Alistair Maughan, Wolfgang Schönig, Sana Ashcroft, Robert Grohmann, and Jana Brun
Communications Service + Technology | Europe, Media + Entertainment | Europe, Technology, Media + Telecommunications | Europe, and Technology Transactions
The United Kingdom is set to leave the European Union on 29 March 2019 (“Exit Date”). With Brexit fast approaching, on 25 November 2018 the EU and the UK announced their consensus on a withdrawal agreement that sets out the terms of the UK's exit. But the withdrawal agreement is subject to approval by the UK Parliament which is likely to be controversial.
The post-Brexit treatment of intellectual property (IP) is one of the issues addressed in the withdrawal agreement. For months leading up to the announcement of this agreement, the UK government has also been preparing contingency plans for what might happen if an agreement either couldn’t be reached or was agreed but then rejected by Parliament (the so-called “no-deal” scenario).
In this article, we summarise what IP owners can expect in relation to the various categories of IP when the UK leaves the EU on 29 March 2019. We also set out recommended actions that can be taken to address IP risk – especially in a potential no-deal scenario. At the bottom of this article, you will find a table that sets out the various implications of Brexit for intellectual property in both a deal and no-deal scenario.
In an effort to harmonise national IP rules and create a unitary European IP system that reduces costs and makes the EU an attractive market for IP owners, the EU has made a significant effort over the years to create an EU-wide IP protection regime. These supranational rights that take effect in all EU Member States include, inter alia, European Union trade mark registrations (EUTMs), Registered Community Designs (RCDs), Unregistered Community Design Rights (UCDs) and granted Community Plant Variety Rights (CPVRs) (together, EU-IP). A pan-European patent right regime – the Unitary Patent system – has also been long in the making but has not yet been ratified by all required Member States.
With the UK’s public vote in June 2016 to leave the EU, one of the countless questions to be addressed in the Brexit negotiations has been: “What will become of this EU-IP post-Brexit?” Without an agreement between the EU and the UK in place after the Exit Date, EU law will no longer apply to the UK, and the European Court of Justice (ECJ) will not have jurisdiction over the UK. In this worst-case scenario, EU-IP will simply cease to extend to the UK from one day to the next. IP rights holders that had mainly or exclusively relied on such EU-IP could end up without any form of protection in the UK. Given the thriving activities of UK businesses in filing, for example, EUTMs (with the UK generating the second-highest number of filings in the EU), this is not only a concern for EU-IP holders in the mainland Member States but also of particular interest to EU-IP holders in the UK.
So IP rights holders looked to the EU and the UK government for guidance.
The European Commission got the ball rolling in March 2018 by releasing the “Draft Agreement on the withdrawal of the United Kingdom and Northern Ireland from the European Union and the European Atomic Energy Community”, which reflected the state of affairs with regard to post-Brexit protection of pan-European IP.
In April 2018, the UK ratified the Unified Patent Court Agreement, and the Hague Agreement for industrial designs took effect in June 2018. Additionally, the UK and EU jointly released a statement in June 2018 (“Joint Agreement”), stating that they had reached an agreement with regard to the Draft Agreement relating to, inter alia, the protection of pending Supplementary Certificates (SPCs).
Crucially, EU and UK negotiators agreed on a version of the UK’s withdrawal agreement on 14 November 2018 (the “Draft Agreement”), before the leaders of the 27 EU Member States also formally agreed to it on 25 November 2018. However, the Draft Agreement must still be voted through UK Parliament in order to be adopted. Such approval is far from guaranteed, and it is looking increasingly likely that if UK Parliament does not vote in favour of the Draft Agreement, a no-deal scenario will be the only alternative.
But the UK government spent the first part of 2018 doing contingency planning for a no-deal scenario. This might still be relevant if Parliament rejects the Draft Agreement. So, in July 2018, the UK government released a white paper setting out a proposed structure for the future relationship between the UK and the EU in terms of IP rights. That white paper highlighted the importance of further co-operation in matters of IP protection and touched on issues such as the participation in the Unified Patent Court system and the establishment of the UK’s own protection scheme for Geographical Indications (GIs). And the UK followed that up in September 2018 by publishing technical notices on IP explaining what will happen to IP in a no-deal scenario.
