UK: Less Harmony, More Divergence? Intellectual Property Rights And Enforcement In A Post-Brexit UK

Last Updated: 7 June 2016
Article by Jo Joyce

There are a lot of uncertainties in the UK around intellectual property at the moment. Legal certainty is one of the key requirements for the rule of law; it's also essential for a healthy economy. Unfortunately the current uncertainty over the possibility of a Brexit goes beyond a lack of clarity on matters of legal principle, stretching to confusion over the future of the system itself.

IP lawyers are used to change. It's not always fast but there is constantly something on the horizon, as the law attempts to keep up with the pace of new technology. Because IP harmonisation has been a key priority for the European Union, most change in recent years has been designed to bring Member States closer together in how they manage the granting and enforcement of IP rights. If the UK opts to leave the EU on 23 June 2016, IP lawyers will have to learn to embrace a lot more change, regardless of the final political settlement.

The results of the UK simply exiting the EU without further negotiation are fairly easy to establish. However, we know that, if the 'Leave' campaign wins the day, there will be a lengthy negotiation process, through which UK will make arrangements for its future interactions with the remaining EU Member States across all areas, including intellectual property. What the IP landscape looks like in the aftermath of a departure from the EU will depend on the form of its future dealings with the EU and, in particular, on whether it joins the European Economic Area (EEA). The exit process would be likely to take at least two years and currently we have little idea of how it will be managed.

Trade marks and designs

Trade marks along with Registered Community Designs (RCDs) and Unregistered Community Designs, are the most harmonised forms of intellectual property in the EU and, therefore, the way that they are protected and enforced in the UK is likely to experience significant change if the UK leaves the EU.

A new reliance upon national protection

At present the UK is part of the EU Trade Mark regime (until recently known as the 'Community Trade Mark' and now EU Trade Marks - EUTMs) and the Registered Community Design regime. In addition to registered design rights there is an Unregistered EU Design Right which arises automatically upon creation of a design within the EU (or by an EU-based designer) which is of shorter duration. All of these rights entitle the holder to protection across the 28 Member States of the EU, achievable (in respect of the registered rights) through the filing of one application and payment of a single fee.

If the UK leaves the EU then, in theory, existing EUTMs and RCDs would not be valid in the UK because the UK would no longer be a party to the Regulations creating those rights. This could mean that current EUTM holders would have to register for UK national trade marks and designs to preserve protection in the UK. Existing registrations that have only, or primarily, been used in the UK, could be at risk of revocation for non-use post Brexit, since their owners would not be able to demonstrate use in a substantial part of the EU. It is likely that the UK IPO would offer EUTM holders the opportunity to convert their EUTMs to national marks within the UK, presumably upon payment of some sort of fee.

Those relying on unregistered design rights in the UK will also need to rethink their strategies. The UK has an equivalent of the Unregistered Community Design Right (UCDR) - UK Unregistered Designs, currently operating in parallel to the European right. UK unregistered design rights last longer than the European equivalent (ten years from the date of first sale, compared to the three years afforded by the EU system) but the scope of protection is narrower, covering the overall configuration of the design but excluding surface decoration. The good news for UK companies looking to enforce unregistered rights in the EU is that they would still be able to do so after Brexit, since the only requirement for ownership of a UCDR is that the goods have been put on sale in the EU. Within the UK, however, rights in surface design would have to be protected through UK design registration or by other means (such as copyright which may be a solution in some cases).

Exhaustion

Bigger issues than the scope of registered and other harmonised rights will arise if the UK does not join the EEA after Brexit. At present a trade mark owner can object to goods being sold in the EEA (including the UK) if they have not consented to them being offered for sale within that market. Once a trade mark owner has sold or permitted goods bearing their mark to be sold in the EEA they cannot prevent further sales, their rights are said to be 'exhausted'. If the UK were not a member of the EEA, trade mark owners would potentially be able to restrict trading of goods between the UK and EEA Member States since trade in, for example France, would not exhaust trade mark (or other forms of IP right) in the UK and vice versa.

Representation

For rights holders, an important area of concern would be the practical management of their portfolios of registrations. For UK-based practitioners too, there is concern over the changes to practice that Brexit could bring.

For organisations or individuals used to managing their own trade mark matters with the EU Intellectual Property Office (EUIPO – known until recently as OHIM), Brexit could add complication and expense. It is not currently necessary to have professional representation in proceedings before the EUIPO if the applicant/registrant is domiciled or principally doing business in an EEA jurisdiction. However for parties based outside the EEA, representation within the EEA is necessary for all but the most straightforward matters (exceptions being the filing or renewing of trade mark applications or applying to inspect files). Representatives, whether appointed through choice or necessity, must be based in the EEA in accordance with Article 93 of the EU Trade Mark Regulation (Regulation (EU) No 207/2009 as amended). A representative should be a legal practitioner qualified to act as a representative in trade mark matters in one of the Member States of the EEA and have its place of business within the EEA. For practitioners in the UK this will mean a significant curtailing of business if the UK does not join the EEA, unless other arrangements are agreed.

