European Union: No Deal Brexit Implications For Automotive IP?

Last Updated: 10 September 2018
Article by Gordon Harris

If a deal is reached ahead of Brexit, the indications are that a transition period would preserve the status quo for intellectual property (IP) until the end of 2020. This article explores the implications of a no deal Brexit, for IP regimes supporting the UK automotive sector. It explains what would not be impacted significantly, how the UK government can (and has indicated intent to) minimise disruption for owners of EU-wide rights, and practical steps that IP right owners can take now to minimise risks and maximise commercial certainty in the context of a no deal Brexit on 29 March 2019.

Brexit implications for automotive intellectual property

Brexit will impact intellectual property regimes presently in operation in the UK; but exactly how depends upon the tactility of Brexit and the subsequent relationship between the UK and the EU.

If a deal is reached, it has been indicated by the EU and the UK that it will include a "transition period" lasting from 29 March 2019 until 31 December 2020. During the transition period the status quo would largely remain in place for intellectual property.

The relationship between the UK and the EU beyond 2020, or following 29 March 2019 in the event of a 'no deal' Brexit, remains a matter of negotiation. Its eventual form is likely to impact the legal landscape in which intellectual property sits (for example, trade arrangements, customs, jurisdiction and enforcement of judgments) and the extent of collaboration between the UK and the EU in respect of intellectual property regimes (for example, the proposed Unified Patents Court (UPC) and the unitary regimes for trade mark and design protection).

In the absence of an agreement being reached, the UK Government has indicated that it intends to preserve the acquis - the existing body of EU law - in the national law of the UK. This would largely prevent a substantive change to applicable law in the UK.

However, the UK cannot unilaterally preserve its involvement in pan-EU regimes concerning intellectual property. The remainder of this article, therefore, seeks to outline the expected intellectual property landscape for UK-based business on 30 March 2019 in the event of a no deal Brexit.

Patents

At present, there are two systems pursuant to which a patent may be granted covering the UK: the national system, in which an application is made to the UK Intellectual Property Office (UK IPO); and the European system, pursuant to which an application is made to the European Patent Office (EPO). (Either system may be preceded by, or may provide the receiving office for, an application under the international system). Generally speaking, questions of infringement or validity of a patent covering the UK granted under either system are litigated in the courts of the UK.

A no deal Brexit will not impact significantly the existing patent systems, both of which are largely outside the remit of EU law. However, a no-deal Brexit would be a considerable obstacle to the UK's involvement in the UPC. This is because the UPC system draws upon aspects of the EU's legal system, such as the Article 267 TFEU mechanism for reference to the Court of Justice of the European Union (CJEU) and the 'Brussels' regime governing jurisdiction and enforcement.

Trade marks

There are, presently, two systems pursuant to which a registered trade mark may be granted covering the UK. Either system may be accessed via the Madrid international system.

For a UK national trade mark, an application is made to the UK IPO. Questions of infringement and validity are a matter for the courts of the UK. As the system is governed by national law (amended in order to comply with EU-wide harmonising legislation), a no deal Brexit will not impact significantly the UK national trade mark system.

For an EU-wide ("unitary") trade mark, an application is made to the EU Intellectual Property Office (EUIPO). Questions of infringement and validity are a matter for EU trade mark courts around the EU (such as the High Court of England and Wales), whose judgments have effect for the whole of the EU. Jurisdiction is governed by the EU trade marks legislation and the Brussels regime.

Upon a no deal Brexit, the EU trade mark system would cease to cover the UK. The UK can enact national legislation to minimise the disruption caused in such a scenario and to protect UK rights registered or applied for through the EU system, and the UK government has indicated that this is its intent1. The expectation is that a mechanism would be introduced to allow an EU trade mark owner to become the owner of an equivalent national right covering the UK upon Brexit; questions of infringement and validity being a matter for the UK courts. The remaining EU registration would continue to be enforceable (including by UK owners) in the remaining EU. UK based brand owners should, however, be aware that after Brexit, issues regarding genuine use or acquired distinctiveness of the remaining EU trade mark may be assessed without reference to activity in the UK or the perceptions of UK-based consumers.

In the meantime, brand owners relying upon EU registrations can file UK national trade marks now, in parallel with their EU protection. While this may lead to duplicate protection in due course, in the short term it may assist with commercial certainty. A new registration also brings no proof of use requirement for the first five years.

Brand owners should also be aware of the tort of passing off, which can protect goodwill attached to goods or services in the UK. Passing off is a common law right outside the remit of EU law and so will not be impacted by Brexit.

Designs

There are four systems pursuant to which a design may, at present, be protected in the UK: the national registered and unregistered systems; and the EU (unitary) registered and unregistered systems.