AGREED AND NOT AGREED (UNTIL EVERYTHING IS AGREED)
1. Transition Period and Certain Common Principles
The Draft Agreement provides for certain common principles that apply to most EU-IP. Other arrangements only apply to certain types of IP.
Most helpfully, the negotiators have agreed on a transition and implementation period that will run from 30 March 2019 to 31 December 2020 (the “Transition Period”). During the Transition Period, EU rights – including EU-IP – will extend to the UK and will:
The Draft Agreement also states that EU-IP granted before 31 December 2020 will also automatically be registered as a separate right in the UK (“UK Equivalent”). This applies to all registered rights – i.e., EUTMs, RCDs and CPVRs. The UK Equivalents will have the same filing, renewal and priority dates as the original EU-IP rights.
If an EU-IP right is subject to an invalidation/revocation, nullity or cancellation proceeding that was started prior to the end of the Transition Period and such EU-IP is declared invalid/revoked or cancelled in such a proceeding (even after the end of the Transition Period), the UK Equivalent will also be held invalid/revoked from the same date. However, in accordance with Article 54, Sec. 3 of the Draft Agreement, the UK will have no obligation to issue such declaration where the grounds for invalidity/revocation, nullity or cancellation of the EU-IP do not apply in the UK.
Another agreement that could be reached pertains to the exhaustion of IP, which is a principle common to most IP but has found its specific expression in the EU in what is called ‘Fortress Europe’. In principle, exhaustion in the EU applies, and IP is not infringed if the IP, or a product applying the IP, was put on the market in the European Economic Area (EEA) by the proprietor or with his or her consent. The Draft Agreement contemplates that IP so exhausted within the EU (including the UK, for the term of the Transition Period) will remain exhausted in the UK and the EU thereafter.
The Draft Agreement does not address exhaustion after the Transition Period. The UK faces a decision on its position on post-Transition Period exhaustion: if the UK decides on using a national exhaustion regime, it may be possible for UK IP rights to be used to prevent parallel imports from the EU into the UK. While the UK government’s view of the no-deal scenario is that the UK will continue to recognize the EEA regional exhaustion regime, the EU has currently provided no indication that it will reciprocate this recognition. As a result, while there ought to be no change for the importation of goods into the UK, there could still be restrictions on the parallel import of IP-protected goods from the UK into the EU/EEA. The UK government has advised that IP rights-holders take necessary precautions to determine whether they need to obtain any consents or other approvals in order to export goods to the EU after the Exit Date.
2. Trade Mark Rights
In addition to the above-stated principles that will apply to the registration of UK Equivalents, holders of EUTMs that are converted into UK Equivalent trade marks will further benefit from the seniority of a UK trade mark that was claimed in the EUTM registration. EUTMs will convert into UK Equivalents automatically, and without any charge.
Importantly, EUTM applications that were filed within the Transition Period and received a date of filing, but are still pending at the Transition Period’s end, will not automatically be converted into UK Equivalents. Instead, the applicant will have a so-called “right of priority”, meaning the right to file for an identical copy of such EUTM application (i.e., identical mark and identical list of goods and services) in the UK within nine (9) months of the end of the Transition Period, and will then be granted the same filing date and priority as its corresponding EUTM application.
Other trademark issues to be aware of relate to:
A. Genuine Use
UK Equivalent trademarks will not be liable to revocation on the ground that the corresponding EUTM was not used in the territory of the UK before expiry of the Transition Period. It remains unclear, however, when the non-use period will start to run after the end of the Transition Period. This effectively extends the so-called “grace period” of the UK Equivalent trade marks (meaning the period in which to commence use of the mark in the UK before the UK Equivalent trade mark becomes vulnerable to cancellation for non-use). However, there is no such provision for the reciprocal grant of EUTMs used solely in the UK. Even though the EU has previously suggested that use of a EUTM in the UK qualifies as use in the EU (at least as it relates to the period before the end of the Transition Period), that position has not found its way into the Draft Agreement. For businesses that have been operated exclusively in the UK prior to the end of the Transition Period, there remains a risk that their EUTMs may be vulnerable to cancellation for non-use in the EU.
Until expiry of the Transition Period, UK Equivalent trade marks will benefit from the reputation that the corresponding EUTM enjoys in the EU. Thereafter, reputation will be based on their use in the UK.