Whereas the EU Trade Mark Regulation specifies that representatives may be domiciled in any EEA Member State, Article 78 of the Community Design Regulation (EU Regulation 6/2002) limits the representatives who may act before the office in respect of design matters, to those domiciled in EU Member States. For designs, therefore, even membership of the EEA would be insufficient to enable UK practitioners to continue acting on registered design matters without appointing an agent based in the EU to go on the record.

It is, of course, possible that the UK's access to and membership of the EU Trade Mark and Registered Design regime could be maintained through a bilateral agreement of some sort between the UK and the EU, though the appetite for this from the latter may not be high if the UK opts to leave.

Patents

At present, patent law across Europe is not generally harmonised by EU legislation and although a "European Patent" is available through the European Patent Office, it is, in effect, a bundle of national patents accessed via a central application process. The UK's access to the European Patent system is not dependent on being in the EU and it would continue as normal whatever the outcome of the Referendum. The key area likely to be affected, unless the issue is resolved upon exit, is that of supplementary protection certificate (SPCs). SPCs are available to extend the life of a patent (normally restricted to twenty years from the date of filing) for certain, limited types of invention (primarily pharmaceutical inventions). Since the SPC regime operates via an EU Regulation, it would not automatically apply to allow the grant of SPCs post Brexit. Many states have national SPC regimes however (Switzerland being one, which is based on the EU model) and Norway and Iceland have effectively opted in to the EU SPC regime through their EEA membership. It is possible that UK could come to a similar arrangement.

The bigger question in patent law is what impact Brexit would have on the progress of the Unitary Patent and Unified Patent Court (UPC), for which UK support has been important. Unlike the current European patent, the Unitary Patent, once launched, will be tied to the EU. The UK's support for the Unitary Patent and Unified Patent Court scheme has been crucial to getting it off the ground and it is one of three nations which must ratify the final UPC Agreement. It is likely that Italy, as the next largest state for patent grant, will have to step up to replace UK as a ratifying party in the event of Brexit, but there are more practical concerns too. One of three Central Division Courts is to be based in London (this one dealing with disputes relating to life sciences patents) but post Brexit, it seems unlikely that it will remain in London. Despite this, Baroness Neville-Rolfe, the UK Minister for IP, has indicated that the government intends to proceed with preparing the London UPC centre and the UPC Agreement ratification process despite the looming Referendum.

Spain's refusal to join the UPC came as a blow to the scheme and it is possible that UK's withdrawal, as the loss of a major patent litigation centre to the Unified Patent Court plan, could damage it. However, the other contracting states may decide that the Unitary Patent and the UPC will still be a worthwhile venture without the UK's participation, in which case while Brexit may cause further delays to an already lengthy process, the UPC and the Unitary Patent would continue. Of course, given its prior commitment to the project, the UK may seek to continue its involvement through a bilateral arrangement but this is likely to require the UK's ongoing adherence to EU law on related matters (such as enforcement mechanisms) and indeed for it to be subject to CJEU decisions arising from references from the UPC. Whether the other participants and the EU would accept such a proposal is entirely uncertain.

Less harmonised areas

Although trade marks, registered designs and patents are the types of IP and areas of IP practice where Brexit would be most obviously felt, EU legislation and jurisprudence have had a substantial impact on other areas of IP.

Harmonisation of copyright law across the EU has not been as extensive as harmonisation efforts in other areas. The nature and application of copyright continues to vary considerably across EU Member States. Copyright law in the UK (primarily expressed in statute through the Copyright, Designs and Patents Act 1988 (CDPA)) has been shaped significantly by EU Directives but Brexit would not have any impact upon the immediate state of the law without repeal or amendment of the CDPA and related UK legislation. Similarly the EU concept of database right protecting "databases" has been incorporated into law in the UK through the Copyright and Rights in Databases Regulations 1997. Since, like copyright, a database right is an automatic right which exists as soon as the database exists in a recorded form and is conferred by UK legislation, rather than directly applicable EU legislation, there are no associated formalities associated with claiming the right that are likely to be complicated by Brexit.

One issue that would have to be addressed in relation to database right, however, is the fact that the UK statute refers to establishment in an EU Member State as being a necessary qualification to enjoy the right. Left unaltered post Brexit, this could inadvertently mean that those domiciled in the EU could benefit from database right in the UK but those domiciled in the UK would be excluded. This could, of course, be fixed very simply through a legislative amendment but it is indicative of how entwined EU and UK laws have become in the field of IP. All UK statutes enacted since the UK joined the EU would need to be checked with a fine tooth comb to avoid illogical outcomes caused by references to the EU.

