European Union would have far-reaching consequences for the protection of Intellectual Property. The details, however, will only become clear in the course of the withdrawal negotiations between the EU and the UK. We will continue to monitor developments and report any important results and options for IP proprietors in due course.

 
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