C. International Registrations with EU designations
The UK also agreed to take measures to ensure that trade marks protected in the UK through an international registration designating the EU via the Madrid System (i.e., the primary international system for facilitating the registration of trade marks in multiple jurisdictions around the world) will continue to enjoy protection following the end of the Transition Period.
The UK government’s no-deal scenario position is that it will ensure that all existing registered EU trade marks will continue to be protected and to be enforceable in the UK by providing an equivalent trade mark or design registered in the UK. It will continue to allow rights holders nine (9) months to apply in the UK for the same protections, retaining the date of the EU application for priority purposes.
The government intends that rights holders with an existing EU trade mark will have a new UK Equivalent right granted that will come into force at the point of the UK's exit from the EU “with minimal administrative burden”. It’s not clear what such an administrative burden will include, but rights holders should be aware that there may be some action (however small) required on their part to assert their new UK Equivalent trade mark right.
A. Registered Community Designs (RCDs)
The protection mechanisms provided under the Draft Agreement for RCDs are essentially the same as those for UK Equivalents in general and UK Equivalent trade marks in particular. Here, too, UK Equivalents will have the same filing and priority dates as their RCD counterparts, and RCD applications still pending at the end of the Transition Period must be filed again with the UK IPO within nine (9) months in order to enjoy such privilege.
In addition, with its ratification of the Hague System in March 2018, the UK opened up another possibility for foreign companies and individuals to obtain design protection in the UK. Comparable to the Madrid System for international trademark registrations, the Hague Agreement allows applicants to register a design in any one of the 67 contracting countries through a single application via the World Intellectual Property Organization (WIPO). Previously, design protection in the UK via the Hague Agreement could be obtained by means of designating the EU only (which included the UK), but it will now be possible to designate the UK directly through the system. On the other hand, in the Draft Agreement, the UK agrees to take measures to ensure the protection of EU designations via the Hague System that were registered before the end of the Transition Period.
B. Unregistered Community Designs (UCDs)
UCDs are designs that, from the date on which they were first made available to the public within the EU, are protected under the Council Regulation (EC) No. 6/2002. The UCD protection lasts for a period of three (3) years. The Draft Agreement provides that the holders of UCDs that were made available before the end of the Transition Period will benefit from a UK Equivalent for the remaining period of protection. However, the UK still has to provide the relevant mechanism for this, as the UK’s current unregistered design right legislation does not offer the same scope of protection as that provided under the EU regime.
But in its no-deal scenario notice, the government has stated that it will ensure that all UCDs which exist at the Exit Date will continue to be enforceable in the UK. Additionally, the UK will create a new UK unregistered design right which mirrors the characteristics of the Unregistered Community Design. This means that designs which are disclosed after the UK exits the EU will also be protected automatically in the UK under the current terms of the Unregistered Community Design. This new right will be known as the Supplementary Unregistered Design right. The UK also intends to amend legislation to ensure that the UK unregistered design right regime functions effectively once the UK is no longer part of the EU system for designs.
4. Geographical Indications and Protected Designations of Origin
According to the Draft Agreement, the UK will provide holders of GIs and Protected Designations of Origin with continued protection of their rights in the UK after expiry of the Transition Period without any re-examination, and GIs will be granted at least the same level of protection under UK law as they are under the relevant EU equivalent.
However, the White Paper states that the UK will establish its own GI scheme consistent with, and possibly going beyond, the provisions of the World Trade Organisations Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The new scheme will provide a clear and simple set of rules on GIs and continuous protection in the UK for UK GIs, notwithstanding exit from the EU. It will be open to new applications from both UK and non-UK applicants.
The current UK position is that, post-Brexit, it anticipates that all current UK GIs will continue to be protected by the EU’s GI schemes. If this is not the case, UK producers wishing to regain the protection offered by EU GI status, and the right to use the EU GI logo, would need to submit their applications to the European Commission as “third country” producers. The application process would be similar to that used by EU countries, with the additional need to show that the GI was protected in the UK.
The UK is working to replicate EU free trade agreements and other sectoral agreements, including accommodating the protection of UK GIs in third countries. After March 2019, irrespective of the outcome of EU negotiations, the UK expects that UK GIs currently named in and protected by EU free trade agreements and other sectoral agreements will continue to be protected.
5. Community Plant Variety Rights (CPVRs)
UK Equivalents relating to CPVRs benefit from the same principles common to all registered EU-IP, as discussed above. Additionally, the term of the UK Equivalent will be at least equal to the remaining period of protection under EU law.
