Legal Alert: IP Rights & Brexit

Co-authored by: Herbert Kunz

This paper provides a view from outside the United Kingdom (UK) of how the June 23rd vote by a majority of UK voters to leave the European Union ("Brexit") may affect IP rights and their enforcement in the UK and Europe.

In summary, the Brexit vote had no immediate effect on the laws and regulations governing IP rights in the UK and in the EU. The vote was advisory and the UK is very likely to remain in the EU for at least two years during exit negotiations. The work necessary to achieve Brexit appears to be enormous.

Patents
European Patents will not be directly affected by Brexit, because they are granted by the European Patent Office pursuant to the European Patent Convention. The EPO is not an agency of the EU and has many non-EU members. Enforcement of patents in the UK, however, will no longer be subject to EU directives and regulations after Brexit takes effect. Provisions for Supplementary Protection Certificates (SPCs), currently based upon EU regulations, also will need to be provided by new UK law.

Activity toward implementing the EU Unitary Patent and Unified Patent Court, which were poised to move ahead in 2017, is very likely to be suspended as a result of the Brexit vote, because both EU Reg. No. 1257/2012, which would create the UP, and the UPC Agreement limit participation to EU member states. EPO President Battistelli is optimistic. In a statement on June 24th, he said "Concerning the Unitary Patent and the Unified Patent Court, the Office expects that the UK and the participating Member States will find a solution as soon as possible which will allow a full implementation of these so-long awaited achievements."

Although hypothetically, the UK could ratify the UPC Agreement before formally leaving the EU, it seems doubtful to us that the other necessary ratifications—including the required ratification by Germany—€”can now be obtained. Some experts have suggested that the UPC Agreement might be amended to permit participation in that court by non-EU states if they agree that questions of EU could be referred to the Court of Justice of the European Union, but it seems possible that any such change could take years.

The UPC cannot proceed without the UK until the UPC Agreement is amended. In particular, Article 89 requires ratification by the UK. Also, Article 7(2) provides that the central division of the UPC shall have a section in London and Appendix II allocates cases dealing with human necessities, chemistry and metallurgy to that section. Of course, a risk of opening the UPC Agreement to amendment is that other possible changes in the Agreement may have to be addressed.

A UP including the UK or any other non-EU state would not be permitted by the current regulation. Because the start of UP grants is tied to the effective date of the UPC Agreement and because the UP and UPC were to be established as a package, progress toward the UP will very probably be stalled until the future of the UPC is resolved.

Trademarks & Designs
European Union trade marks and registered designs are granted by the European Union Intellectual Property Office (EUIPO), formerly OHIM, which is an agency of the EU. Registrations by this office provide EU-wide protection in parallel with national registrations. After Brexit, the UK is expected to enact legislation providing continued protection in the UK of trade marks and registered designs under a procedure which might be similar to the existing conversion process for EU trade marks, allowing to preserve the filing dates of existing EU filings; however, actions by owners and fees may be required, and there may be a temporary gap in protection until a conversion to national registrations is successful where no parallel UK national registrations are available in the first place. Until the new UK laws are adopted, UK practitioners are advising continued use of the EUIPO to obtain protection in all of the EU—€”including the UK—€”with possible parallel UK filings, the latter in particular where right owners expect upcoming enforcement of their rights in the UK where a temporary gap in protection might be fatal.

A Few Details Relating to Brexit
Article 50 of the Lisbon Convention provides that an EU member state wishing to leave should give notice and that the separation should take effect when an agreement is reached on the terms of separation or two years from the date of the notice, unless all EU states agree to an extension. (When Greenland decided to leave the then-European Community in 1982, it took about three years until an agreement on the withdrawal was reached.) It is currently unclear when the UK might give notice. Prime Minister Cameron has resigned, to be effective in October, and has suggested that his successor should be the one to address that issue.

The "European Union Referendum Act 2015" (here) provided for the referendum, but did not specify any effect. While a majority voted to "Leave" in the June 23rd referendum, there does not appear to be any plan or consensus on what "Leave" means or how to proceed. That will be up to Parliament. The amount of work necessary to accomplish Brexit is immense, including UK internal legislation to replace current EU law, negotiation of terms of exit and future relations with the EU, and replacement of existing EU agreements with other non-EU states. Some say that 10,000 pieces of UK legislation will be required. There probably will be little time for nuanced consideration of IP laws and treaties.

The two most frequently mentioned models of non-EU states' relationships with the EU, that the UK might seek to adopt, are those of Norway and Switzerland, discussed below.

Norway participates in the European Economic Area (EEA) along with EU states, in the context of being a European Free Trade Association (EFTA) member. This arrangement provides for free movement of goods, capital, services and people between the EU and EFTA members, and requires Norway to adopt certain types of EU legislation and make certain financial contributions, but does not give Norway voting rights in EU decision-making. London's role as the leading European financial center could be preserved if the UK negotiates a Norwegian-style arrangement with the EU; however, that would require free movement of people, contrary to the views of at least some "Leave" voters in the UK.

Switzerland vacillated regarding whether to join the EU, eventually deciding not to join. Its relationships with the EU are governed by over 200 bilateral agreements with the EU (rather than with individual EU states), negotiated during a period of over 10 years. Interestingly, its position on free movement of people is in at least one way more liberal than that of the UK. Unlike the UK, Switzerland is a member of the Schengen Area, which means that EU citizens can travel into Switzerland without a passport. However, restrictions on immigration continue to be the subject of discussion in Switzerland.