European Union: Effect Of 'Brexit' On Intellectual Property Rights

Last Updated: 4 July 2016
Article by Vikrant Rana
Most Read Contributor in India, September 2018

The UK electorate addressed the question of withdrawal from the European Union on June 23, 2016 in a referendum that was arranged by the Parliament, by the passage of the European Union Referendum Act, 2015. The Act provided for a consultative referendum in the United Kingdom and Gibraltar no later than December 30, 2017, and on February 20, 2016, Prime Minister David Cameron announced that the date for holding the referendum will be Thursday, June 23, 2016.

Brexit, a portmanteau of the words British and Exit, was a political goal that has been pursued by various political parties, and advocacy groups, since the time the UK joined the European Economic Community (ECC), a precursor of the European Union back in 1973. The result of the same referendum was 51.9 % in support of an exit and 48.1 % to remain with a total turnout of 72.2 % of the entire electorate. Provision for withdrawal from the European Union is a right of each member states under Article 50 of the Treaty on European Union (hereinafter referred to as the Treaty). Clause 1 of the said Article states that, "any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements."

The decision to withdraw from the Union will have a significant effect in world economy, and the news is poised to dominate prime-time television throughout the world for the entire week, much because of the fact that the referendum is just a vote of intention among the people of the United Kingdom, and the actual exit process will now have to be negotiated. The time limit prescribed for the exit is a maximum period of 2 years, post notification by the UK government, according to clause 3 of Article 50 of the Treaty, which states that, "The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period." Thus, the actual exit date is still tentative, and is not expected to be announced formally before 2018.

Since, the exact fate of the exit is very much dependent on subsequent negotiations, let us have a look at the possible implications it might have on Intellectual Property Rights in the United Kingdom.

Registered Community Designs

The European Union's Council Regulation (EC) No. 6 / 2002 of 12 December, 2001 on community designs provides for "a unified system for obtaining a Community design to which uniform protection is given with uniform effect throughout the entire territory of the Community". The term "community" used therein refers to all the member states of the European Union, and the scope of the regulation extends only to such member states. After the vote for Brexit, it will no longer be a part of the Registered Community Designs (RCD) system once such severance comes into effect.

Post-Brexit, if an applicant seeks to obtain Europe-wide design protection, he will have to file a separate national application in the UK to secure protection, thereby incurring additional costs. This will in turn lead to an increase in the number of design applications to be dealt with by the UK Intellectual Property Office, which may cause administrative difficulties and delays. Further, there will be uncertainty with regard to community design registrations obtained prior to Brexit. If the geographical scope of such registrations is reduced (elimination of rights in UK), the commercial value of the right will diminish as UK is an important market.

In terms of enforcement, UK courts will not be able to grant EU-wide injunctions in respect of EU-wide rights, while EU-wide injunctions granted by other European jurisdictions will not cover the UK. Separate injunctions will have to be obtained to enforce rights in the UK.

Patents and Supplementary Protection System

The European Patent Office (EPO) has been established under the European Patent Convention (EPC). The EPC is not an organ of the European Union (unlike the EU IPO), and its contracting states include nations which are not members of the EU, like Switzerland and Turkey. Therefore, Brexit will not have any effect on the patent system of the EPO, and applicants will still be able to make one central application to the EPO, and secure grant of patent in different nations chosen, including the UK. Existing UK patents obtained under the EPO will also remain in force.

European Union's Regulation (EC) No. 469/2009 pertains to Supplementary Protection Certificates (hereinafter referred to as 'SPC') for medicinal products. Post-Brexit, this regulation will cease to have effect in the UK, and there will be a need to preserve its provisions through national legislation. An option will be to re-enact the regulation as UK law, but there might be a debate as to whether SPCs should be retained at all, since they extend the period of protection of certain patents after their expiry, by upto 5 years. A policy decision will have to be taken by UK as to whether the regulation is to be adopted, modified or done away with. It will be an opportunity for the UK to fine-tune the law on SPCs in accordance with its own requirements.

Unitary Patent Scheme

The UK's participation in Unitary Patent Scheme (hereinafter referred to as the 'UPS') is still in question. EU will decide the status of UK in UPS, during the negotiation period. UK is still a member of European Patent Convention (EPC) and will continue to be one. The Unitary Patent will weaken because one of the major European economies will not be covered in it. But it will still be possible to obtain UK patent protection via European Patents granted under European Patent Convention.

The European Patent matters relating to UK will now be litigated in UK courts and not in new Unified Patent Court. UK while being a member of EU, had consolidated UK Patents Act with EU directives like, Biotech Directive and the Bolar Directive, but the same is not expected to be repealed merely due to Brexit.

EU Trade Mark

The system is governed by EU legislation and it provides protection to European Union Trademarks throughout the member countries of EU. Now after Brexit, the existing EUTM's will lose protection in UK, necessitating the holder to file a fresh application in UK Intellectual property Office. It is expected that a transitional provisional will be implemented so as to allow the EUTM holders to obtain registration in UK.

The EUTM which were protected only on the basis of use in UK will now become vulnerable and shall be liable to revocation on the ground of non-use until they are put into use in any of the member countries. The EUTM holder might face the issue of genuine use. From now on, demonstrating genuine use only in UK will no longer be a sufficient ground of registration in EU. The licensing and assignment agreements will be affected. Such future contracts will need special care regarding its implementation in EU and UK jurisdiction.

UK might adopt the "Norway model" as an option through which the UK would become a member of the European Economic Area and European Free Trade Association.

Conclusion

Separation of UK from EU will not be an easy task, as EU legislations and guidelines are so interconnected with UK laws that unravelling one from the other would likely be an arduous task. Brexit may be beneficial to UK, as it will provide opportunity for UK laws to deviate from EU guidelines. It can be a welcoming step in certain areas, but it does not seem to be true in the case of IP laws, as it will narrow down the territory of IP protection and may lead to the increased cost of protection.

After Brexit, UK will not have any influence on EU policies, which may diminish the prosperity of Intellectual Property for companies operating in UK.

Since, the Treaty of the European Union provides for a period of 2 years before the actual implementation of Brexit, hence the real impact of Brexit is still unclear and it is advised that, the IP owners should identify the potential changes in their rights and start planning to deal with those changes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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