Comparable to the provisions on pending EUTM and RCD applications at the end of the Transition Period, CPVR applications will not automatically be converted into corresponding UK applications. The applicant will instead have an ad hoc right of priority, meaning the right to file an identical UK application that secures the priority of the CPVR application for the UK application for the purpose of determining distinctness, novelty and entitlement to the right of such a UK application. However, the period in which to file a priority-saving application in the UK has been reduced to six (6) months only.
6. Database Rights
Database rights were introduced in the UK with the implementation of the EU Database Directive (Directive 96/9/EC). This protects databases where, at the time the database is made, its maker is (1) an individual who is a national of or habitually resident in the EEA; or (2) a company incorporated, or an unincorporated body formed, under the law of an EEA state that has its central administration, principal place of business or registered office within the EEA.
In the Draft Agreement, the UK agrees that the holder of a right in relation to a database that arose before the end of the Transition Period will be granted an IP right in respect of the United Kingdom with the same level of protection as that afforded under the EU Database Directive if such person or entity is: (i) a UK national, (ii) a person with a habitual residence in the UK or (iii) an undertaking established in the UK.
In relation to (iii), where an undertaking has only its registered office in the UK, its operations must be genuinely linked on an ongoing basis with the economy of the UK or of a Member State.
7. “.eu” country code Top Level Domains (“ccTLD”)
In addition to the Draft Agreement, the European Commission released another statement in March 2018, announcing that the regulatory framework pertaining to .eu ccTLDs will cease to apply to the UK from 30 March 2019. Thus, undertakings and organisations that are established in the UK but not in the EU and natural persons who reside in the UK will:
The statement of the European Commission stresses that a transitional arrangement may be contained in the final Withdrawal Agreement. The Draft Agreement in its current form, however, provides no information in this regard.
In general, there will be no impact on European patent protection in its current form, which is granted as a bundle of national rights in selected countries of the European Patent Convention (EPC). This is because, in contrast to what its name suggests, the EPC is not a sole EU institution and several non-EU Member States (e.g., Morocco) are party to it.
However, it remains an open question whether the UK will be party to the Unified Patent Court (UPC) system, under which a new type of patent will be issued by the European Patent Office conferring protection across the entire territory of the participating European nations as one single right. As indicated at the beginning of this article, the United Kingdom ratified the UPC Agreement (UPCA) and thereby paved the way for negotiations to ensure the UK’s continued participation in the UPC following Brexit. In the White Paper, the UK again affirmed its intention to further explore staying in the UPC and the Unitary Patent systems post-Brexit and to “work with other contracting states to make sure the Unified Patent Court Agreement can continue on a firm legal basis.”
However, as with almost everything concerning Brexit, the UK’s participation in the UPC System is still far from certain. On the one hand, it is yet to be seen whether the UK is willing to accept the role of the ECJ in the UPC System despite its intentions to end the ECJ’s jurisdiction in the UK overall. On the other hand, as reported earlier here, the UPCA must enter into force before the UK leaves the EU – i.e., before 29 March 2019 – but there are still outstanding ratifications, from, inter alia, Germany, where a constitutional claim filed with the German Federal Constitutional Court (Bundesverfassungsgericht) is currently pending, barring the German Federal President (Bundespräsident) from signing the UPCA and the UPC’s Protocol Privileges and Immunities.
9. Supplementary Certificates (SPCs)
SPCs can provide up to five (5) additional years of protection for a marketed medicine or plant-protection products. Since these SPCs are based on EU regulations No. 1610/96 and No. 469/2009, the UK will need to replace the existing legal framework for rights of patent term extension with a new framework to be available at the end of the Transition Period. Under Article 60 of the Draft Agreement, SPC applications filed before the end of the Transition Period and still pending at its end will be granted even after the end of that Period and provide the same level of protection under UK law as under the EU Regulations.
WHAT’S LEFT TO DECIDE?
Although consensus on the Draft Agreement has been reached by the negotiators of the EU and UK government, the UK government must still steer the Draft Agreement through the UK Parliament for approval. A large chunk of the UK Parliament appears to remain strongly opposed to the Draft Agreement as it stands, so the possibility that it will not vote in favour of the Draft Agreement remains a real one. The EU has been fairly unequivocal in its claims that the Draft Agreement is the only deal possible for the UK, meaning that if the UK Parliament does not approve it, a no-deal scenario will loom large, though whether attitudes on either side may soften remains to be seen.
