Legal Bulletin July 2016

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Published date: 27 Jul 2016

Surviving Brexit: What we should be asking about IP protection in the UK and EU, following the recent referendum

On 23 June 2016, the United Kingdom (“UK”) voted via a referendum to leave the European Union (“EU”), commonly known as “Brexit”. This article offers a preliminary analysis on the implications of Brexit on intellectual property (“IP”) rights, and suggests some practical steps that may be taken to proactively manage the transition of the UK out of the EU. It is envisaged that a withdrawal agreement will have to be concluded between the UK and the EU.
 
Needless to say, this article is written on the assumption that the UK will, in the wake of the referendum, actually proceed to issue its notification to the European Council pursuant to Article 50 of the Treaty on European Union (this Treaty is part of the Lisbon Treaty. Please click here to view the full text of Article 50 on the Lisbon Treaty website www.lisbon-treaty.org). It also assumes that a withdrawal agreement will be concluded over the next two years (and perhaps over an even longer period if an extension is negotiated between the member states of the EU), making way for a full-fledged egress by the UK out of the EU. The following observations should also be received subject to any transitory arrangements that may be put into place, following the UK’s departure, that affect individual IP rights.
 
The principle of territoriality
 
The underlying principle is that with the UK’s departure from the EU, its IP rights will continue to subsist as they have done in the past. Fundamentally, IP rights are territorial. National rights will continue to be governed by national laws, as they have done so until now. In the wake of Brexit, these rights are not expected to be changed or compromised as to their validity. However, from a practitioner’s perspective, it is the case that much of the UK’s IP jurisprudence and legislation have, through harmonisation, been ‘“Europeanised” through rulings by the Court of Justice of European Union (“CJEU”), as well as domestic implementation of EU regulations and directives in the form of primary or subsidiary legislation. For example, the term of protection for UK copyright works was increased from 50 to 70 years post mortem autoris as a consequence of domestic implementation of the EU Term of Protection Directive.
 
The question remains as to whether wholesale reform will take place to purge UK IP law of these longstanding European additives. If so, then the scope of UK IP rights may be expected to change in time to come. What is clear is that there is likely to be a divergence between the IP jurisprudence of the UK courts and their European counterparts. Given that many British judges have in the past voiced scepticism about the CJEU’s interpretation of IP laws, the common law following Brexit may exemplify a more autonomous and independent path. In the case of Singapore, our trade marks legislation derives largely from the European Trade Marks Directive, and it is expected that Singapore IP practitioners will have to wrestle with this anticipated divergence before the Singapore courts for years to come.
 
Trade marks
 
The position is very different for European IP rights. For example, in the case of European trade marks, they will cease to have effect in the UK following Brexit. European trade marks that are filed in EU states would not be enforceable in the UK. A separate filing programme will have to be initiated in the UK. Brand owners should be encouraged to consider now, whether to supplement protection for their core brands in the form of domestic UK filings.
 
Another question to ask would be whether European trade mark protection was obtained on the basis of use of a trade mark in the UK, and not in other EU member states. Following Brexit, this category of EU trade marks would be vulnerable to cancellation proceedings for non-use. In other words, after Brexit, the “use” of trade marks in the UK would be insufficient to sustain European trade mark protection. It is also a question whether post-Brexit the UK will continue to recognise
the protection and priority dates of existing European trade marks. In the short term, brand owners would be advised to audit their trade marks to determine which marks would be considered redundant in the context of European protection.
 
Designs
 
Following Brexit, registered European Community designs will also cease to apply in the UK, although this remains subject to any transitional arrangements that may be agreed and implemented. As with European trade marks in the wake of Brexit, separate registration will have to be obtained for the UK, in order to maintain the same geographical coverage pre-Brexit.
 
Patents
 
For companies who maintain European patent registrations, it is expected that little will change with the cessation of the UK’s membership in the EU. The UK remains a member of the European Patent Convention (“EPC”), and the European Patent Office (“EPO”), which administers this convention,
is not an European institution. Companies will still be able to obtain UK and European-wide patent protection as long as they maintain their current European patents under the EPC. In this context, the UK will be in no different a position from countries like Switzerland, who are outside the EU but are signatories to the EPC.
 
The EPC-situation is quite different from the Unitary Patent (“UP”) and Unified Patents Court (“UPC”) regime in the EU, which has gained traction in recent years. The UPC Agreement was signed by 27 EU member states (including the UK) in February 2013. The UPC aims to implement a Pan-European unitary patent regime that will apply uniform protection of patent rights in all contracting member states. EPC patents are currently granted by the EPO, resulting in a collection of national patents which have to be enforced in the relevant member states. The UP potentially offers a more cost-efficient patents regime, where a new patent right will become immediately effective and enforceable in the UPC, whose decisions on validity and infringement will be directly enforceable across all EU member states who have subscribed to the UPC. The UPC regime has provided for
the formation of three Patent Courts in the UK, France and Germany. The timelines for the implementation of the UPC (currently set for early 2017) are likely to see a delay, in view of the result of the referendum. Following Brexit, it should be expected that the UK will cease to be part of the UPC, and another EU member state will take its place in the formation of a new Patent Court.
 
Exhaustion of rights and parallel imports
 
One of the more disruptive changes that will be brought about by Brexit, is the stark reality that UK-based IP rights may be invoked to prevent EU-originating parallel imports from entering the country. The converse also applies. Under current rules, the free movement of goods within the EU provides for a genuine product that is placed in the UK to circulate freely in the whole of the EU. The IP rights are said to be regionally “exhausted” for these goods, following the application of EU law. In light
of Brexit, the exhaustion of rights will no longer be automatic upon first sale in the UK, viz
., EU.
EU-wide distribution agreements will have to be reviewed to reflect this significant change. Much will also turn on whether the UK implements a rule of “universal exhaustion” (as opposed to national exhaustion) of IP rights.
 
For UK litigants, the end of Pan-European remedies for IP infringements
 
A significant jurisdictional curtailment lies in the form of the loss of the UK court’s powers to grant Pan-European injunctive relief following Brexit. Enforcement and other proceedings will have to be brought separately in the UK and another EU member state, in order to achieve the scope of geographical coverage reflective of the status quo pre-Brexit. Quaere what will be the status of existing Pan-European injunctions that have already been issued by the UK courts. Are they susceptible to revision following a substantial change of circumstances such as Brexit?
 
Concluding observations
 
The above views are preliminary and assume a linear trajectory to swift egress on the part of the UK. In actuality, one should expect further permutations as to how transitory arrangements are to be formulated and agreed upon, and these in turn will profoundly affect the scope and coverage of
UK and EU IP rights. The medium term geo-political alignments of the UK (such as continued membership of the European Economic Area) would also significantly inform these discussions,
as well as the impact on trade.
 
 
For further information, please contact:
 
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