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Brexit: Implications for Intellectual Property

Brexit: Implications for Intellectual Property

  • United Kingdom
  • Brexit
  • Intellectual property

12-12-2018

Brexit and the legal implications for businesses

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; and

- 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;
  • UK-based satellite broadcasters may need to clear copyright in each member state to which they broadcast as they will no longer be able to rely on the country-of-origin copyright clearance rule when broadcasting into the EEA;
  • UK-based cultural heritage institutions may need to seek additional copyright permissions because they will no longer be able to rely on the exception under the Orphan Works Directive (Directive 2012/28/EU) to digitize orphan works in their collection and make them available online across the EEA without the permission of the rights holder(s); and
  • UK Collective Management Organisations may need to enter into new arrangements because they will no longer be able to mandate EEA Collective Management Organisations to provide multi-territorial licensing of the online rights in their musical works.

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 the 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 unaffected and will continue to be assessed as on the same basis following exit day.

Of the few areas of UK patent law which come from the EU legal order, by far the most important is the supplementary protection certificate regime. A supplementary protection certificate (“SPC”) is a national intellectual property right (akin to a patent term extension). It provides an additional period of patent protection for patented pharmaceutical products and agrochemicals inventions and is available in each EU member states under two EU Regulations (Regulation EU/469/2009 and Regulation EU/1610/92). SPCs are of great significance in the life science and agrochemical sectors.

Under the EU Withdrawal Act 2018 (which sets out the position that will apply in the event of a no-deal Brexit), the relevant EU legislation will be retained in UK law. The existing systems will therefore remain in place, operating independently from the EU regime, with all the current conditions and requirements.

This means that the EU’s legislation on supplementary protection certificates will be kept in UK law. This law, along with the existing supporting provisions in UK patents legislation, will form the UK’s own supplementary protection certificate regime on exit. So it seems that the date of the first marketing authorization in the EEA will remain relevant for calculating the duration of the SPC, rather than the first marketing authorization in the UK. Moreover, the UK Intellectual Property Office has clarified that SPC applications which are pending at exit date will continue to be assessed as normal, and will not need to be refiled.

There have been some suggestions that the UK should take this opportunity to improve some of the infelicities and uncertainties in the current SPC regime, which have led to many preliminary references to the CJEU. However, that will not happen in the short term.

Moreover, in the event of a no-deal Brexit, UK courts will make no further preliminary references to the CJEU following exit day (29 March 2019) and will not have to follow post-exit day CJEU decisions. Decisions of the CJEU prior to exit day will remain binding on the UK Courts apart from the UK Supreme Court, which will be able to depart from earlier decisions of the CJEU in any circumstances where it would depart from one of its own earlier decisions (the test laid down in the 1966 Practice Statement of the House of Lords was “where it appears right to do so”). This is particularly important in this area of IP law, where CJEU decisions have frequently been subject to cogent criticism. As such, even though the UK’s SPC legislation will be worded identically to the EU legislation, it may not be too long before divergences in interpretation emerge.

It is unclear how the CJEU will treat any preliminary references concerning the SPC regime which are pending as of exit day, in the event of a “no deal” Brexit. However, in Opinion 1/91, relating to the compatibility of the first version of the EEA Agreement with EU law, the CJEU objected to the proposed role allocated to it under that Treaty of giving advisory (i.e. non-binding) opinions to national courts of non-EU EEA member states (i.e. Norway, Iceland, Liechtenstein). It ruled that giving non-binding opinions was incompatible with its role and function under the EU treaties, and hence rejected the draft EEA Agreement as incompatible with EU law. Since any CJEU decision handed down on the preliminary reference pending on exit day will be non-binding in the UK, it seems likely that the CJEU will simply dismiss the preliminary references as inadmissible, or treat them as withdrawn.

6-month paediatric extensions to the term of an SPC will also continue to apply in the event of a no-deal Brexit, as they are based on EU law (Article 36 of Regulation EU/1901/2006). Under the EU Withdrawal Act 2018 (which sets out the position that will apply in the event of a no-deal Brexit), this EU Regulation will be retained in UK law.

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.

In the event that the draft UK-EU Withdrawal Agreement is approved, the position will be largely the same. The draft Withdrawal Agreement refers (Article 60) to applications for SPCs (and for term extensions) which are pending as of exit day. It provides that EU law will continue to apply to those applications, and that any certificate granted pursuant to such an application should provide the same level of protection as under the EU regime. In this case, any preliminary references which are pending at the end of the implementation period will be allowed to continue, and the decisions of the CJEU on such references will be binding in the UK (Articles 86 and 89, draft UK-EU Withdrawal Agreement).