RECOMMENDED ACTIONS TO BE TAKEN NOW
The UK, at several points in negotiations, has threatened to leave the EU without a deal. And, indeed, the possibility remains that topics other than IP prevent the UK from signing the final draft of the Withdrawal Agreement. IP owners are advised to bear the genuine possibility of a no-deal scenario, as described above, in mind when planning their IP strategy moving forward.
Even though each portfolio is unique and measures should be taken on a case-by-case basis, there are a number of general actions that could be considered at this stage:
1. EUTM and RCD Holders
2. Breeders: With regard to applications not yet filed or likely not to be granted until December 31, 2020, breeders should prepare to file applications in the EU and immediately following the Transition Period in the UK. Unfortunately, this will likely go hand-in-hand with double the paperwork: two lots of Distinctness, Uniformity and Stability examinations and, of course, an increase in fees.
3. License Agreements: Existing license agreements where (i) the UK is part of the license territory and/or (ii) EU-IP or international registrations designating the EU are licensed should be carefully examined and, with regard to new license agreements, emphasis should be given to the contractual language to not only provide for a license to the EU-IP or the international registration itself but to also encompass its future UK Equivalent. Furthermore, territory definitions should make express reference to the UK, rather than merely to the EU as a whole.
4. .eu ccTLDs: Holders of eu. ccTLDs located in the UK with no establishment in the EU should consider registering other ccTLDs.
The table below sets out the various implications of Brexit for intellectual property in both a deal and no-deal scenario. The deal scenario is dictated by the terms of the Draft Withdrawal Agreement, and sets out the lay of the land after the end of the agreed Transition Period at the end of 2020. While the UK government has planned for a no-deal scenario, that would only apply if the Draft Withdrawal Agreement is rejected by the UK Parliament and no replacement is negotiated before the UK leaves the EU on 29 March 2019 (the “Exit Date”).
Comparison of a Deal and No-Deal Scenario
Registered European Trade Marks (EUTM) and Registered Community Designs (RCD)
Pending applications of EUTM and RCD at the end of the Transition Period
Possibility to refile equivalent UK application within nine (9) months of the Exit Date
Unregistered Community Design Right (UCD)
Existing UCDs will continue to be valid in the remaining EU Member States
UK will provide automatic right equivalent to UCD for rights still existing at the end of the Transition Period (Art. 57)
Existing UCDs will continue to be protected on the day of exit (as so-called “supplementary unregistered design right”)
Designs first disclosed in the UK after the Exit Date will be protected as supplementary unregistered design rights in a new system that will mirror the current UCD System
Community Plant Variety Right (CPVR)
Geographical Indications (GIs)
UK will set up its own GI schemes:
In the absence of an agreement with the EU, UK GI right holders will lose their EU right
UK patents, UK patent applications and EP applications
Remain generally unaffected by Brexit; the UK will continue to be a member of the European Patent Office (which is not an EU organisation) and will therefore continue to be a contracting state to the European Patent Convention
Remain generally unaffected by Brexit
Supplementary Certificates (SPCs)
UK will uphold the current SPC regime in the UK after the Exit Date and has assured the EU that existing EU laws (including the decisions of the ECJ, by which the UK will be bound during the Transition Period) will continue to apply, in particular:
The applicability of ECJ decisions after the end of the Transition Period is less clear: the indications are that such decisions will not apply to UK law, but this may be clarified during the Transition Period itself
UK will maintain existing EU law on SPCs in UK law:
Unitary Patent (UP) and Unified Patent Court (UPC)
UK plans to stay in the UP and UPC system - no further details provided
Marketing Authorisation (MA)
Reciprocal obligation to make available information in relation to past authorisation procedures for medicinal products (Art. 45):
UK copyright works’ protection will remain the same
EU cross-border copyright mechanisms
Will cease to apply to the UK from the Exit Date:
Exhausted IP rights remain exhausted (Art. 61); no further details have been provided as to IP-protected goods placed on the EEA or UK markets after the end of the Transition Period, and such arrangements will be linked to the state of play of EU and UK trade arrangements more generally
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