Under the UK national registration system, an application is made to the UK IPO or pursuant to the Hague international system. A UK registered design has a term of 25 years from filing, provided renewal fees are paid. It protects the appearance of the whole or part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture or materials of the product or its ornamentation.

Pursuant to the national unregistered design right (UDR) system, UDR covering the UK arises automatically in qualifying circumstances. It protects the shape or configuration of the whole or part of an article and lasts for the shorter of ten years from first sale or 15 years from first creation (dates calculated from the end of the relevant calendar year). In either case, the final five years of protection are subject to licence of right requirements.

The UK national systems are governed by national law and issues of infringement and validity are matters for the UK courts. The systems will not be impacted significantly by Brexit.

The EU designs regime enables unitary ("Community"), registered protection, and provides for the arising of unitary unregistered protection in qualifying circumstances. An application for a Community registered design is made to the EUIPO or pursuant to the Hague international system. Like the UK registered designs system, both the Community systems protect the appearance of the whole or part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture or materials of the product or its ornamentation. A Community registered design has a term of 25 years, provided renewal fees are paid, whereas the unregistered Community design right lasts for three years from the point the design is first disclosed or made available to the public in some manner. Questions of the infringement or validity of a Community design are matters for the Community design courts around the EU (such as the High Court of England and Wales), whose judgments have effect for the whole of the EU.

Upon a no deal Brexit, both the Community design systems will cease to cover the UK. UK owners of Community registered designs, and of unregistered Community design rights that exist before Brexit, will still be able to enforce them in the remainder of the EU. As regards the UK, the Government has indicated its intent to enact national legislation to allow a Community design owner to become the owner of an equivalent national right.

For Community registered designs, the mechanism is expected to track, broadly, that adopted for registered trade marks.

For unregistered Community design right, the position is a little more complex because the Community right protects slightly different aspects of a design than is protected under UK UDR. Most notably, the Community right enables protection for surface decoration whereas UK UDR does not. It is expected that UK national legislation will therefore provide for a UK national right of equivalent scope to unregistered Community design right.

In the meantime, for UK-based designers and business relying upon Community design right, it should be considered whether steps should be taken to ensure protection for existing and future designs; for example, by filing UK and Community registered designs or considering where the design should be first marketed.

Copyright

Copyright and neighbouring rights are protected by UK national law, which has been framed to give effect to the terms of international treaties and shaped in order to implement harmonising EU legislation. A no deal Brexit would not significantly impact the regime in its present form.

Trade Secrets

The common law tort of breach of confidence protects information which has the "necessary quality of confidence", is communicated in circumstances importing an obligation of confidence and is used (or threatened to be used) in an unauthorised way to the detriment of the owner. In June 2018, legislation was introduced in this area for the first time, to give effect to the terms of the EU's Trade Secrets Directive. While the new legislation may adjust some assessment of the tort of breach of confidence, no significant change is likely to occur before the CJEU's jurisprudence starts to address questions of interpretation of the Directive. Accordingly, a no deal Brexit would in practice mean no change from the status quo for the protection of trade secrets in the UK. For further insight on the law regarding trade secrets, please see our commentary here.

Transactional matters and other practical arrangements

All stakeholders should be aware of the impact of Brexit for transactional terminology, including in respect of intellectual property; for example, a licence granted for the countries constituting "the EU from time to time" may not be fit for purpose following Brexit.

Existing documents, including licences, distribution agreements and other transactional arrangements, should be audited to identify those in which unclear or inappropriate terminology is used. The parties should consider seeking a suitable clarification agreement now. For new agreements, care must be taken with geographical terms, for example listing by name the countries covered by the agreement, not simply the "EU".

Brexit will not impact the need for parties to ensure that documentary records are kept on the existence and status of both registered and unregistered intellectual property rights. This facilitates timely review of scope of protection vs maintenance fee cost for registered rights and ensures that the subsistence and scope of unregistered rights can be established should a dispute arise, irrespective of whether the regime is UK national or EU-wide.

Finally national legislation is expected to preserve the ability of owners of UK intellectual property rights to register applications for action, and of UK customs authorities to intervene, where there is a suspected infringement of an intellectual property right.

Future divergence?

Across intellectual property law, a no deal Brexit would, in the longer term, provide some scope for divergence from the EU's legislation and the case law of the CJEU. Where the interpretation of EU law continues to require references to the CJEU, such as in some aspects of trade mark law, the UK courts may reach a settled solution sooner following Brexit than would otherwise be possible. However, where the interpretation of EU law is settled, the preservation of the acquis will incorporate this and the scope for divergence with EU jurisprudence can be expected to be minimal for as long as the underlying legislation remains aligned.

For further insight, please explore our in-depth analysis Brexit - what are the implications for intellectual property?

Footnote

1 IP and Brexit: The facts, 23 July 2018

Read the original article on GowlingWLG.com

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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