European Union: Brexit Update (I): IP-Related Provisions In The Draft UK-EU Withdrawal Agreement

Last Updated: 9 March 2018
Article by Alexander Robinson

On 28 February 2018 the European Commission published its draft for an agreement on the UK's terms of withdrawal from the EU.

It must be stressed that this is a draft, rather than a finalised agreement, and sets out the European Commission's position, which will not necessarily coincide completely with the UK Government's own position and is likely to be subject to further negotiation. Nor does this draft agreement govern the future relationship between the UK and EU - that will be the subject of a separate agreement (assuming that a "no-deal" scenario is avoided). We must also bear in mind that - in the now tiresomely-familiar phrase beloved of negotiators on both sides - nothing is agreed until everything is agreed. Nevertheless, the draft does, at least, provide us with an indication of the direction of travel in the Brexit negotiations, and in this context it is interesting to review some of the draft proposals which relate - directly or indirectly - to intellectual property.

Those who have been following the Brexit debate to any extent might be forgiven for finding a certain wry humour in the fact that many of the intellectual property provisions of the draft withdrawal agreement begin at Article 50...

Many of the provisions of the draft agreement are broadly in line with proposals made by (amongst others) the Chartered Institute of Patent Attorneys, the Chartered Institute of Trade Mark Attorneys, the IP Federation, and other representative organisations. Provided that the UK Government agrees with those proposals, these aspects of the draft agreement should be relatively uncontroversial. As expected, the provisions are also in close agreeement with the proposals in the European Commission's previous position paper. However, the devil is in the detail and there are some aspects which appear to diverge from these earlier broad outline proposals. There are also potentially a number of questions which are posed and left unanswered by the draft text, as well as some notable omissions, particularly in relation to regulatory data protection for pharmaceuticals. Hopefully the most significant loose ends will be tied up during the remaining negotiations.

This analysis is not - and cannot be - exhaustive and there is not time or space to analyse the minutiae of every detail of the draft agreement (which could, in any case, change subject to further negotiations) but I aim to provide an overview of some of the most significant provisions. Any errors of analysis are my own. Please feel free to send comments, observations or corrections via email!

Transition Period

In the absence of an extension to the official withdrawal process under Article 50 TEU, the final day of the UK's formal membership of the EU will be 29 March 2019. However, under Article 121  of the draft withdrawal agreement, many aspects of EU law are proposed to remain in force in the UK until the end of a "transition period" ending on 31 December 2020. This appears to be consistent with the concept of a "standstill" transition during which the UK will, in effect, continue to have most of the rights and obligations which apply to it as an EU member state (but without any representation in the European Union's political institutions).

For the purposes of the present commentary, it is notable that Article 122(1)  of the draft agreement provides that EU law shall be applicable to and in the United Kingdom during the transition period "unless otherwise provided". There is nothing in the Agreement which suggests that the relevant EU law relating to intellectual property will cease to apply to the UK during this period - to the contrary, it seems implicit in the IP provisions that the status quo will continue, with most of the relevant consequences of the withdrawal agreement taking place only at the end of the transition period. If I am reading this correctly, this suggests that the UK will remain a member of the EU intellectual property framework - including, for example, the EU trade mark and registered design systems - in its entirety until the end of 2020, presumably with continued rights of representation for UK practitioners. This "stay of execution" beyond the looming 29 March 2019 Brexit date will surely be welcomed by industry and by practitioners in the UK.

EU Trade Marks

Where an EU Trade Mark has been granted or registered prior to the end of the transition period, Article 50(1)(a)  of the draft agreement obliges the UK to grant a corresponding right in the UK without re-examination, and subject to the same renewal dates. Article 50(5)(a) further provides that UK trade marks granted under this provision will continue to enjoy the same filing, priority or seniority dates as their EUTM counterparts. According to Article 51(1) the grant of such UK rights should be carried out free of charge. Article 51(2) requires that the conversion of EUTM's to UK trade marks should take place automatically - i.e. at the UKIPO's instigation - rather than requiring the owner of the trade mark to take any procedural steps.

In the case where an application for an EUTM is still pending at the end of the transition period, Article 55(1) of the draft agreement provides an ad hoc period of six months from the end of the transition period (i.e. up to the end of June 2021) for filing a UK trade mark application which will then take the priority date of the EUTM application as its filing date to the extent that the UK mark is the same as that in the pending EUTM application and to the extent that the same goods/services are designated.

Notably, Article 55(1) of the draft agreement differs from CITMA's proposal, which was for pending EUTM applications to be entered automatically onto the UK register as corresponding UK trade marks upon completion of the EU registration procedure (analogously to the "conversion" procedure outlined above for EUTM's granted prior to Brexit).