Although EU efforts to harmonise copyright and related rights have not been as successful as efforts in other areas, there are nonetheless several proposals currently on the table that, if enacted at EU level, will have the effect of triggering greater harmonisation. In particular, the EU's Digital Single Market strategy envisions a much more consistent approach to copyright and related rights across Member States. It is unclear what the UK would do in relation to measures already tabled for incorporation into UK law or measures adopted at EU level after a UK vote to leave. Of course the UK may well decide to incorporate such measures into its national laws of its own volition in order to make access to the EU market possible, but whether this would be done wholesale or on a piecemeal basis is impossible to predict.

The EU has recently turned its attention to the protection of Trade Secrets with a new Directive on that topic, currently in draft form. At the moment, trade secrets are protected through the common law in England and Wales, Scotland and Northern Ireland. If the UK remains in the EU it must adopt the Trade Secrets Directive, in which case the law relating to breach of confidence and misuse of confidential information (the tortious basis for many claims relating to trade secrets) may require adaptation to provide protection at the level required by the EU. In the event of Brexit, without having implemented the Directive, the UK may be out of step with a more harmonised approach to Trade Secret protection from the EU Member States. In this case UK may come under pressure to bring its laws in line with those of the EU whether or not it joins the EEA.

Human rights – the role of the ECtHR

One area in which many people are incorrectly anticipating change in the event of Brexit is the field of human rights law. While it is true that (depending on the terms of the exit agreement and subsequent agreements), the EU Charter on Fundamental Human Rights would cease to apply, withdrawal from the EU is not the same as withdrawal from the European Convention on Human Rights which the EU legislation mirrors in many respects (see our article for more on this).

Decisions of the European Court of Human Rights are increasingly having an effect upon content, producers and hosts of user generated content in particular. Recent decisions have sought to establish the extent of website hosts' responsibility for third party copyright infringement and defamatory content as well as harassing and privacy-invading content. This is an ongoing challenge for content publishers and hosts and one that is not likely to be much impacted by Brexit.

IP litigation

The likely impact of Brexit on the IP litigation (for example, claims over copyright infringement in online publications) market has not been fully analysed and most comment on the issue is pure speculation. The UK may see its status as a venue of choice for some kinds of litigation diminish if it is unable to offer pan-European solutions. Claimants without the appetite or resources to run multiple claims may prefer to pursue a case in an EU Member State and forego pursuit in the UK. Having said that, the recently founded jurisdiction of the English court to grant cross-border declarations of non-infringement of patents would remain unaffected, as it is not based on EU rules.

There will also be a broader jurisdictional issue for claimants in the UK courts seeking to enforce their judgments (on IP and other matters) against foreign defendants. After Brexit, unless otherwise agreed, the UK will not have the benefit of the Brussels Regulation (as recently recast), dealing with allocation of jurisdiction, the enforcement and reciprocity of judgments across the EU Member States. The UK could seek to rely on the Hague Convention (though it would need to re-sign this separately to the EU) which provides a degree of reciprocity but only for final decisions, not interim relief (such as interim injunctions or freezing orders). More likely the UK would seek to join the Lugano Convention which provides for very similar reciprocity to EU Member States but extends to the EFTA countries.

IP – Not likely to affect the Brexit decision but certain to feel its effects

Since we know that any decision to leave the EU will be followed by withdrawal negotiations and an adjustment period likely to last several years, the most important thing for IP practitioners and owners to remember is that there is currently no need to panic.

If UK stays in the EU then the status quo will persist. If the UK leaves then the primary areas of concern will be working out what to do about EU rights currently valid in the UK and how to handle ongoing litigation involving such rights. More broadly, the UK will have to plan its transition to ensure that the decisions of UK courts are respected and enforceable beyond our borders. Whilst this might involve EEA and/or Lugano Convention membership, any number of mechanisms could be employed to achieve the desired ends.

Practically speaking, brand owners will have to invest time and probably money in considering and revising their registered IP portfolios. Commercial arrangements will have to be checked and reviewed to ensure that rights licensed include the relevant rights in the UK if defined terms related to EU rights.

In respect of UK rights, without a repeal of domestic legislation implementing EU Directives (such as the Trade Marks Act and the CDPA) not much will change in the immediate future, even after the conclusion of any Brexit. There would probably be a gradual divergence of case law, since although decisions of other EU courts and the CJEU would probably still be considered by courts in the UK, they would no longer be binding as precedent and, in time, they would become less persuasive (although there may be commercial imperatives to following them or incorporating their effect into UK law in addition to any post-Brexit commitments).

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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