Aside from providing for SPCs, EU law:

  • sets out legal provisions on the patenting of biotechnological inventions. This includes exceptions from patenting, the scope of any protection, and a compulsory licensing regime between overlapping patents and plant variety rights;
  • provides processes for a compulsory licence to be granted for UK manufacture of a patented medicine for export to a country with a public health need; and
  • sets out an exception that certain studies, trials and tests can be carried out using a patented pharmaceutical product without there being an infringement of the patent. (A broader exception to infringement is also set out in UK law which allows for other activities to be carried out to meet regulatory requirements for medicines. This exception relies on references to relevant EU law.)

All this EU legislation will be kept in UK law. This will ensure UK law continues to work in respect of biotechnology patents and applications, compulsory licensing arrangements, and exceptions from infringement for the testing of pharmaceutical products.

The conditions for patenting biotechnological inventions will remain in place. UK, EU and third country businesses as patent holders, third parties and applicants can continue to make decisions on the basis of the current legislation. Patent examiners will continue to apply the same law when scrutinising patent applications in this area. Third parties who wish to challenge the validity of a patent will be able to do so on the same grounds as at present.

For compulsory licensing, UK, EU or third country businesses as holders of patents or plant variety rights which are valid in the UK will continue to be able to apply for a compulsory licence, where there is an overlap between the rights. Similarly, UK, EU and third country businesses will continue to be able to obtain a compulsory licence for manufacturing a patented medicine to meet a specific health need in a developing country.

For pharmaceutical product testing, UK, EU or third country businesses can continue to rely on the exceptions from patent infringement provided for various studies, trials and tests carried out on a pharmaceutical product.

As regards the Unified Patent Court, the project remains in turmoil. Despite the Brexit vote, the UK Government proceeded to ratify the UPC Agreement and the Protocol on Provisional Application on 26 April 2018. The only outstanding step required for the Unified Patent Court to come into effect is ratification by Germany. This has been delayed pending a complaint to the German Constitutional Court. There are rumours that the German Constitutional Court may issue its decision on this complaint in December 2018. If so, and the complaint is rejected, it is expected that German ratification will be withheld until August 2019 (at the request of the UPC Preparatory Committee), to allow an 8-month period for final preparations to be completed. German ratification will trigger a 4-month sunrise period, with the Unified Patent Court finally opening its doors in December 2019 or January 2020.

Whether there is a no-deal Brexit or a negotiated Brexit, it is clear from this timetable that the UK will have ceased to be an EU member state by the time that the Unified Patent Court opens. 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.

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, and chemicals) would have to be relocated. 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.

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

The UK Government has announced that, in the event of a no-deal Brexit, it will not retain in 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. It considers that these rules operate on the basis of reciprocity between the EU members. Since the EU would no longer be offering reciprocity following Exit Day, the UK should not do so either.

As a consequence, UK courts will no longer be able to take jurisdiction over infringement of foreign intellectual property rights and grant cross-border injunctive relief (whether interim or final). Also, 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 in its own right (rather than by virtue of its membership of the EU, as at present) 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 also 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. 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. Similarly, Pan-EU injunctions or cross-border injunctions granted by the courts of other EU member states will cease to apply in the UK.

All parts of the UK would however unilaterally retain the Rome 1 rules on choice of law clauses and the Rome II rules on non-contractual obligations. The UK Government considers that these do not rely on reciprocity and retaining these rules will help maintain continuity and predictability for UK businesses and individuals, as they can continue to apply the same rules as at present to determine which law would apply in cross-border disputes.

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. (i) has reduced significance now, given the UK Government’s willingness to retain the Rome 1 and Rome 2 rules permanently even in the event of a no-deal Brexit. However, (ii) and (iii) remain important aspects of the draft UK-EU Withdrawal Agreement. Existing Pan-EU or cross-border injunctions should continue to be enforceable both in the UK and the EU.

From a practical perspective, the European regime that simplifies the service of English legal proceedings and the taking of evidence outside the UK will also in principle cease to apply as it is based on other EU 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 on Brexit please visit the Eversheds Sutherland Brexit hub.

 

Visit our Brexit Legal Advice Hub for in-house lawyers

For more information contact

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