The wording of Article 55(1) is somewhat confusing in that the six-month period is referred to as conferring an "ad hoc right of priority" (this is a rather pedantic point, but in effect it is really an ad hoc extension of the period during which priority can validly be claimed...). It also appears unnecessarily to conflate or confuse the terms "priority date" and "filing date", with the effect that it is left unclear whether the UK trade mark application must be identical to (or narrower than) the pending EUTM application in respect of the designated goods/services in order to be accorded a valid filing date whatsoever, or whether, alternatively, the UK trade mark application could potentially relate to a broader set of goods/services than the EUTM and still enjoy a valid filing date (but with the right of the earlier priority date extending only to those goods/services designated in common with the EUTM application). Hopefully this will be clarified by the time the agreement enters into force. [NB: I am not a trade mark practitioner, so it's possible that I have overlooked something here, or that I am raising a non-issue - clarifications are welcome.]

Article 52 of the draft agreement essentially obliges the UK to ensure that designations of the EU made under the Madrid system prior to the end of the transition period will continue to have effect in the UK afterwards (note here that the UK is already also a participant in the Madrid system in its own right, independently of its EU membership).

The provisions of the draft agreement in relation to cancellation of marks for non-use, and in relation to marks having a reputation within the EU, are interesting:

Article 50(5)(b) provides that, where a granted EUTM is "converted" into a UK trade mark, it will not be liable for revocation on grounds of non-use within the UK prior to the end of the transition period. Presumably, however, such a mark would then potentially be liable for cancellation in the UK on grounds of non-use in the UK after the relevant 5-year term has elapsed following the end of the transition period. Notably, this portion of the draft agreement is silent on whether an EUTM covering the remaining EU27 countries would be liable for revocation in future if the only genuine use had been on UK territory prior to the end of the transition period.

Article 50(5)(c) relates to the rights of proprietors of EUTM's having a reputation within the EU (i.e. with respect to the scope of protection conferred by the mark, and with respect to relative grounds of refusal/invalidity of later-filed marks). This essentially provides the proprietor of a "converted" UK trade mark with the same rights in the UK that they would have had in respect of the EUTM on the basis of an acquired reputation. However, this provision raises some questions. There does not appear to be any time-limit on such rights - what if the reputation in the EU is acquired (or can only be proven to have been acquired) after the expiry of the transition period? What if the reputation can only be proven to have been acquired in the UK - does the proprietor then have reciprocal rights in respect of the "residual" EUTM on the basis of the reputation acquired in the UK?

Finally, Article 50(3) relates to invalidation/revocation of "converted" UK trade marks. If the corresponding EUTM is declared invalid or revoked as the result of a procedure "ongoing" on the last day of the transition period, the corresponding UK right will also suffer the same fate. However, this leaves open the question of whether a UK mark deriving from an EUTM would be liable for invalidity/revocation on the basis of actions taken in respect of the "residual" EUTM in the EU27 countries after the expiry of the transition period - or indeed whether reciprocal obligations would exist in the EU in respect of UK invalidity/revocation decisions after the transition period. Perhaps these issues will be the subject of the separate agreement on the future UK/EU relationship; in the absence of any explicit provisions, however, it seems that the EUTM and its derivative UK right could have divergent fates after 2020.

Registered and Unregistered Community Designs

Unsurprisingly, the provisions relating to registered community designs are essentially identical in most respects to those relating to EUTM's. Article 50(1)(b) obliges the UK to grant a corresponding registered design in the UK and, pursuant to Article 51 this should be free of charge and should take place automatically without requiring any actions by the proprietor. Article 52 obliges the UK to continue to recognise the effect of designations of the EU made under the Hague Agreement prior to the expiry of the transition period (note here that the UK recently also adopted legislation enabling it to accede to the Hague Agreement in its own right). Article 50(3) imposes the same terms regarding revocation and invalidity as discussed above in relation to trade marks.

Unlike trade marks (which are renewable in perpetuity), registered community designs have a maximum lifespan of 25 years. Article 50(6)  therefore obliges the UK to ensure that the UK "re-registration" of an RCD retains the same effective filing date and enjoys a period of protection "at least equal" to the remaining term of the residual EU27 RCD.

The provisions relating to unregistered designs are more interesting, and are likely to require additional legislation in the UK if adopted in the form proposed in the draft agreement. Article 53  of the draft agreement requires the UK to provide protection equivalent to any unregistered community design arising prior to the end of the transition period and for at least the remaining term of that unregistered design. The UK already has a domestic unregistered design right, but this differs in some notable aspects from the EU unregistered design system - for example, in the duration of protection afforded (3 years for a community unregistered design, versus 15 years for a UK design right) and in the requirements to qualify for such protection. Implementation of Article 53 will therefore require legislation to be made to ensure the continuation of community-style unregistered design rights in the UK for at least three years after the end of the transition period.

Supplementary Protection Certificates

Article 56  of the draft agreement requires the UK to grant supplementary protection certificates in line with the existing regimes for medicinal and plant protection products where a valid application for such a certificate has been made prior to the end of the transition period. Applications for paediatric extensions of medicinal SPC's should also be honoured.

The agreement does not make any provisions for a continued SPC regime in the UK after the end of the transition period, other than for applications which are still pending at that time. It is widely expected that the UK will implement domestic SPC legislation to come into force after the transition period ends, but the form of this UK SPC regime could potentially differ from the current regime, for example with regard to qualifying marketing authorisations, duration, etc. This could depend on the provisions of any eventual UK-EU trade agreement, which will be the topic of another blogpost.

Plant variety rights, geographical indications and database rights

I will not say much about these here, other than to note that Articles 50(1)(c) and 50(2) respectively provide for the continuity of plant variety rights and geographical indications granted prior to the expiry of the transition period. Article 54 provides for the continuity of database rights arising prior to the end of the transition period. Provisions are also made in Articles 50(3) and 55(2) for the cancellation of plant variety rights and for an ad hoc extension to the priority period for pending plant variety right applications: these are essentially identical to the corresponding provisions for trade marks.

Medicinal and plant protection product marketing authorisations

These are dealt with in a separate section of the draft withdrawal agreement, but marketing authorisation procedures are intimately linked to the Supplementary Protection Certificate regime and therefore warrant some discussion.

Where medicinal or plant protection product assessments or authorisation procedures are still ongoing on Brexit day, Article 40 of the draft agreement obliges the UK to transfer "all relevant files or documents" to a regulatory authority of another Member State if those assessments or procedures are being led by a UK authority at the time of Brexit. This provision is not particularly clearly-worded, but presumably relates at least to those cases where a UK authority's product assessment or authorisation procedure might be relied upon in support of authorisations elsewhere in the EU via the mutual recognition procedure.

Article 41 of the draft agreement obliges the UK, when requested, to make marketing authorisation dossiers for medicinal products available to the European Medicines Agency and/or to other EU Member States' regulatory authorities in cases where the relevant marketing authorisation was first issued in the UK and is relied upon for an application for an authorisation in respect of a generic version of the authorised product. This obligation extends until the end of the transition period.

Notably, neither Article 40 nor Article 41 imposes any reciprocal obligations upon the EU or its remaining Member States. The asymmetry between Article 40 (which runs only until 29 March 2019) and Article 41 (which runs until 30 December 2020) is also curious (perhaps the wording of Article 40 is an oversight?). If these portions of the draft withdrawal agreement are adopted in their current form, this could have serious ramifications for obtaining medicinal or plant protection product authorisations in the UK where the relevant assessment and authorisation procedures first took place (or are still ongoing) in the EU. This could also have potential knock-on effects on new applications for Supplementary Protection Certificates in the UK (assuming, as noted above, that the UK implements a domestic SPC regime to replace the current regime, which has its roots in EU law). It is therefore to be hoped that these loopholes are closed during negotiations, or else that the UK swiftly makes its own domestic legislation to allow parallel authorisations to be obtained in the UK on the basis of European authorisation procedures which are still ongoing on Brexit day or during the transition period.

Regulatory data protection

Another notable omission from the draft withdrawal agreement is any provision relating to regulatory data protection. This is surprising in view of the economic importance of the pharmaceutical industry in the EU.

At present an "8+2+1" system applies to authorised medicinal products in the EEA, where 8 years of data exclusivity are provided starting from the first marketing authorisation, a further 2 years of marketing exclusivity exist in respect of generic products, and 1 further year of marketing exclusivity may be obtained on the basis of a new authorisation for a new medical indication under some circumstances. 10 years of marketing exclusivity are also available for so-called "orphan drugs".

These provisions originate in a mixture of European Directives (which have necessarily been transposed into UK law already) and Regulations (which take direct effect in the UK and therefore have not - up until now - been transposed). To the extent that any of this legislation will cease to apply in the UK at the end of the transition period, it is odd that the draft withdrawal agreement does not provide continuity where, for example, a period of exclusivity may still have time left to run beyond December 2020.

In the absence of reciprocal arrangements there is also the potential for asymmetry in the protection available after Brexit in the UK and in the rest of the EU. For example, on the one hand, a first marketing authorisation granted elsewhere in the EEA prior to Brexit could potentially give rise to continued data exclusivity in the UK on the basis of EU legislation that has been transposed into domestic law, whereas, on the other hand, a first marketing authorisation granted pre-Brexit in the UK might not necessarily provide a continued right of data exclusivity in the remaining EEA states after Brexit.

Exhaustion of rights

Articles 36-38 of the draft agreement essentially seem to provide for a continued regime of exhaustion of IP rights within the UK and EEA in respect of goods placed on the market prior to the end of the transition period. This is explicitly confirmed by Article 57 of the draft agreement.

And finally... patents

The draft agreement does not mention patents, as the European Patent Convention and the European Patent Organisation are not part of the EU's legal order and will be unaffected by Brexit.

If the proposed Unitary Patent Package is implemented prior to Brexit, however, transitional provisions will most likely need to be put in place (whether by amendment of the withdrawal agreement or by a separate agreement) to deal with any Unitary Patents granted while the UK remains subject to the relevant European legislation. That, however, is a separate topic for another blogpost...

For now I will simply note that, under the proposed terms of the transitional period, the UK could potentially remain a member of the Unitary Patent system until 31 December 2020. This potentially relaxes some of the time pressure with respect to UK and German ratification of the UPC Agreement, which is required for the Unitary Patent Package to enter into force and which is currently held up in Germany by a case in the Federal Constitutional Court which may (or may not) be resolved this year.

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